Financial Market report for August 29, 2011
1) … World stocks, ACWI, and US Shares, VTI, rallied as Insurance company shares, KIE, moved higher after property damage from Hurricane Irene was less than feared. Travelers Cos Inc, TRV, and Allstate Corp, ALL, rose strongly as investors were relieved that hurricane damage in New York City, especially in lower Manhattan, was not as bad as expected.
Financial stocks, XLF, investment Bankers, KCE, Investment Brokers, IAI, Banks, KRE, European Financials, EUFN, were the top gainers after Greece’s Alpha Bank and EFG Eurobank sealed a merger agreement. Euro Intelligence reports significant participation of the Quatar Investment Authority. U.S.listed shares of National Bank of Greece, NBG, soared. Market leaders included
2) … Euro Intelligence reports in their for fee news letter.
Troika discusses Greek civil servant pay structure.
Plans to introduce a new pay structure in the civil service will top the agenda of discussions between the Greek government and the troika this week, amid concerns that Greece is dragging its feet over the reform, Kathimerini reports. Last week, Finance Minister Evangelos Venizelos and Administrative Reform Minister Dimitris Reppas suggested that the new pay policy would be phased in over seven rather than three years as previously agreed. The troika is also pressuring the government over the slow pace of its scheme to merge and shut down public bodies, and its privatization program.
Jean Quatremer returns deeply disillusioned from Greece.
Libération correspondent and Coulisses de Bruxelles blogger Jean Quatremer spent his summer holiday in Greece and returns deeply disillusioned from the motherland of the euro crisis. After having attempted in vain to obtain official receipts for his holiday visits to hotels, bars and restaurants around the country he comes to the conclusion that the country is run “by a real mafia”, that tax fraud is “a national sport” and that “30 to 40%” of the Greek GDP are being generated by the black economy. Quatremer says EU subsidies that should have helped to build highways, bridges or a land registry in Greece were channelled into consumption. “During my holiday I have never seen, apart from Germany, as many Porsche, Audi, Mercedes and BMWs”, he writes and he points out that there are more cars per inhabitant than in France. Quatremer finishes his blog by lauding the fact that EU structural funds will now be managed by a European body headed by a German and that privatization receipts will also be controlled by an independent body. “But the resistance capacity of the Greek no longer needs to be proven”, he concludes. “The Europeans may still have to pay for a long time their Greek error.”
Francois Hollande is the French Socialist’s front runner after party meeting
The French Socialist’s former chairman Francois Hollande clearly emerges as the front runner for he party’s primaries on October 9 after this weekend’s “summer university”, according to Les Echos. A poll in Journal de Dimanche gave him a 10 points lead over Martine Aubry, the current chairwoman and mayor of Lille.
Greece may spurn debt swap if take-up is lower than 90%
The FT writes that the Greek finance minister warned that unless the take up of the “voluntary” debt swap was 90%, the Greek government reserved the right to cancel the entire deal. While the take-up rate in Belgium, for example, is 96% according to its finance minister, there is a fear that the overall target might not be hit, given the dispersion of Greek bond holdings. The paper quotes from a letter, saying the government would then not be under an obligation to accept the offer, but said that a final decision would be made in co-operation with the official creditors to ascertain whether a lower take up would still meet the conditions for a substantial private-sector contribution.
Angelo Baglioni explains the difference between a Eurobond and a EuroUnionBond.
Angelo Baglioni has an illuminative article in Lavoce, in which he looks at the difference between various Eurobond proposals, including the Eurobond proposal by Jean-Claude Juncker/Giulio Tremonti – and also Mario Monti – and an alternative proposal by Romano Prodi. The first is a classic Eurobond, which replaces a proportion of national debt. The Prodi proposal is for a EuroUnionBond, which is different because it is issued by a new funding agency, with €1tr in paid in capital, and a total ceiling of €3tr, which spends some €700bn on infrastructure investments, and the rest on purchasing national debt. (Interim institutional arrangemens will undoubted be needed, but if this is going to work, it will have to mutate into a genuine Eurobond eventually.)
The Bundestag’s supervisory powers will be beefed up by a super committee
There are signs that a deal will be struck between Bundestag and the German government on parliamentary control of the enhanced EFSF. According to the Saturday’s Süddeutsche Zeitung, Bundestag president Norbert Lammert, a member of Angela Merkel’s CDU, wants the Bundestag to vote on any new EFSF assistance for a euro country. Questions of lesser relevance could then be dealt with by the Bundestag’s budget committee. Implementation measures such as paying out the agreed sum or buying government bonds would be decisions the EFSF could take on its own right according to Lammert’s thinking. Meanwhile, Spiegel reports that there are plans to create a new super committee to which the Bundestag could delegate some of the parliamentary controlling rights over the EFSF. This new committee would be composed of the heads of the parliamentary groups and some members of the present committees for European affairs, budget and finance.
Wolfgang Münchau on the wretched politics of eurobonds
In his FT column, Wolfgang Münchau writes that we are already well into the phase whether the delay in crisis resolution is becoming very expensive. The extension of the crisis to Italy and the economic downturn have created a situation where Eurobonds are the only solution to this crisis – since the ECB will not be able to maintain its bond purchases for many years, and since Italy is very likely to fall into a recession and potentially register rising deficits. But eurozone bonds cannot be introduced overnight for legal reasons, and politically the debate has been going in the wrong direction among the northern states. Angela Merkel has been so explicit in ruling out Eurobonds most recently that it is hard to imagine that she would accept them soon – and sacrifice her coalition and her own position in the process. Yet waiting for another two is not a realistic option either.
3) … Will there be a Eurozone Breakup, or will there be a Super European Government, that is a One Euro Government.
3A) … Many article herald the end of the Euro and that ongoing efforts to save the banks and their bondholders will fail.
1) … Mike Mish Shedlock writes IMF research says Eurozone break-up certain; I say banks cannot be saved.
2) … Mr Shedlock also writes Greece 1-Yr Rate 60%; Finland retains collateral demand; Multiple veto points; ECB “Litmus Test” coming up; Germany accuses ECB of treaty violations
Kiss a Larger EFSF Goodbye
- Kiss a larger EFSF goodbye unless 17 nations all agree to raise the pool to a collective to the proposed €2.2 trillion from the current €440 billion pool.
- Kiss a larger EFSF goodbye unless Greece offers hard collateral
- Kiss a larger EFSF goodbye unless German courts rubber stamp the EU summit deals
- Kiss a larger EFSF goodbye unless 90 percent of investors agree to the deal
In other words, kiss a larger EFSF goodbye, expect a test of the ECB’s Italian, Spanish, and Portuguese bond purchasing power, and expect a German court test that in-and-of-itself would settle this matter once and for all. Even if the German courts approve the deal, there are still more than 17 points of failure, counting investors. One way or another Greece will default
3) _ Zero Hedge writes September 23: Beginning of the end for Merkel … and the eurozone?
4) …Ambrose Evans Pritchard writes Euro bail-out in doubt as ‘hysteria’ sweeps Germany
“German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe’s revamped rescue machinery, threatening a constitutional crisis in Germany and a fresh eruption of the euro debt saga.”
I comment on the above that the Austrian Economists and those of the Mises Institute who are leading the charge for a breakup of the EU perceive themselves and many others to be sovereign individuals, and that they envision market forces will cut a path to national sovereignty, and sovereign national.currencies.
To this I say that such thinking is a mirage on the Neoauthoritarian Desert of the Real. Freedom, liberty and choice, are all placards and epitaphs of the bygone era of Neoliberalism which has been replaced by Neoauthoritarianism, as the economic, investment, and political teutonic plates have shifted. First with the down turn in world stocks in May 2011, then the awareness of investors that a Default Union has formed in the Eurozone, with the sell off of stocks on Black Thursday, and now with the proposal for a true European Government by President Sarkozy and Chancellor Merkel; as well as the statement by the Chancellor, that there will not be a breakup of the EU. While the Chancellor may have lost her job, others who have heard the 1974 Clarion Call of Club of Rome, will arise and pick up the Authoritarian Imperative for European Economic Government.
3B) … I write, out of the soon coming Gotterdammerung, that is the clash of the gods, specifically, the investors and the European leaders, a new moneyness will be deployed not
built on sovereign debt, but rather on diktat.
Out of the soon coming European and global economic collapse, a European Economic Government, together with a President of the EU, the Sovereign, and his Eurozone Banker, the Seignior, will rise in power and authority, as national leaders waive national sovereignty and fiscal authority is sacrificed, and institutional holdings such as power companies, utilities, and central bank holdings, are transferred from the periphery, that is from the PIIGS, to the core, that is Brussels, Paris and Berlin. A Fiscal Union is coming in the EU
The word, will and way of the Sovereign, and the Seignior, will provide seigniorage, as the Beast regime of Neoauthoritarianism replaces the Free To Choose regime of Neoliberalism. A federal and feudal European Economic Government is coming as a fulfillment of the 1974 Clarion Call of the Club of Rome as well as to the other nine world regions to make for a Ten Toed Kingdom of regional economic government. Banks will be integrated with governments; for example, Bank of America will be nationalized. These institutions will be known as Government Bank, or Gov Bank, or the Bank of Government.
Gotterdammerung, Global Economic Collapse, Eurozone Breakup, Super European Government, One Euro Government, Eurobonds, EFSF, Sovereignty, Sovereign Individual, Desert of the Real, Freedom, Diktat, Neoliberalism, Neoauthoritarianism, The Sovereign, The Seignior, Seigniorage, Default Union, Clarion Call Club of Rome, Authoritarian Imperative, European Economic Government, President of the EU, Fiscal Authority, Fiscal Union, Beast Regime, Free to Choose, Ten Toed Kingdom, Government Bank, Bank of Government, Gov Bank