Greece and France Reject Austerity

Greece and France have rejected austerity.

Unfortunately, they are still broke and the markets will now reject them!

Shares in Europe's banks are now falling, as it is clear that the Eurozone is going to become ungovernable in its present form.

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French Downgrade Rumours

The Twittersphere is awash with rumours that France is to be downgraded.

Sacrebleu!

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Europe Rearranges Its Deckchairs

As the EU holds yet another summit today to discuss the ongoing Eurozone crisis, still smarting from German attempts to takeover the country Lucas Papademos the Greek Prime Minister said that unless Greece's international backers agreed to a new bail-out, Greece would be unable to pay off its loans and be forced out of the Eurozone.

He warned that Greece faces “the spectre of bankruptcy and all the dire consequences that entails.

Nothing new there then!

What is actually required is for Greece and its bondholders to agree the haircut, and for Greece to actually make good on its promises.

Don't hold your breath waiting for either of those!


Meanwhile Nicolas Sarkozy claims that he will introduce a Tobin tax in France by August.

All very well, but he may well not be president by then!

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For Fuchs Sake! II

Standard and Poor’s have cut France’s AAA rating, and have also reduced the ratings of Italy, Spain, Portugal (now consigned to junk status) and Cyprus by two notches.

Austria, Malta, Slovakia, and Slovenia had their ratings lowered by one notch.

Needless to say these downgrades have not gone down well with the political "elite" of Europe.

Michael Fuchs, a member of the Christian Democrats (who earlier this week said the Greece had no intention of paying its debts), said that Standard and Poor’s was “playing politics” and stated that S&P should downgrade Britain as well:


“If the agency downgrades France, it should also downgrade Britain in order to be consistent.”

How exactly would that help restore confidence in the Euro experiment?

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France To Be Downgraded

S&P are, so the rumour goes, about to downgrade France, Spain, Italy, Belgium and Portugal.

Meanwhile Greece looks more or less certain to default, as it is incapable of reaching an agreement with its bondholders on the size of their haircut.

Update

Now confirmed France to be downgraded

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The Fate of The Euro To Be Decided At The Gates of Rome

The ratings agency Fitch has decreed that the fate of the Euro will be decided at the gates of Rome, and has put Italy on notice that it faces a downgrade at the end of this month.

For good measure, Fitch's head of rating has stated that if Italian debt is restructured it will mark the end of the Euro as a reserve currency.

Given that a downgrade of Italy will increase the likelihood of a debt restructuring, Fitch has placed itself in the role of judge, jury and executioner.

In other news, the French are determined to push through a financial transactions tax; despite the fact that this tax has split the German coalition.

As European dictators learned in the past, a war on two fronts (in this case three fronts, Greece, Italy and France/Germany) is unwinnable. The European political "elite" need to focus their minds, and determine exactly what it is they really need to do, can do and want to do in the short term.

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La Guerre Est Finie!

France has admitted defeat in the war of words which it started with Britain.

French foreign minister, Alain Juppé, told the Telegraph:

"The comments [of the past few days] went further than their authors wished, [but there is] no need for excuses on either side. 

There is not an ounce of doubt that Franco-British relations, that will become excellent once again as we have too much in common to allow them to deteriorate. 

I cannot imagine that we will push Britain out of the European Union."

I wonder if the war will reignite, when France is downgraded; as the head of France's stock market regulator (AMF) believes it will be?

Jean-Pierre Jouyet, is quoted in the Wall Street Journal:

"Keeping the triple-A would be a miracle, but I want to believe it's possible."

Joyeux Noel!

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The Dangerous Juncture

IMF chief Christine Lagarde has told a roundtable on Africa's economic future in Lagos that the world economy is at "a very dangerous juncture".

Despite this, as predicted, the European finance ministers failed yesterday to raise Euro 200BN for the IMF.

However, France is not depressed and has issued an upbeat prediction (or is it a wish?) that the UK (the country that it was criticising so publicly a few days ago) will provide funds to the IMF.

The Germans were also displaying a heavy handed attempt at buttering the Brits, up when Guido Westerwelle, the German foreign minister, described the UK as an "indispensable partner" and promising a "hands-off" approach to our financial services industry.

"My main message is for the British people – you can count on us, and we can count on you. There is no doubt that we want to make the next steps in the EU together as 27. I am here to show you that we are willing to build bridges over troubled water."

How the tone has changed, clearly things really are bad!

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Quelle Dommage!

One week on from the "Summit To Save The Euro", and it appears that the much hyped "deal" is already unravelling before it is even signed.

Viz:

- Fitch has downgraded a number of banks, including BNP Paribas and Deutsche Bank.

- The leaders of Hungary and the Czech Republic have stated that they are ready to reject the planned treaty changes and implied move towards a centralised tax system. 

- Mario Draghi, the head of the European Central Bank (ECB), warned that the bond-buying programme was “neither eternal nor infinite”.

- Pedro Nuno Santos, vice-president of the Portuguese Socialist Party told MPs:

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay.

Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble."

- Greece has yet to agree a deal with its bondholders etc.

Despite the above, the French appear to believe their own hype. France's finance minister Francois Baroin said:
   
"It's true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment. 
 
We don't want to be given any lessons and we don't give any."

As I said last Friday:

"Cameron, over the coming days, will be vilified by many for his actions. However, time will prove that the Eurozone and its "leaders" are not up to the job of running single currency.

Oh, and by the way, the "new treaty" is not yet a done deal. Member states have to formally sign up to it, and at least Poland and Ireland are already discussing having to hold referendums before they sign up!"

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France To Be Downgraded

A week is a long time in politics.

Less than a week ago President Sarkozy of France was crowing over the EU's "historic" summit, that allegedly set in place systems and procedures that might one day resolve the Euro crisis.

The markets were less than impressed, and it is now expected that S&P will downgrade France's credit rating from Sarkozy's much prized AAA.

Why believe this rumour?

Well, Sarkozy seems to know that it is more than just a rumour because he is publicly stating that a downgrade doesn't matter!

BTW, a downgrade does matter, but don't spoil his day by telling him that!

As to the EU agreement fixing the Euro crisis, well it seems it hasn't.

The ECB's Klaas Knot has said that the Euro crisis will drag on for another two years, and that at least Euro 1 Trillion is needed to fix it.

Best not tell Sarkozy that either:)

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The Eurozone's Death by a Thousand Cuts

As Angela Merkel and Nicolas Sarkozy held a press conference yesterday, in which they rehashed the vague and unconvincing aspirations about the reform of the Eurozone that they have issued before (note as per usual, there was absolutely nothing said about what they will do to address the current crisis), economic reality slapped the Eurozone in the face.

Standard and Poor's issued a warning that 15 out of 17 Eurozone nations may suffer a credit downgrade. There is now a 50/50 chance that France and Germany will lose their AAA ratings.

Does this matter?

Yes it does, the much hyped busted flush aka the EFSF relies for its non existent funding on the ratings of the Eurozone. In the event that these are downgraded, funding for the EFSF (if any actually ever materialises) will become more expensive and harder to obtain.

Suffice to say, the political "leadership" of the Eurozone is foaming at the mouth with indignation that their political aspirations are being blown off course by economic reality. However, as we know, the politicians who claim to be "leading" the Eurozone don't care much for reality.

Meanwhile, according to @FGoria (an Italian financial journalist) Greece is about to exit the Eurozone:

"A Cleary Gottlieb lawyer to me: "We're almost ready to advise Greece in an exit from Eurozone. We began our job over one year ago"." 


Thanks to the inaction of the politicians, the Eurozone is suffering a long and protracted death of a thousand cuts.

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The Abyss

Starting the week as it will most surely go on, the OECD has given an urgent warning that Europe, and by definition the global economy, is standing on the edge of the abyss.

The OECD stated that the failure of EU leaders to stem the crisis could "massively escalate economic disruption" and end in "highly devastating outcomes".

"The euro area crisis represents the key risk to the world economy at present."

Needless to say, the Eurozone seems determined to dig its (and the global economy's) own grave, and continues to sow the seeds of confusion and despair.

Die Welt reports that Germany is considering issuing joint 'elite bonds' with five fellow AAA nations. That of course means the creation of a two speed Eurozone. Needless to say the German government has issued a hasty denial of the plan.

Which, given that France may well lose its AAA rating, is doubtless welcome news for the French (assuming that is, the Germans are being truthful in their denial).

Meanwhile in Washington, Barack Obama will today meet European Council president Herman Van Rompuy and European Commission president José Manuel Barroso at the annual EU-US summit.

Good luck with that then!

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Dexia Deal Unravels

In mid October I wrote that the rescue "plan" for Dexia was unravelling.

Today (one month later) the media are awash with reports that Belgium is pressing France to pay more into an emergency facility for Dexia.

For why?

Because Belgium knows that if Dexia falls over, the collateral damage to France (wrt its exposure to Dexia) would be immense.

France is less than amused, because if it pays more into the rescue fund it's AAA rating will be undermined.

This "renegotiation" is of course going to send the whole deal "tits up".

As I noted in October:

THERE IS NO PLAN!

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The European Financial Clusterfuck

The European financial clusterfuck continues this week unabated.

Here are but a few headlines to start the week with:

- Moody's has issued a downgrade warning on France.

- Despite a landslide victory in Spain, for a party that will implement further austerity measures, markets are falling and Spanish bond yields are rising.

- Hungary has asked the EU and IMF for financial assistance, oddly enough they haven't put a figure on how much they actually want/need!

- The European Commission has sated that the "cure" for Europe's ills are Eurobonds. This has been publicly slapped down by Germany, which stated that Eurobonds were not a "cure" at all.

- The EU's Jean-Claude Juncker says if France were to lose its AAA rating so would the EFSF.

Wrt the latter point, so what?

The EFSF is a busted flush anyway, a downgrade in rating is completely irrelevant.

Oh, and if anyone is remotely interested, Belgium's politicians have yet again failed to form a government (Belgium has now been without a government for 526 days).


The week starts as it means to go on, badly!

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A Smaller Eurozone

As the world waits for Greece and Italy to name their new Prime Ministers, it seems that France and Germany have finally woken up to the fact that the current Eurozone structure is doomed to failure. They have talked about creating a smaller Eurozone.

Additionally, Merkel's party is discussing a move to permit countries to exit the eurozone without leaving the EU.

The question is, will these rumours turn into facts before the markets tear the Eurozone to pieces?

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China Says "Not Yet"

Despite European hopes and spin that the Chinese will bailout Europe, by funding a large part of the EFSF, China is not rushing to write Europe a cheque.

Klaus Regling, went to Beijing to discuss terms. However, his poorly planned, uninvited visit and the comments of Nicolas Sarkozy about Beijing having a "major role to play" in proposals to expand the European Financial Stability Facility (EFSF) only seem to have irritated the Chinese.

China, quite rightly, wants more clarity on terms and conditions etc before it considers investing anything.

The official Xinhua news agency said that Europe must put its house in order:

"China can neither take up the role as a saviour to the Europeans, nor provide a 'cure' for the European malaise.Obviously, it is up to European countries themselves to tackle their financial problems."

Europe needs to understand that it is a "buyers' market", and that it is up to the Europeans to "sell" their "investment opportunity" (EFSF) to potential investors.

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Another Day, Another Crisis in The Eurozone

Another day of rumour, tension and dashed hopes in the ongoing farce that is the Eurozone crisis.

Today Eurozone "leaders" are meeting in Brussels, to allegedly hammer out a rescue package for Greece and the beleaguered Eurozone.

Tensions are running high, not least because it is apparent that only in the last week have the "leaders" bothered to look closely at the figures required to save the Eurozone. Seemingly they got quite a shock.

In Greece the Finance Minister, Evangelos Venizelos, has finally got around to presenting Greek bankers with a plan for a 50% write down in debts (something that has been known about for several weeks). The real resistance to any write down is coming from French bankers, therefore I wonder when he will be making his presentation to them?

In the Bundestag Chancellor Merkel has told fellow MPs that Greece "needs permanent monitoring".

That will go down well in Syntagma Square!

Meanwhile rumours abound that the chief clown of Italy (Berlusconi) has done a deal with the Northern League that he will resign by year end, in exchange for their support of an increase in retirement age.

That's nice, the question is will the Italian people accept that?

Unsurprisingly the IMF is a "tad fed up" with the ongoing circus and wants to see a resolution. As such it is expected to take matter into its own hands in the not very distant future, as and when the circus in Brussels fails to achieve anything tangible.

It is going to be a long day!

As our "leaders" continue to make fools of themselves and create havoc in the markets, they may care to remember that this ongoing farce, the outcome of their decisions and the promises that they make is having/will have a direct impact on the lives of the millions of people living and working within the EU.

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Of Mice and Men

Despite the rancorous meetings over the weekend between various "leaders" of the Eurozone and other leaders from non Eurozone countries, the markets are optimistic that a deal will be reached by Wednesday that will resolve the Eurocrisis.

Sadly this optimism is somewhat misplaced.

Aside from rumours that Wednesday's "solve the Eurocrisis" meeting (the one that was postponed from Sunday) may in fact be postponed, today's economic news for the Eurozone is not good.

Goldman Sachs have published manufacturing and services PMI numbers that show a decline to 47.2 in October down from 49.1 in September. This is the sixth consecutive monthly decline, and it clearly shows that the Eurozone is in a recession.

Does this matter?

Yes, it does matter, aside from the obvious negative effects on people's standards of living it will also increase the pressure on ratings agencies to downgrade France's rating. In the event that this happens, the calculations behind the "plans" for the Eurozone bailout will go out of the window.

Now repeat after me and learn this for prep:

- There is no plan
- There was no plan
- There will never be a plan

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Europe Is Fucked!

Those of you who still think that the "leaders" of the Eurozone are capable of "leading" Europe out of its financial crisis, may care to read a few choice extracts from a report in the Telegraph about what really is going on at the Euro meeting this weekend:

"She says she is on a diet and then helps herself to a second helping of cheese," the French president allegedly said after a dinner meeting with Mrs Merkel....

Francois Baroin, the young and inexperienced French finance minister, attempted to hit back, complaining that the IMF's default medicine would hit France the hardest; the country's banks are highly exposed and could threaten its "untouchable" AAA rating. ....

But Mrs Lagarde, who had held his post until taking up the IMF job this summer, "shut him up" by brandishing the report and pointing to it its detailed figures. "She really slapped him down - and in perfect English too, a language he cannot speak," said a diplomat. ....

Their shouting could be heard down the corridor in the concert hall where an orchestra was about to play the EU's anthem, Ode to Joy," said an incredulous EU official. .....


So pointless was the gathering, that Didier Reynders, the Belgian finance minister, left early to attend the world premiere of the new Tintin film, The Secret of the Unicorn. .....

Wolfgang Schaeuble, Germany's finance minister, could not resist taking an "I told you so" approach - he had been, after all, the first to call for an "orderly" default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today. 
 
"Schaeuble is a man who does not mince his words, whose reputation for harshness and arrogance is well earned. He was, frankly, unbearable," said one diplomat. ....

It was grim. The worst mood I have ever seen, a complete mess," said one eurozone finance minister." 

It should be clear to even to the Europhiles, that Europe is fucked!

Learn this for prep:

- There is no plan
- There was no plan
- There never will be a plan

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Eurozone Descends Into Chaos

Yesterday I wrote that Sunday's EU Summit to save the Euro had been cancelled.

The Eurozone "heavyweights" (Germany and France) claim that is not true.

A statement released by the Elysee Palace said that Nicolas Sarkozy and Angela Merkel will meet to discuss their "ambitious and comprehensive response" to the crisis ahead of the European Council summit on Sunday.

So it's not been cancelled then?

Ahem, actually it has been postponed to (apparently) Wednesday, the statement added that resolutions would be "finally adopted" at a "second meeting no later than Wednesday".

In other words the meeting on Sunday is to save face, and to talk about a future meeting (the exact date of which is not yet known).

This is not "leadership", this is not "a plan".

Learn this:

- There is no plan
- There never was a plan
- There never will be a plan

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