Mish's Global Economic Trend Analysis

Panic Capital Flight in Greece, Depositors Yank 1.5 Billion Euros in 2 Days;EU Wants Severe Bail-Out Conditions Including International Tax Collection
Who's the Bigger Socialist, President Obama or the Socialist Prime Ministers from Greece and Spain?
French President Says Bondholders Must Share Greek Pain; Greece Mulls Setting up Bad Bank; Lagarde Says Greece Needs "Support" Not Restructuring
Yemen Coastal Town Falls to Al Qaeda

Panic Capital Flight in Greece, Depositors Yank 1.5 Billion Euros in 2 Days;EU Wants Severe Bail-Out Conditions Including International Tax Collection

Posted: 29 May 2011 11:18 PM PDT

Courtesy of Google translate please consider They lifted 1.5 billion Thursday and Friday from banks

Only a few steps separating from Friday to yesterday's mass panic! From early morning to counter the banks there is serious pressure for withdrawals of deposits, especially small amounts. The pressure on banks began last Wednesday, culminating in yesterday's day.

It is significant that Thursday and Friday, banking sources estimate that rose around 1.5 billion euros in total! According to the same month in May estimated the outflow estimated at least 4 billion from 2 billion in April.

The majority of depositors rushed to withdraw for pensioners and small savers and amounts ranging from 2-3000 lifted until 10 -15 000 euros. Motivation in most cases it was the fear that led the country into bankruptcy, deposits frozen even temporarily left without cash, or even lose their savings.

Politicians do not seem to fully understand the risks posed by a widespread panic, not only for the stability of the banking system but for the economy and the country.

EU Requests Severe Bail-Out Conditions Including International Tax Collection

The Financial Times reports Greece set for severe bail-out conditions

European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.

People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens' repayment schedule, as well as another round of austerity measures.

Officials warned, however, that almost every element of the new package faced significant opposition from at least one of the governments and institutions involved in the current negotiations and a deal could still unravel.

In the latest setback, the Greek government failed on Friday to win cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.

Officials think Greece will be unable to return to the financial markets to raise money on its own in March – as originally planned in the current €110bn package – meaning that the IMF is now forbidden from distributing any additional cash. Without the IMF funds, eurozone governments would either be forced to fill the gap or Athens could default.

30,000 Protest in Greece

Courtesy of Google Translate More than 30,000 Greeks in Athens take center inspired by the protests of Spain

Some 30,000 people, police said, more as protesters have gone to the streets Sunday in Athens to protest the Greek political class. The demonstration has been called through social networks, as well as in Spain, and the participants cited the movement as a reference 15M.

"We've had enough. The politicians are laughing at us. If things continue like this, our future will be very hard," said one of demonstrators gathered outside the headquarters of the Greek Parliament in Syntagma Square, while his teammates chanted "Thieves, thieves!".

This is the fifth day of protests in Syntagma Square and this time they have been joined by a Spanish group who wanted to express solidarity with the merger.

"People were outraged, but needed motivation to express themselves. The Spanish have given us that motivation," said Argyrou Iphigenia, an insurance agent, told Reuters. "We're not asleep. We are awake. The IMF must go. There are solutions without them," he argued.

Is it any wonder people are yanking money out of Greek banks? How long before a bank freeze?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Who's the Bigger Socialist, President Obama or the Socialist Prime Ministers from Greece and Spain?

Posted: 29 May 2011 08:49 PM PDT

Courtesy of Google Translate More than 30,000 Greeks in Athens take center inspired by the protests of Spain

Some 30,000 people, police said, more as protesters have gone to the streets Sunday in Athens to protest the Greek political class. The demonstration has been called through social networks, as well as in Spain, and the participants cited the movement as a reference 15M.

"We've had enough. The politicians are laughing at us. If things continue like this, our future will be very hard," said one of demonstrators gathered outside the headquarters of the Greek Parliament in Syntagma Square, while his teammates chanted "Thieves, thieves!".

This is the fifth day of protests in Syntagma Square and this time they have been joined by a Spanish group who wanted to express solidarity with the merger.

"People were outraged, but needed motivation to express themselves. The Spanish have given us that motivation," said Argyrou Iphigenia, an insurance agent, told Reuters. "We're not asleep. We are awake. The IMF must go. There are solutions without them," he argued.

The above link thanks to Bran who lives in Spain. Bran has been sending me links every day for a year. Here is the original link in Spanish: Más de 30.000 griegos toman el centro de Atenas inspirados por las protestas de España

Socialist PMs Selling State Owned Assets, Committed to Anti-Union Reforms

The most amazing thing to me is how socialists in Spain and Greece are committed to selling off state owned assets and property while embarking on a path of reform that is 180 degrees removed from socialism.

Reform is much needed of course but unions protest every step of the way, just as has happened in the US, notably Madison, Wisconsin.

As it sits now, President Obama is a far bigger socialist in practice than either the Prime Minister of Greece, George Papandreou (representing the Panhellenic Socialist Movement party) or José Luis Rodríguez Zapatero, the Prime Minister of Spain (representing the Spanish Socialist Workers Party).

The issue in Europe is whether everything blows sky high before reform takes hold. Given the payback from reform is measured in years, not months, the bond market continues to bet on default.

At the moment, socialist Prime Ministers in Greece and Spain are committed to reform. In the US, president Obama remains committed to the socialist policies that destroyed Greece and Spain.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

French President Says Bondholders Must Share Greek Pain; Greece Mulls Setting up Bad Bank; Lagarde Says Greece Needs "Support" Not Restructuring

Posted: 29 May 2011 11:28 AM PDT

Christine Lagarde, French finance minister, fully cements her appointment as next IMF Chief, toes the previous IMF line with a nonsensical statement: Greece Needs 'Support' Instead of Debt Restructuring

Christine Lagarde, French finance minister and a candidate to head the International Monetary Fund, said Greece needs "support" and its debt shouldn't be restructured.

"It's essential that we retain a balance," Lagarde said today on Europe 1 radio. "Greece has made significant efforts and we have to support those efforts," she said.

Soft Default

Support, Reprofiling, soft restructuring, and restructuring all mean the same thing: default. As long as everyone is tossing out words to hide the obvious, the words "soft default" have still not been claimed.

Der Speigel Claims Greece Missed All Financial Targets

Via Google translate, please consider EU threatens Greece with funding freeze

Hamburg - It is a clear warning to the Greek government: Because of the lack of pace of reform, the European Union, the payment of the next loan tranche to Greece in question.

The International Monetary Fund (IMF) is considering the words of Prime Minister of Luxembourg Jean-Claude Juncker , the planned transfer to refuse June. "Over the next installment we will decide according to the report of the troika," said Rehn, adding: ". The situation is very serious"

The team of experts from the European Central Bank , IMF and EU Commission, the economic and fiscal condition of Greece examined the will, according to information obtained by SPIEGEL, in its quarterly report on an alarming finding: Greece miss all agreed fiscal targets

For those who can read German, here is the original link: EU droht Griechenland mit Zahlungsstopp

IMF Denies Greece Missed Targets

The IMF and Greek Finance Minister responded to Der Speigel report with Talks Continuing, Targets Not Missed

Greek Finance Minister George Papaconstantinou said talks with European Union and International Monetary Fund officials in Athens were still under way, denying reports the team had said Greece has missed its targets.

"The talks are continuing and will wind up in the next few days," Papaconstantinou said in a phone interview with Greece's Mega TV channel. "I have every reason to believe they will end positively for our country and that we will receive the fifth tranche."

Papaconstantinou spoke to Mega after the TV channel reported unnamed IMF sources as saying the country had missed targets in a review under way under the 110 billion-euro ($157 billion) EU-led bailout. Greece is subject to quarterly reviews by a team of officials from the EU, IMF and European Central Bank before each payment of loans under the bailout.

The minister said Mega's report and another cited by Mega in German magazine Der Spiegel were inaccurate as the inspection hadn't finished and no report had been written.

Greece Mulls Setting Up "Bad Bank"

Not that it will accomplish anything useful in regards to avoiding default, MSNBC reports Greece mulls setting up Spanish-style "bad bank"

Greece is considering setting up a Spanish-style "bad bank" to clean up its lenders' accounts from "toxic" Greek bonds and make them more attractive to potential buyers, a Greek paper reported on Sunday.

A 'bad bank', formed to hold risky assets owned by a state guaranteed bank, could be set up to absorb the risky Greek bonds held by state-controlled lenders slated for privatization, such as the Savings Post Bank, To Vima said.

"With problematic, Spanish savings banks (cajas) as a model, the finance ministry is examining proposals to implement the idea in the country," it said, without citing any sources.

Spain's Bankia, created from the merger of seven cajas, said last month it would create such a unit in a bid to attract investors ahead of a stock market listing.

Greek banks are believed to hold roughly 50 billion euros of Greece's outstanding sovereign bonds. The bonds have lost much of their nominal value in the wake of the Greek debt crisis, while a possible Greek debt restructuring could mean additional losses for the lenders.

Bondholders Must Share Greek Pain

Interestingly, French President Nicolas Sarkozy is now at odds with his finance minister, Christine Lagarde, over the need to restructure.

The Independent reports Bondholders must share Greek pain, says Sarkozy

French President Nicolas Sarkozy said bondholders need to share the burden of solving Greece's fiscal woes, following leaders in Germany and Luxembourg in raising the prospect of restructuring Greek debt.

Mr Sarkozy called for a "formula" involving investors, adding to talk that Europe might engineer an extension of Greece's debt-repayment schedule or press bondholders to buy new bonds as old ones mature.

"Restructuring is a poorly used word," Mr Sarkozy told reporters yesterday after a G8 summit in Deauville, France. "If it means that we can think of ways for the private sector, private operators, to take on a share of the burden, it's not restructuring at all; then there are formulas, there is no problem, and we should then converge in that direction."

Greek 10-year bonds trade at less than 55c on the euro, a sign of investors' diminishing expectations of being repaid in full.

Greek leaders meeting in Athens last night failed to agree on Prime Minister George Papandreou's new austerity plan. Conservative leader Antonis Samaras rejected the measures, saying they would "flatten the Greek economy and destroy Greek society".

In his first comments on a potential Greek restructuring, Mr Sarkozy gave no timeline for talks on pushing bondholders to take losses in Greece. A planned permanent European rescue fund would mandate some form of "private sector involvement" as of mid-2013.

No Problem?

Excuse me, but all three rating agencies said that any extension of Greek debt would be considered a default and trigger CDS contracts.

Back of Irish Government Will Crack

Think this crisis can be postponed to mid-2013? Including Ireland and Portugal?

I don't nor does Nouriel Roubini. The article continues ...

For now, economists including Nouriel Roubini estimate that Greece has a financing hole of about €60bn over the next two years.

Meanwhile, Ireland may be plunged into a "disastrous" sovereign debt crisis within three years as the cost of rescuing its banks mounts, Nouriel Roubini, who predicted the global financial crisis, said.

"Eventually the back of the government is going to crack" by "taking all the huge losses of the banking system," said Mr Roubini at a conference in Budapest yesterday.

The approach will "lead us with almost near certainty to a sovereign debt crisis in Ireland in a matter of two or three years".

"Eventually we're going to have a sovereign debt crisis that's going to be disastrous for Ireland and for the eurozone," Mr Roubini said.

Eventually will arrive sooner, rather than later.

Indeed, I would not be surprised if this crisis blew sky high within weeks or even days. That said, perhaps there is one more rabbit in the hat. There always seems to be.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Yemen Coastal Town Falls to Al Qaeda

Posted: 29 May 2011 10:20 AM PDT

The New York Times reports Militant Group Tightens Grip on Coastal Town in Yemen

An Al Qaeda group tightened its grip on a Yemeni coastal town on Sunday while a truce was holding in the capital city of Sana after nearly a week of deadly street fighting.

Opposition leaders claimed that President Ali Abdullah Saleh had allowed the city of Zinjibar, on the Gulf of Aden, to fall to the militants in order to raise alarm in the region that would in turn translate to support for the president.

Armed men believed to be from Al Qaeda appeared to have full control of Zinjibar, in the province of Abyan.

Also on Sunday, a breakaway military group called for other army units to join them in the fight to bring down President Ali Abdullah Saleh, piling pressure on him to end his three-decade rule.

"Security withdrew and left the city of Zinjibar to armed Islamic elements that looted government institutions," Ali Dahams, a leftist opposition official in Abyan province, said. Opposition groups have said they could do a better job of containing al Qaeda than the president.

In Sana, pedestrians and cars returned to streets where pitched battles during nearly a week of fighting killed at least 115 people.

The latest violence, pitting Mr. Saleh's forces against members of the powerful Hashed tribe led by Sadeq al-Ahmar, was the bloodiest since pro-democracy unrest erupted in January and was sparked by Mr. Saleh's refusal to sign a power transfer deal.

Forces loyal to Mr. Ahmar handed back control of a government building to mediators as part of the cease-fire deal, witnesses said. It was the first building seized by the tribesmen that was handed back as part of the truce intended to normalize life in Sana, where fighting with machine-guns, rocket-propelled grenades and mortars prompted thousands of residents to flee.

For years the US openly supported the corrupt regime in Yemen. What did it get us? Now Yemen is in financial and moral ruin and an alleged Al Qaeda group holds a city on the Gulf of Aden.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Sunday, May 29, 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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