Mish's Global Economic Trend Analysis

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Ceasefire in Tatters; Separatists Reject Losing Proposition; Poroshenko Rejects "Green Corridor" Posted: 16 Feb 2015 10:31 PM PST Battles continue northwest of Lugansk, near Mariupol, and in other locations, in addition to the Debaltsevo cauldron. The only reason for the ceasefire that I can see was for Ukrainian president Petro Poroshenko to allow his troops to escape the Debaltsevo cauldron. The separatist refused the ceasefire losing proposition because the intent of Kiev was known from the start. Kiev never intended to honor Minsk II, having denied upfront amnesty and constitutional agreements. (See Ceasefire or Not? Will Kiev Honor Agreement? Poroshenko Says "Prepare for Martial Law"). Also note there never was agreement on the Ukrainian forces surrounded in the Debaltsevo cauldron. Situation Hopeless for Ukraine The Ukrainian situation is hopeless given the rebels have said that the ceasefire does not oblige them to lift the encirclement. And from Kiev's perspective, there is no longer a reason for a ceasefire. Translation Difficulties Continue Colonel Cassad reports "Debaltseve Ours. We Do Not're Gone" More accurately, that is what Google translate says Cassad reports. I pinged Jacob Dreizin asking him what "Мы не уйдём" means. It does not mean "We Do Not're Gone", but rather "We Won't Leave". In context it means "Debaltsevo is ours and if you think we're leaving it, you're crazy". My synopsis of the rest of the article follows. An associate of Yushchenko Balogh [former minister of emergencies in Ukraine] made ​​a suggestion 'let's not repeat the situation with the airport.' But such statements are clearly not in the political mainstream in Ukraine. Propaganda hastily sculpts another myth about the 'Ukrainian Stalingrad' under Debaltseve. This will end as pointless and bloody as the airport 'cyborgs'. People die for no reason. The Debaltseve truce is moribund. Ceasefire in Tatters The Guardian confirms the above in its report Ukraine Ceasefire in Tatters as Clashes Escalate in East. Fighting has escalated in eastern Ukraine as government and pro-Russia forces struggle for control of the besieged town of Debaltseve, leaving the new ceasefire in tatters on its second day. The Ukrainian military said on Monday that rebels had fired on its troops 112 times in the past 24 hours. At least five Ukrainian fighters have been killed and 25 wounded since the ceasefire began on Sunday, a military spokesman, Vladislav Seleznyov, told the Guardian. Most of the fighting was concentrated around Debaltseve, where thousands of soldiers have been cut off from the main Ukrainian lines near Artemivsk by rebel artillery. Pro-Russia forces have been trying for weeks to take the town, which holds a rail junction connecting the main rebel centres of Donetsk and Luhansk. The rebel leader, Alexander Zakharchenko, said this weekend his forces would observe the ceasefire everywhere except in Debaltseve. Kiev has repeatedly denied that Debaltseve is cut off, despite evidence to the contrary. "These aggressive actions and statements by the Russia-backed separatists threaten the most recent ceasefire," the US State Department said in a prepared statement. "We call on Russia and the separatists it backs to halt all attacks immediately." Donetsk negotiator Denis Pushilin said on Monday that pro-Russia forces would offer a "green corridor" through which the Ukrainian troops in Debaltseve could leave "without weapons and vehicles". But the Ukrainian president, Petro Poroshenko, rejected similar proposals during bargaining last week in Minsk, the Russian newspaper Kommersant reported at the weekend. US Nonsense and Ukrainian Stupidity "These aggressive actions and statements by the Russia-backed separatists threaten the most recent ceasefire," the US State Department said in a prepared statement. Let me point out the obvious: There never was agreement on the Debaltseve cauldron, and it is Ukraine, not the separatists who have openly rejected terms of what was agreed upon. This is not taking sides. Rather it's a simple point-by-point assessment of the accord. Poroshenko Rejects "Green Corridor" The lunatic masquerading as president of Ukraine has committed his troops in the Debaltseve cauldron to their doom. The Guardian reports "Debaltseve has been virtually cut off from the rest of the Ukrainian forces. A group of Ukrainian soldiers who broke out of Debaltseve on Sunday told the Guardian their column of seven trucks had come under heavy fire from rebel positions despite the ceasefire, and two of the vehicles were destroyed. They said that more than 60% of the city has been ruined by near-constant fires and shelling, and Kiev's troops are trapped there with dwindling ammunition and supplies." The above Guardian quote is nearly the same as Cassad's assessment "This will end as pointless and bloody as the airport 'cyborgs'. People die for no reason. The Debaltseve truce is moribund." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Bailout Talks Collapse in 4 Hours; Greece Says Extension is "Absurd"; 79% Support Syriza's Negotiation Stance Posted: 16 Feb 2015 12:11 PM PST Greece Says Extension is "Absurd" Talks between Greece and eurozone officials were expected to last through the night. Instead Greece Bailout Talks Collapsed in Acrimony after four hours. A crucial meeting of eurozone finance ministers over the future of Greece's bailout broke down in acrimony after Athens angrily rejected the bloc's insistence that it extend its current €172bn rescue as "absurd" and "unacceptable". It is the second time in five days that negotiations between the new anti-austerity Greek government and its eurozone creditors have collapsed and it means Athens, whose public finances are deteriorating fast, could soon be left with no European financial backstop. The eurozone gave Athens until Wednesday night to reverse course. Jeroen Dijsselbloem, chairman of the eurogroup of finance ministers, said the time available for a Greek request was almost out: "We can use this week, but that's about it," he said. "There was a very strong opinion across the eurogroup that the next step has to come from the Greek authorities," he added. Monday's talks collapsed when Yanis Varoufakis, Greek finance minister, strongly objected to a draft statement according to which Athens would drop its fierce opposition to prolonging its bailout. Mr Dijsselbloem said holding another finance ministers this week to discuss Greece was contingent on a request for a bailout extension from Athens. He added that he had spoke with Donald Tusk, president of the European Council, and that Mr Tusk had no intention of calling a summit of eurozone heads of government. 79% Support Syriza Negotiation Stance It's easier to take a hard stance when you have the support of the country as does Syriza. The BBC has poll data in its report Greece Rejects EU Bailout Offer as 'Absurd'. Talks between Greece and European finance ministers have collapsed early after Greece rejected the EU's bailout offer as 'absurd' and 'unacceptable'. Before the meeting, German finance minister Wolfgang Schaeuble had already said he was not optimistic a deal would be reached. Mr Schaeuble told German radio: "The problem is that Greece has lived beyond its means for a long time and that nobody wants to give Greece money any more without guarantees," Mr Schaeuble said. Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds. The second part of the plan would see the county's debt refinanced. Part of this might be through "GDP bonds" - bonds carrying an interest rate linked to economic growth. Greece also wants to see a reduction in the primary surplus target - the surplus the government must generate (excluding interest payments on debt) - from 3% to 1.49% of GDP. In Greece last week, two opinion polls indicated that more than three-quarters of Greeks supported Mr Tsipras's hardline stance. According to the polls, 79% of Greeks backed the government's policies and 74% believed its negotiating strategy would succeed. Drop the Debt Rally Protesters showed their solidarity with Greece at a rally in Trafalgar Square over the weekend. AP How Long Can Greece Last Without Funds? Andrew Walker, World Service economics correspondent, offers his opinion on how long Greece can last if the ECB pulls the plug. Two pressing financial issues loom over Greece: whether the government can pay its bills and the stability of the banks. Greek officials have said the government could keep going for several months, but there are doubts. How long it takes depends to a great extent on Greek taxpayers. The banks have already seen money being withdrawn and increasingly need central bank loans. If there is no bailout programme, the European Central Bank could pull the plug on the banks. If it came to that, it really would mean a major financial crisis, with perhaps the imposition of extensive financial controls to prop up the banks and possibly even the re-introduction of a national currency. It's hard to nail down a date by which an agreement must be done to avert some sort of financial Armageddon, because it depends on the actions of taxpayers, bank customers and the ECB. But time is getting short. Primary Account Surplus How long Greece can remain on the euro depends on how long Greece can keep a primary account surplus. Tax revenues are key, but so is a run on the banks. If the ECB pulls the plug, and it will if talks break down, Syriza will have no choice but to quickly see capital controls. Then it will be up to the tax collectors. Given that capital controls can come at any time, I once again repeat my message to Greek citizens Get Out While You Still Can; Buy Gold. For further discussion of how Greece can default and still stay on the euro, please see ... Third Greek Bailout? Another €53.8 Billion Needed? Primary Account Surplus Revisited Competing Views: Grexit Would Be "Lehman Squared" vs. No Problem; Where to Point the Finger When it Blows Playground Bully Theory vs. Eurozone Gang Rules; The Only (and Ironic) Solution By the way, it appears we have the answer to this question: Austerity Queen Angela Merkel Ready for Compromise on Greece? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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