By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/05/europes-problems-multiply/“>MacroBusiness.
It feels as if Europe has rolled the clocks back to 2011 as the effects of the ECB’s LTRO have now well and truly warn off and the markets appear to have reconnected with idea that the fundamental issues of the Eurozone have never been addressed.
Spain is 55% through its debt schedule for the year but, as the shadow of emergency operations passes over, yields are rising quickly:
Spain sold 372 million euros of a bond maturing January 31, 2015 at an average yield of 4.375 percent, after paying 2.89 percent April 4, with a bid-to-cover ratio of 4.45 after 2.4 in April.
The bond maturing July 30, 2015 sold 1.0 billion euros, had a yield of 4.876 percent compared to 4.037 percent May 3 and was 3 times subscribed following a bid-to-cover ratio of 2.9 percent at the last auction.
The bond maturing April 30, 2016 sold 1.1 billion euros with an average yield of 5.106 percent, higher than 3.374 percent March 15. Demand was lower than previously, with the bond 2.4 times subscribed after 4.1 times at the March auction.
But that wasn’t Spain’s only problem overnight:
The Spanish government moved Thursday to quell fears of massive deposit withdrawals in Bankia SA (BKIA.MC) as its shares were pummeled by an unconfirmed local media report that depositors were withdrawing savings after the government rescued the ailing lender last week.
“It is not true that there’s a deposit flight,” Deputy Finance Minister Fernando Jimenez Latorre told a news conference to discuss the country’s economic outlook. “Depositors are safer now than they were a couple of weeks ago.” He also dismissed the notion that Spanish banking sector could face massive deposit withdrawals.
Bankia’s stock fell as much as 29% early in the session, before recovering some of the ground and ending down 14% on the day.
And then this morning Moody’s took a blowtorch to the rest of the banking system:
Moody’s Investors Service has today downgraded by one to three notches the long-term debt and deposit ratings for 16 Spanish banks and Santander UK PLC, a UK-domiciled subsidiary of Banco Santander (Spain) SA. The rating downgrades primarily reflect the concurrent downgrades of most of these banks’ standalone credit assessments, and in five cases also Moody’s assessment that the Spanish government’s ability to provide support to the banks has reduced.
The debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.
The outlooks on the debt and deposit ratings for ten of the 17 banks downgraded today are now negative. For the remaining seven banks affected by today’s actions, their ratings remain on review for further downgrade, for reasons specific to each bank
It is now quite apparent that the sovereign and banking system in Spain are so intertwined that they are coming to be seen a one thing by the CRAs. The problem is this looks like a downwards spiral for both with no apparent solution to addressing the country’s underlying economic problems. Spain’s broader equities market was down another 1.1% overnight and 35% for the year, while yields continue to rise back towards their November 2011 peaks.
But it isn’t just Spain having trouble with banking deposits, and banking stability more generally. Greece is most certainly struggling from the same, but with the added issue that the ECB is refusing to work directly with a number of Greek banks:
Depending on who you talk to, anything from €700m ($892m; £560m) to €1.2bn was taken out of banks in the days after the election, out of total deposits of around €160bn. That total, in turn, is about a third lower than it was at the end of 2009.
At the same time, the ECB has apparently now said that it won’t directly lend to some Greek banks that it judges to be technically “insolvent”. These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can’t now expect to get back all of the money that they lent to the government.
That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB (though unlike the more direct form of ECB liquidity support, all the risk implicit in this so-called ELA lending is, formally at least, borne by the Greeks alone).
Please see this post for some further discussion of ECB/NCB interactions.
Just like Spain, Greece also managed a downgrade overnight with Fitch ratings downgrading the sovereign, sighting the outcome of country’s election as the major reason for the cut:
Fitch downgraded Greece’s credit a notch Thursday, to CCC from B-, citing political uncertainty over the country’s commitment to a crucial bailout and possible exit of the eurozone.
“The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU),” Fitch Ratings said in a statement.
Fitch said that a strong showing by Greek “anti-austerity” parties in May 6 parliamentary elections and the subsequent failure to form a government “underscores the lack of public and political support for the EU-IMF 173-billion-euro ($220 billion) program.”
In the meantime, as an interim procedure, Greece has installed a temporary cabinet in the lead up to elections:
Amid deepening economic and political upheaval and under the watchful eye of foreign creditors, Greece’s caretaker prime minister, Panagiotis Pikrammenos, on Thursday appointed a temporary cabinet that will be in place until June 17 when the second general election in a little more than a month is expected to determine the future of the troubled country in the euro zone and the broader stability of the bloc.
According to the polls Syriza’s leader Alexis Tsipras could be the next Greek Prime Minister, and he has kicked off his new campaign in much the same way he left the last one:
“There is no memorandum,” the Syriza leader, Alexis Tsipras, 37, told state channel Net. “The memorandum is finished politically because it has not produced results,” said Mr. Tsipras, referring to a deepening recession in the debt-wracked country.
“Mrs. Merkel is becoming increasingly isolated in Europe,” he said, referring to the German chancellor, Angela Merkel, whose country has taken the toughest line on Greek economic reforms. “Austerity has failed across Europe,” he added and he insisted that his party’s line does not expose the country to a possible euro zone exit even though European leaders have stressed that nonenforcement of the bailout provisions would achieve just that.
We’ll have to wait for the results of the June election before we can determine what happens next, but Mr Tsiparas isn’t alone in Europe calling for a serious re-think of the “fiscal compact”:
France’s new finance minister has reiterated that the country’s new socialist government will not ratify the European Union’s (EU) fiscal pact. Pierre Moscovici said the pact would have to include provisions for growth before France signed up.
The fiscal pact aims to ensure governments keep a tighter control of spending to reduce debt levels. French President Francois Hollande is campaigning for a greater focus on growth alongside austerity.
Austerity alone, he says, will not solve the eurozone debt crisis.
“What has been said quite clearly is that the treaty will not be ratified as is and that it must be completed with a chapter on growth, with a growth strategy,” said Mr Moscovici in a television interview, his first public comments since his appointment.
As I said at the start of the post it feels like 2011 again. A worrying mix of political squabbling on top of the fact that there is no credible plan to address the problems of the countries at risk.
Surely it’s time for another summit, or at least talk of LTRO 2.5.
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Beppe Grillo is the Man.
He’s a puppet of Fascism.
His ideologue, Gianroberto Casaleggio, is a freak who makes crazy appeals in favor of a nuclear holocaust to reduce human population and what not.
His economic advidsor, Eugenio Benettazzo, is often seen at meetings of Fuorza Nuova, the fascist party.
http://strugglesinitaly.wordpress.com/info-on-italian-politics/movimento-cinque-stelle/
Thanks for the link. I also read between the lines.
Beppe Grillo is supremely intelligent, a mensch with a great sense of humor and caustic wit, who has shaken Italy out of its torpor. We’ll see if he can shake Italians down to their deepest roots, so that they might become alert to their possibilities as living human beings of stupendous intelligence, political sagacity, creative talent, and vivacity. I hope he can shake great women out of their despair and into positions of dynamic leadership.
We’ll see what Beppe Grillo becomes in time. He is a passionate lover of Italy and her people, a people subjected to cruel despotism and the tyranny of dynastic dictatorships for centuries, not least of the Bishop of Rome and his entrenched despotic coterie. Only a man of Beppe Grillo’s love and audacity can rise to face the legion of despots and organized criminals that govern Italy’s citizens still. He has the will to face them, to call them by name, and to provoke the People to rise in fury against them. If he lives, he may rise to LEAD Italians out of bondage into a mutually productive, successful life that Dante, Machiavelli, and other condemned visionaries could only dream of.
Maybe this is not possible. Maybe, as you suggest, Beppe Grillo is only the “next Mussolini.” Maybe a “miracle” will happen it Italy. Maybe a “United States of Italy” will be formed: “e pluribus unum.” It is a matter of “mind over matter,” as Beppe Grillo demonstrates. The MMT conference was recently held in Rimini, and paid for by Italians “yearning to break free.” The human resources of Italy are boundless. Can it be that Italy’s time has come?
Does Beppe Grillo love Italy and Italians with the passion of Moses and (first and second) ISAIAH? (See: Abraham Joshua Heschel: “THE PROPHETS.”) If so, can he lead his People independently to the promised land?
This is a possibility. The reality remains to be seen. What’s the alternative?
“to face them, to call them by name”
This is his biggest obstacle, because calling out the “thieves” is calling out EVERY SINGLE ITALIAN. There is no-one who doesn’t cheat on their taxes, or who hasn’t asked for a tax-free “sconto”. There is no-one who doesn’t want special privileges and protections.
Just as there exists an underlying Protestantism which makes Americans feel as though being poor is their personal failing, the underpinnings of Italy are feudalistic, not to say tribalistic, and based on elaborate systems of privilege-seeking and protectionism if not outright criminal rackets. Everything is organized into familial and hereditary castes, most of which are invisible to the naked eye of the foreigner.
What he’s really asking to happen is that all that be dismantled, and that’s never going to occur. As an American, I respond positively to his message, but I’ve run across very few Italians who do.
I run into those who are just resigned to the fact that—while they would never be able to explicitly elaborate to me that modernity is over—jobs will be less and less in middle-class occupations like computer programmer, and more and more in feudal servitude, like vacation-property-caretaker, or whore. When I compare the American reaction to the Secret-Service-prostitution flap to the Italian reaction over Berlusconi’s bevy of bodacious babes… Italians were, like, “girl’s gotta eat…!”
Neither in Italy nor any other country I know of regular workers can cheat in their taxes: their money is taken from their salaries in advance and everything is so strictly regulated that for any person whose main income is a salary, cheating on taxes is in fact impossible.
But businesspeople… that’s another story: most of them cheat (in Italy and elsewhere) and their cheating is tolerated and even officially supported by the state, which keeps ridiculously low taxes on financial transactions, allows people to falsify their residence and does not spend enough in tax inspectors.
It’s the rich who cheat and then get bailouts from workers’ money. Let’s be clear.
Maju, that’s true about salaries, but you forget about the vast underground economy. It’s not only the wealthy or “business owners” who participate in this. When I was talking about taxes, I meant sales taxes, too. There’s not an Italian breathing who has never gotten a 20% discount from his plumber for paying in cash, or who hasn’t walked away from some minor transaction without a receipt (not holding on to a receipt for some specified number of meters from the place of transaction is illegal for the customer). Everyone in Italy is a lawbreaker, punto e basta. I’m not saying this is right, I’m just observing that that’s how things are.
Of course, it’s a situation which is manipulated by TPTB to create solidarity with gross tax evaders, just as we have in America those (not only on the right wing) who find it trivially easy to defend the rich: Americans imagine themselves as having solidarity with the rich, because they, too, want the possibility to become rich.
This kind of maverick populists reflect the discontent but are almost never any solution. I do not deny that the guy is smart and capitalizes the discontent but it’s clear that his success potentially serves other interests: keeping the discontent under control by means of building a non-revolutionary illusion of “change”, just like with Obama.
Maju, I keep trying to reply to your comment with the “Struggling” link, but something must be wrong with my text, because it keeps not posting…
What I most wanted to say is that… the issue of who’s backing Grillo brings up a general problem. Re-localization can be interpreted as a cri-du-coeur from one xenophobe to another, domestic production an insistence that women return to traditional roles, and addressing the problems inherent in our monetary system can be taken as shorthand for wrenching it from the hands of the Elders of Zion.
I don’t know how one insists on monetary reform without attracting nuts (like Ezra Pound, the inspiration for Casa Pound, another Italian rightwing movement referenced at the site you linked to above, or like Ron Paul).
Massimo Fini, another writer who has written about money in the style of Galbraith and Graeber, forseeing a return to localized economies, seems to have been semi-adopted by the Storm Front folks (though I can’t say whether he is aware of that). He has his own political movement, MZ (Movimento Zero), which has gotten just about that much “movement”: zero! When you read MZ’s manifesto (http://www.movimentozero.org/manifesto.htm) there’s nothing in it that any OWS’er would necessarily disagree with, but the call for smaller, more direct democracies is a—real or imagined—code word for racist practices or outcomes.
While I’m not a Grillo voter (exactly because he is not enough “leftish” for me), I don’t think that “puppet of fascism” is a correct description of him.
His whole point is that politicians are corrupt, and that this corruption causes all ills (economic or not) of Italy.
Also another important part of Grillo-think is that there is a lot of cronism between politicians and some Italian “big finance” guys.
In facts, Grillo’s blog resembles a sort of Italian edition of Naked Capitalism (but much weaker on economics).
His blog has an English version, so you can judge for yourself:
http://www.beppegrillo.it/en/
However this is one of his last posts as an example:
No one must be left behind
New words are needed. Important words. Solidarity, social participation, sense of community, sense of national identity. No one must be left behind. The entrepreneur who commits suicide, usually so as not to have to face his inability to provide for the family (how can you tell your wife?), is a curse that he doesn’t deserve and neither do we. The court of miracles, of beggars, that is thronging in our cities is getting even fuller of Italians. Even the people from outside the European Union are leaving Italy. One in four has gone back to their country or has gone elsewhere to seek their fortune.
We have lost a war for democracy. Many people fought for it on our behalf after the war and were killed for this. The list is never ending from Impastato to Ambrosoli, from Puglisi to Borsellino to Vassallo. The civil war didn’t finish in 1946, it’s been going on right up to the present. It has given rise to thousands of deaths, dozens of slaughters, the occupation of power by the P2, the end of the sovereignty of the State in the regions where organised crime reigns. And now the economic collapse of Italy. We have to create a social protection network to tackle the perfect storm that awaits us. We cannot tolerate the death of a citizen because of poverty, debts or loneliness. We either do things all together or the country will disintegrate into a thousand egoisms. A new dictatorship is possible. The citizen must feel protected by the State (and that’s not so), equal before the law (and that’s not so, it depends on his income and on the law firm he can afford), respected as a tax payer (not taken for a ride by an infinite series of amnesties and by the Fiscal Shield). The citizens must be able to recognise themselves in the State. It must be our mirror. We are the State. The time of carefully prepared desserts, of declarations of affection, of fabulous TV shows, has come to an end. The truth, that no one wants to say or even hear said, is that Greece will soon be in default and from that moment onwards, everything is possible. Meanwhile our politicians are entertaining themselves without making any real cuts and amassing useless costs for the citizens like the war in Afghanistan, the bomber planes, the parties, the newspapers, and the TAV starting from 22 billion euro. Those whom the gods would destroy, they first make mad.
PS: Follow the tour “Ballottaggi 2012” {tour for the second ballot}. Participate using the hash tag #m5sTour on Twitter and on Youtube or using the tag “MoVimento Cinque Stelle” on your photos and Facebook posts.
Today, 16 May, I’ll be in via Milano, quartiere Quadrifoglio in Garbagnate Milanese at 9:00 pm.
“The time of carefully prepared desserts, of declarations of affection, of fabulous TV shows, has come to an end.”
The original says something more like: “The time of empty promises, of making declarations just for effect, of carrying out a masquerade on TV, has come to an end.”
It’s devastating. What an ineffable tragedy. What incalculable loss. I weep.
Authorities in Frankfurt/Main are caught in a spiral of hysteria because of a 4-day long action announced by Blockupy that was supposed to start on WEdnesday and end tomorrow and include blockading the ECB as well as assorted other actions targeting banks-like things. The city forbid everything except the demo tomorrow. They cleared the Occupy camp next to the ECB on Wednesday morning and kept a heavy police presence in the city in anticipation of the arrival of 30,000 demonstrators from around Europe. Today the university has cancelled classes – for what reason I don’t know but I have the day off and I’m going into town to see what if anything other than police patrols is happaning.
Hollande is correct. How can any fiscal pact not include references to economic growth? What good are balanced budgets when you have flat or negative GDP growth and 20%+ unemployment rates? With a good part of Europe seeming to slip back into recession, Germany’s stance is untenable.
Spain and Greece are “old news”, so to say. What about the slump in the Netherlands (-1.3% interannual slump, four times as bad as in Spain)? What about not a single state West of the Rhine or South of the Danube growing above 1%?
NE Europe is growing (in some cases after a massive slump) but all the rest is in very bad shape.
…
As for Greece, I do hope that SYRIZA wins and forms a true left coalition but the reality may be much more somber. First, the conservatives of New Democracy may repeat victory (voting intention is concentrating in the largest parties again) and this time be able to form a new Troika-slave coalition with PASOK (we already know the results of that nefarious policy). Second, if SYRIZA wins, it will have trouble mustering a sufficient majority to form government (KKE wants Greece out of the EU and wants it now, PASOK wants it submitted to the banksters – neither seems pliable enough).
But Tsipras is right in relation to the euro: EU can’t legally expel a member and that’s the only way to expel a member from the Eurozone. Furthermore, there are states like Montenegro or Kosovo which use the euro as daily currency without being part of the Eurozone. Even if expelled (what is not legal), Greece would be able to use the euro.
Furthermore the actual bank notes of the euro are printed by the individual states. In a coordinated manner indeed, but no provision states that a member can’t keep printing euro notes. Some may call it “counterfeit” but Greece can argue that they are in their right, “sue me”, etc.
Of course the bulk of the money is not banknotes anymore but the state can maybe pay workers with such currency if nothing else is available.
What a Tsipras government will surely cause in the mid run is a suspension from EU membership. That’s the closest to expulsion that the legal frame allows. It has only been used and only partly once before: against the Nazi-Conservative government of Heider in Austria. But while Heider could muster nearly zero support, a Greek Left government is bound to have many sympathies, increasing the disaffection of the European citizens against the EU and even their own “nation”-states.
The Bankia panic seems to have been based on a unsubstantiated rumour of a bank run.
What people don’t seem to understand about Bankia is how they divided the good and bad assets when Bankia had its IPO. The holding company of Bankia (BFA) holds all the bad stuff, plus a 45% stake in Bankia (the good stuff). So even if the bad stuff goes to zero, the deposits (and even the shareholders) should be ok. The main risk to shareholders would be if the government tried to dump its stake, but even that wouldn’t dilute any existing shareholders.
There was a social-political “bank run” of sorts promoted by May 15 activists who blamed Bankia for most of the foreclosures in the Madrid area and asked customers (mosty working class citizens) to retire their money from the formerly public savings bank. Not sure how related it may be.
What is clear to me is that the “bankarization” promoted by EU is not working when the formerly public savings banks have to be reabsorbed by the state, not before some oligarchs like Rato plundered them.
Are we in a time warp? That long delusion we just lived through, the Cold War, was only a substitution of finance for politics. And now we are right back where we started almost a century ago. It proves the old adage that everything is politics.
The social-liberalism (welfare state) of the Cold War was indeed an illusion caused by the real threat of revolutionary forces. Now that the threat seems contained Capitalism is shamelessly going back to the roots… sparking a new revolutionary wave in its own heartland – that’s how dialectics work, not linearly but in 3D spiral fashion.
That’s why we need a trialectics! ;-)
But is it not possible to to have an evolutionary, as distinct from revolutionary, wave, as in Gould’s “punctuated equilibrium” model?
I’d say that revolutions are the points of punctuated equilibrium in fact, the paradigm shifts.
But how do we reach revolutionary situations in society? It is dialectical: the thesis (the extant system) is confronted with its weaknesses and shortcomings and limits and either it is flexible enough to adapt to them or it stagnates and decays (or both).
As it decays it becomes less able to adapt and tension accumulates until, like an earthquake, it is liberated in a revolutionary manner, shifting the paradigm towards a new thesis.
I don’t see any opposition between both explanations of evolutionary change: they seem to complement each other quite well.
The crisis opens up a widow of time for revolutionary forces to gather the requisite strength. Enough liquidation and capital will always be able to enter a fresh round of accumulation.
Which should lend urgency and energy to the situation. I suspect we’ll start finding out pretty soon how much.
No much strength needed: revolutions have been described quite correctly as throwing down a rotten door… what the crisis makes is to rot the door, the kick will come sooner than later and does not need much strength.
I wish my hero the shoesalesman was still around because I think he’d make sense of this with a lucidity that would dazzle us speechless.
He would nail it to end discussion. Although I’m not at all sure what he’d say.
He’d probably start from some debauched iconic and invented descendant of the protagonist of La Chute and go from there. Where he’d go, I can only speculate.
But wherever it would be, it would be like watching a meteor blazing in suspended time, slowly flaming with a brilliance that rivals the sun.
It would be amazing. I don’t think I’ve come across any other writer capable of such astonishing illumination as the shoe guy himself. Seriously. AC was The Man. I’d go shopping at his store, but only to get his autograph. I couldn’t buy any shoes from him, I’d be too nervous and intimidated.
A video with what appears more free thinking types with some English explanation.
http://www.youtube.com/watch?v=TZTguvcgmQk
The European experiment is showing its true colours now ….. things are beginning to bubble with the most self aware of people but the rest have become zombified by decades of neo -liberal brainwashing.
A lot of church bells and a mild confrontation with the police
http://www.youtube.com/watch?v=zQAAK1Avmlg
Nothing like 1920s Germany me thinks
None of these people have memories of Flanders fields in their heads.
Dear DoC;
Maybe not Flanders Fields, but very soon, as in this summers American Party Conventions, horrified visions of a new Anacostia Flats ‘Cleansing Operation.’ My moneys on this summers Security Forces responses to #Occupy Charlottes demonstrations showing the Kleptocracys true colours.
It would be an educational radicalization . . . if radicalization is educational. The experiment is well worth running, for those who are ready to risk the hi-tech control and suppression methods awaiting them there.
Can something be so sad, it’s funny? If so, that describes the commentaries about the euro nations.
These countries voluntarily surrendered the single most valuable asset any nation can have — Monetary Sovereignty — and now they are puzzled about why they are poor.
Imagine cutting off both legs, then wondering why walking is difficult. One day the realization will hit them that a monetarily non-sovereign nation cannot exist long term without money coming in from outside its borders.
Meanwhile, I truly feel sorry for the citizens who suffer the results of their leaders’ ignorance about Monetary Sovereignty.
I talked to an Italian commercialista acquaintance prior to the euro’s roll-out. He was all for it I kept saying “but if you don’t have the power to tax and set interest rates, then you can’t control your money”. He blew me off because I was 1.) a woman, 2.) a foreigner, 3.) not part of the esoteric inducted caste of adepts.
He gave me a souvenir coin, a faux-euro that says “My First Euro” on it. Like a child’s toy. I don’t know who minted it but I still have it.
I have a One Hundred Trillion Zimbabwe Dollars note somewhere in my papers . . . if I haven’t lost it.
Sighting instead of citing. Warn instead of worn. No one is paying attention to diction anymore. ;)
Dear Grammarian;
Heaven forfend good sir or madam. I do personally blame the “New Media” and its obsession with quick cutting and short attention span pacing. One assured way to ‘put over’ propaganda is to assault the viewer or auditor with too much data in too short a time period. Bypasing the ‘cognitave’ abilities with an almost direct appeal to the unconscious is now standaed practice, be it to sell soap, or the latest pseudo-sincere politico. We here at the Deep South Observation Post eschew all cable television and most radio. Our lives are commensurably more productive and fulfilling. Be of good cheer!
Your Humble and Obedient Servant,
ambrit
When people say that paying attention to growth is essential, this can mean one of two things: either cutting into the fat of the huge European bureaucracy or borrowing even more money to hire more bureaucrats.
The first is what should be done; the second is what Hollande wants to do.
The first brings real growth; the second brings more debt and more chaos in the economy.
Saying one when thinking of the other can be VERY misleading.
“Growth” itself is the problem. We have reached the Limits to Growth.
You’re somewhat right about choices, but “the first” choice does not bring “real growth”. It only stems the hemmorhaging slightly, not to say that it isn’t worth doing.
Yes, growth is a key problem and a central one. Against scholastic Economics but supported by Physical Science, energy (wealth, resources) is not created nor destroyed, just transformed. Every single euro of growth is taken from a non-accounted (but real) source like Nature or domestic economies.
But of course that’s a problem that only has one solution: an eco-socialist political system, radically different from the predatory one we have now.
It’s also a global and not just a European problem (although I wouldn’t mind being avant-guard for the good, relly).