Selasa, 31 Januari 2012

Highway to Hell ? Happy Tuesday Edition !


European Bailout Infographic: Presenting The Truckloads Of Cash Needed To Rescue The Insolvent PIIGS

Tyler Durden's picture




...  No, literally truckloads. Our friends at demonocracy.info have been kind enough to put together an infographic that explains the European bailout in simple, visual terms, that even the most innocent of FTL truckers can grasp without much exertion, for the simple reason that it shows all the bailouts amounts in terms of trucks of cash. And here is the kicker: one would need a 13 lane highway, filled with trucks bumper to bumper, stretching for about 3 kilometers to represent the €2.91 trillion in total amounts owed by the PIIGS and their citizens (Click the link above for great info graphics , not that we should   worry about this , right ? ) 
     Well , a brief  rehash yesterday's Summit where nothing much got accomplished which wasn't already expected - the ESM got approved ( details to be supplied later ) , the fiscal compact was approved ( by 25 out of 27 countries - meaning its not legal under EU law as a binding treaty for the 27 country EU and naturally it has been watered down to boot ) , nothing has been accomplished with Greece ( second bailout and PSI deal coming in days , wait for Godot continues. ) Sarkozy continued to make a fool of himself ( starting a fresh row with the UK by saying at one point that the UK had lost its industry ) , vainly  trying to convince voters in France he's worthy of a fresh term in office ( one knows a wrecking hates to stop swinging until the building is totally demolished .)  
     Speaking of Greece , allegedly , the long awaited debt swap supposedly is coming to a head - with a coupon perhaps as low as 3 percent ! Good for Greece , very tough for private investors - naturally the devils will be in the details. At 3 percent and depending on the duration of the payout , the haircut could hit 80 percent ! Which means some of the hedge funds likely will litigate. And of course since 100 percent participation is required , that means Greece will have to pass some type of Collective Action Law to cram down those unwilling to take the sledge hammer write down voluntarily ! Which means CDS finally get triggered - which benefit the basis traders ( traders holding Greek bonds bought fairly recently at cheap prices with greek CDS as a hedge ) And of course the battlefield for the hedgies will be those bonds maturing on March 20th , which allegedly is held by hedgies seeking full payment. Can you say massive game of chicken going on ? And the talk of the ECB and IMF taking a haircut - seems to have vaporized ,  I guess ( like that MF Global customer money ) Speaking of other fables , Greek PM L-Pap say not only must the PSI talks get wrapped up this week , but the overall greek bailout 2 talks must be completed as well ( 130 or 145 billion euros ? ) Wonder how that gets wrapped up when Germany has said no further sovereign contributions above the 130 billion mark will be forthcoming - I guess the details will be coming late , along with Godot.
    One last item , a chart of the day . european unemployment . Good news for Germany , bad news for the eurozone and Italy. Germany sees its unemployment drop to 6.7 percent , a twenty year low. Meanwhile for Italy , the numbers has hit 8.9 and the eurozone at large - 10.4 percent . Youth employment remains staggeringly high across the Eurozone. Here is the chart , read it and weep . Happy Tuesday everyone  : 

Eurozone unemployment








Senin, 30 Januari 2012

Another Monday , Another Summit In Europe !

     Good morning ! Today is the latest chapter in the ongoing Summit saga for the slow burning Europe in Crisis soap opera. Coming on the heels of the last Summit in December , today we have the heads of the European Council meeting to once again attempt to fool markets that they are capable of solving a problem beyond their grasp - good luck to that ! In the run up to the Summit , activity was frantic - we saw the EU impose a oil embargo on Iran - not effective until July 1st for pending contracts ( so that the crumbling economies of Greece , Spain and Italy just didn't flatline immediately. It remains to be seen what retaliation , if any , comes from  the Iranian threat to block exports to Europe or some countries in Europe ( probably Greece , Spain and Italy earlier than the EU plan .)  Fitch downgraded various countries in the Eurozone on Friday  - Italy , Spain Slovenia saw their credit ratings cut two levels , Cyprus and Belgium saw their credit ratings cut one level - the reaction in the euro was it actually rose as this was discounted by markets !

     The private investor debt swap negotiations creep onward with imminent deal , good progress , close to a deal announcements predictably provided . as of this morning , no announcement has been made as to an actual deal being reached nor have any specific  terms been announced - the imminent deal will imminent tuesday as well. Probably the biggest announcement was the leaked paper , attributed to Germany , that for Greece to get its second bailout of 130 billion euros  ( or is it 145 billion euros  ) , they must relinquish control over their budget to a Troika selected Budget Commissioner and pledge to repay debt first before any other governmental spending would be allowed. the predictable fire storm from Greece has threatened to overwhelm any productive outcome from the latest faux Summit. As it stands presented - no PSI deal , no Greek rescue deal . expect an announcement that the ESN has been agreed , expect an announcement that the idea of a Fiscal Compact has been agreed - details to be supplied later of course !

     As one would expect , the uncertainty is somewhat reflected in stocks and commodities ( moderately lower for the major Bourse in Europe , notably lower for US Futures , gold and silver off so far ) , risk off is better expressed by looking at CDS in europe , as follows :


                         5Y                     10Y            5/10's Rolls                     
ITALY          416/426 +21        393/413      -23/-13
SPAIN          368/378 +20       342/362       -20/-10
PORTUGAL    39/40.5 +0.5      41.5/44.5      2.5/5.5
IRELAND     610/640 +5          440/510     -180/-120
GREECE        62/64   0              63/67         0.5/3.5
BELGIUM     238/248  +8         226/246       -14/0
FRANCE      169/174  +6.5    190.5/198.5     19/23
AUSTRIA     170/176  +5      184.5/194.5     14/19
UK                77/81   +2           92/98          14/18
GERMANY      88/91   +4.5    107.5/113.5     18/22

Housing data from China was not encouraging , note the following : 

  • New home transactions by area plunged 89% W/w in Jan. 23-Jan. 29 to 4,400 sq/m, Uwin says in e-mailed statement.
  • Sales during Chinese New Year holiday decline to lowest level since 2006 for same period; volume 36% of 7-yr avg. for CNY holiday
  • Avg. new home price down 41% W/w
  • New home supplies plunged 87% W/w
  • Property developers may have to continue price cuts for cashflow to survive, Uwin analyst Zhijian Huang says
  • China may remove or relax home purchase restrictions during June-Oct period: Huang
  • Policy turnaround may boost sales before home prices rebound moderately: Huang
Between disappointing news from Shanghai and the confusion from Europe , various Bourses saw red - Shanghai was off 1.47 percent , the Hang Seng was off 1.66 percent , the BSE was off 2.15 percent , Jakarta was off 1.79 percent , the Strait times was off 1.24 percent and Seoul was off 1.24 percent.  The Lunar Holiday is over and Asian investor clearly had a tad of a hangover - Japan and Australia were not as gloomy , off just .54 and .32 percent respectively. 

     So , where are things presently ? Greece's Prime Minister  is warning that the country is on the brink and faces the spectre of bankruptcy and all of the dire consequences that ensue - unless the country's international backers agree to a new bailout. Ireland is warning its votes that if a referendum is required on the new fiscal Compact and the voters vote no , Ireland  might have to leave the Eurozone. meanwhile , German Finance Minister Schauble has confirmed that a bigger contribution from public sector creditors as part of any Greek debt deal is not up for discussion at the Summit. Sarkzozy has pledged to institute a Finance Transaction Tax in France ( conveniently set to start in August , after the French elections ) , the Spanish Prime Minister has pledged to pass a decree on further bank restructuring next month. So , in sum , we see promises , threats , decrees coming forth , austerity as high as an elephant's eye and taxes being imposed flying into a european recession . Great for confidence. 

     So , as we see another Summit come and go - have the caters started working on the menus for March yet - the next big summit , we grind to the eventual and inevitable default in Greece. Equities grind lower after personal spending was flat last month ( income allegedly up 0.5 ) Portugal is still grinding toward a second bailout as its debt continues to move wider day after day. And a third Aircraft Carrier has been deployed to the Persian Gulf. Stay tuned - will other events eclipse the eventual and inevitable blow ups of sovereigns states in Europe ? who really knows - just bukcle up , its going to be a bumpy ride ! 

Sabtu, 28 Januari 2012

Weekend Post - Open thread !

Happy Saturday ! In light of the news item that Germany had proposed of Friday  that Greece bow down to the EU and surrender budgetary control to Brussels , naturally the question was how would Greece respond ? Well , here is the Greek response !


Greece 'will not discuss' EU budget control


Greece will not cede control over its budget to the European Union as has been proposed by Germany as a condition for a second bailout, Greek government sources have said.

"There is effectively a 'non-paper' that was presented to the Eurogroup," one of the sources said on Saturday, referring to reports that Germany had submitted a proposal to have the eurozone assume control over the Greek budget before it receives a new bailout.
"Greece will not discuss such a possibility," said the source. "It is out of the question that we would accept it, these are matters of national sovereignty."
Al Jazeera’s Andrew Simmons, reporting from Davos, said the possibility of the EU having any oversight of a member-state's buget has huge implications for the future of the European bloc.
"Basically, the EU would be taking over the budget and telling the Greeks what they can do and they can't do," Simmons said.

"What their saying in Greece point blank is you can't do this," he added.

   So , who is bluffing here - Greece or Germany ? Is surrendering  sovereignty over their budget and pledging payment of debt before engaging in any other state spending  pre-condition for bailout number 2 ? By the way , is the second bailout 130 billion or 145 billion - and what happens if Iran cuts off their oil to Europe ? Oil jumping to 140 or higher for Brent will blow up the budgets of Greece , Italy and Spain as surely as any bunker bomb !  Even if the Greek government chose to do , who believes this would go down quietly with the Greek people and what about the military - where do these vital interest groups stand on the latest Troika demands ? Watching this unfold , what must the people of Portugal , Spain and Italy think ? Do they hear the whistling of the executioner's blade coming down toward their necks as well ? Stay tuned - things are starting to move a bit faster......

Jumat, 27 Januari 2012

Has It Comes Down To this - Is Greece About To Become The Eurozone's First Vassal State ?


(Reuters) - Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday.
"There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.
The source added that under the proposals European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy.
"This could be carried out even more stringently through external expertise," the source said.
The Financial Times said it had obtained a copy of the proposal showing Germany wants a new euro zone "budget commissioner" to have the power to veto budget decisions taken by the Greek government if they are not in line with targets set by international lenders.
"Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time," the document said.


     So , what's involved here ? First , Understand unless Greece submits , there is NO second bailout ! Second , what must Greece submit to - a)  they must submit legally to commit absolute priority to future debt ! Now we see why the Troika is seeking further guarantees from  the political parties to kiss the Troika rings. Stat revenues first and foremost has to go to debt payment- only then can the poor Greeks spend money elsewhere ! 2) Greece must relinquish control over its national  budget to a Troika selected stooge ! Unbelievable stuff. and when , not if the Greeks don't comply ( as judged by the Troika ) , the Budget Commissioner of Greece has the power to tommy hammer Greece silly - think Greece has seen austerity up to this point ? It's just getting started friends. and this is the path that Portugal , Ireland , Spain and Italy will travel in the fullness of time. After the PIIGS , the next group of  vassal states will be identified ( you can see which ones have the bullseye on their backs already ) , until the Troika runs the entire show ! One by one - watch the countries drop  , falling under the control of the Troika - until the dream of the EU Super State has been achieved ! 

     Sadly , are the Greek political parties in a uproar over the Troika edicts ? Heck , you know lapdog PM L- Pap is part of the Troika plan. But what about the Pasok , New Democracy and LAOS parties - have we heard their loud and angry voices yet ? There has been a symbolic gesture ( the reform Article to deregulate the Pharmacies failed ) , we have seen the typical political blustering , but what will these pols do when it comes down to the rubber hitting the road ? Is saving Greece more important than winning the April 8th election ( assuming it occurs on that date anyway and have the parties considering what they might be presiding over anyway  ) ,  what will these parties agree to for their hotly sought after  election to be held on time  ) but rest assured , L- Pap is about to crack heads to achieve his masters' mission ! As noted below : 

Prime Minister Lucas Papademos is due to meet Saturday with the leaders of the three parties in his coalition government as he attempts to obtain agreement on the demands for reforms made by the European Commission, European Central Bank and International Monetary Fund, commonly known as the troika.
Papademos will attempt to obtain a clear commitment from PASOK’s George Papandreou, New Democracy’s Antonis Samaras and Popular Orthodox Rally (LAOS) chief Giorgos Karatzaferis on the measures requested by the troika.
The failure of some PASOK and ND deputies to fully back a reform bill earlier this week has caused concern that Papademos will have trouble passing the legislation the troika has requested. The 10-page document distributed on Thursday calls for extra cuts worth 2.2 billion euros, 150,000 firings in the civil service as well as a series of structural reforms.
Papademos is due to take part in the European Union leaders’ summit on Monday and wants to travel to Brussels convinced that he has the backing of all three party leaders. There is considerable pressure on Greece to show a clear commitment to the steps being requested so that Athens can receive a second bailout, currently slated to be 130 billion euros.
“Greece has not only to commit itself, Greece has to deliver. Not all of the commitments have been fulfilled. That is one of the critical issues to confidence,” German Finance Minister Wolfgang Schauble said at the annual World Economic Forum in Davos Friday.
However, there were signs Friday that Papademos could face a tough task in extracting support from all three party leaders. Speaking in Parliament, Karatzaferis made it clear that he would not sign any written commitments if they were requested.
Speaking to Reuters Friday, Papademos indicated he was hopeful that talks with the troika could be concluded soon. “The aim is to complete the discussion with the troika by the middle of next week at the latest,” he said, adding that Greece had made some positive steps. “Much more has been achieved than sometimes appears to the public. There is some slippage in the implementation of the fiscal adjustment program and the reforms but internal devaluation is already taking place.”
Papademos added that the 2011 budget deficit would come in at about 9.5 percent of GDP and that there might be modest growth next year.




Things that make you go Hmm....... And a a Break From Greece !

   Well , good morning All ! Just another day , waiting like Godot to see what Plan 12 from Outer Space gets put forth for Greece's neverending PSI debt swap and eternal bailout .  A few hours to kill before US GDP - have to love a good piece of fiction , right ? Anyway , just as a open post , here are a few things that made me go hmm today ! First up , anyone buying the notion that 35 pounds of cocaine ( street value about $ 450,000 )  allegedly sent by a mexican drug cartel went to a dummy address .... did the wrong dummies screw up the intended transaction ? Nice bribe perhaps , hard to understand why send the dope to the UN rather than some other NYC address - last time I checked , there's much more security in place at the UN than a  Brooklyn bodega.


1) Two forged diplomatic pouches containing a total of 35 pounds (16 kilos) of cocaine were delivered last week to the UN headquarters building in New York, according to a UN official speaking on condition of anonymity.
The packages, delivered to the mail room, were singled out Jan. 16 by security staff during a scan, according to the official, who was not authorized to discuss the matter publicly.
No recipient was identified on the shipment, which was sent from Mexico City, and the badly forged UN logo on the parcels was an effort to get the shipment across the border, the official said.
“Two suspicious mail bags were intercepted by the Security and Safety Service at United Nations headquarters in New York,” according to a statement released by the UN spokesman’s office, which declined to describe the contents.
“The United Nations nor anyone located in the United Nations was the intended recipient of this delivery and the bags were not UN bags, diplomatic or other,” according to the statement.
     Well , I guess that's the story and the UN is just going to stick with that one - until someon figures how to get the coke from the NYPD ! Second item that made me go hmmm..... I see the UN Security Council is set to debate a draft resolution supporting the Arab League plan for Assad to relinquish power..... Russia still stands firmly against it for now. Say what you like about Syria , this appears to be the Libya movie all over again. Consider the state of Libya today after the power grab there.
Russia says it cannot support the current version of a joint Arab-Western draft U.N. resolution on Syria because it “does not take into account” Moscow's positions on how to end the 10-month-old political crisis.
  

2)  U.N. Security Council to hold closed talks on Syria situation

By the CNN Wire Staff
updated 11:20 PM EST, Thu January 26, 2012

Click to play
Pillay: Tracking Syrian deaths diffiicult

(CNN) -- The U.N. Security Council will hold closed-door talks Friday afternoon on the situation in Syria, the British and French delegations reported Thursday night on their respective Twitter feeds.
The discussion -- set to start at 3 p.m. -- comes as members weigh a draft U.N. resolution on Syria, obtained by CNN this week, that calls on "all states" to take steps similar to Arab League sanctions imposed in November.
Arab League Secretary-General Nabil el-Araby and Qatar's prime minister, Sheikh Hamad bin Jassim al-Thani, will travel to New York for talks with the United Nations on Monday, an Arab League official said Thursday. They will meet with the Security Council during the visit, said the official, who cannot be named because he is not authorized to speak to the media.



The 22-member Arab League has called on al-Assad's regime to stop violence against civilians, free political detainees, remove tanks and weapons from cities and allow outsiders -- including the international news media -- to travel freely in Syria. On Wednesday, Syria's government agreed to a one-month extension of the league's monitoring mission there.
     The third item was a piece on Iran that struck me as just a tad too pat , smacking of hubris.....

3)  Citing a number of officials and reports, the New York Times said that estimates that a strike on Iran’s nuclear facilities “would set off a catastrophic series of events” is considered by some to be “partly a bluff,” and that these estimates are accepted at the top levels of the Israeli government.
  Israeli officials and academic experts think that Iran’s threats of retaliation to a possible strike against it are a bluff, the New York Times reported on Friday.
The newspaper said it had spoken with eight current and recent top Israeli officials, and that these conversations suggest that “since Israel has been demanding the new sanctions, including an oil embargo and seizure of Iran’s Central Bank assets, it will give the sanctions some months to work; the sanctions are viewed here as probably insufficient; a military attack remains a very real option; and postattack situations are considered less perilous than one in which Iran has nuclear weapons.”
One retired official told the New York Times that based on past scenarios including threats from Saddam Hussein to “burn half of Israel,” and threats from Hezbollah which resulted in limited harm to Israel, “If you put all those retaliations together and add in the terrorism of recent years, we are probably facing some multiple of that.”









Kamis, 26 Januari 2012

Dear Mr. Secretary - You Have Been Invited To A Care To Explain Yourself Soiree !


You Have Been Invited To A Soiree ! Happy Thursday !

http://www.telegraph.co.uk/finance/debt-crisis-live/9040103/Debt-crisis-live.html

     It's hard to separate all of the EuroGroup Fin min meetings from the other hastily scheduled  EuroGroup meetings , which meetings are Super Summits  versus Informal Summits . is today a Merkozy special meeting or teleconference or are we waiting for the while smoke to arise after a Merkel - Sarkozy - Monti meet and greet tomorrow ? Do any of these sessions produce anything other than the assurances more meetings will follow ? So let's just have a Soiree - after all , the host of all hosts ( Mr Rompuy ) , is pulling out all of the stops !

   Well , Ben Bernanke had his two day regularly scheduled meet and greet with his Fed Reserve Comrades - and when the smoke cleared , what did we learn ? First , we learned ZIRP will now continue until the end of 2014 ( guess that's when the cows actually come home  ) or maybe what the Fed meant we really aren't ever going to end ZIRP - why didn't they just say the end of 2020 ? In that way , we could have seen ZIRP end , Greece see its debt fall to 120 percent of GDP and Santa come down the chimney all in the same timeframe ! Second , we learned the Fed won't set specific long term goals for employment - well , that's good i guess after we saw how central planning worked out with the Soviets with their five year plans. By the way Ben , fixing the Fed Fund rate at artificially low levels for eternity doesn't lead to productive active , jobs or stability - just saying. Finally , the Fed says its not inflation targeting ( I guess some stuff just happens ) with its QE Lite or otherwise programs . On the otherhand , while not targeting inflation , 2 percent inflation is a " goal " Will the Fed shoot and so , will they score ? Just remember that we're only experiencing that  2 percent inflation consistent over the longer run when you fuel up or buy food !

     And could we truly have a soiree without the latest Greek PSI rumor de jour ? Today " news " is the private investors will now accept a 3.75 coupon ( down from their no less than 4 percent demand ) all would be joyful - except the participation of the public sector creditor ( including the ECB ) seems to be a pre-condition. So while Germany and the UK Bourses are rip roaring presently , i expect this will be dashed as time goes on. Stay tuned and enjoy the show while it last ! One news item below and your invitation to Rompuy's Soiree set for below .....



09.58 Now I'm confused. After reports that the ESM won't be on the agenda at the upcoming EU summit, here is EC President Herman Van Rompuy's invitation letter to the event, which states that it is:

Rabu, 25 Januari 2012

The Edifice is Crumbling ! Greece version on Side A , European antics on Side B !


Things fall apart - generally at the wrong times , perhaps they  just fall apart when the supporting pillars no longer can withstand the load placed upon them ! Note the following news from Greece !

 Employers and labor unions found some common ground during the first day of wage talks on Wednesday but it appears that neither side is willing to agree to Prime Minister Lucas Papademos’s suggestion that private sector workers’ salaries should be reduced.
Papademos had indicated that lower wages would help Greece become more competitive but union and employer representatives agreed that the minimum wage of 751 euros gross and the two extra monthly salaries that many private sector workers receive each year should not be reduced or scrapped.
“We are on the right track,” said Vassilis Korkidis, the head of the National Confederation of Greek Commerce (ESEE). “The social partners agree that the minimum wage is not to blame for the recession and businesses closing down.”
Yiannis Panagopoulos, the head of Greece’s private sector umbrella union GSEE, criticized the government for suggesting that it might force a law through Parliament that adjusts salaries if it is not happy with the outcome of union and employer talks.
“We cannot have a dialogue under the threat of decrees that are reminiscent of years gone by,” he said, adding that the apparent pressure from the European Union and the International Monetary Fund for wage reforms was not helping either.

     Apart from the Greek Commerce Organization and the GSEE Union finding common ground against the Troika demands on the minimum , did you see Merkel's sad face at Davos ? The dour warning ( shrilly warning the sky is falling once again ) from Lagarde , the usual Rehn and Barraso bleatings - this time for more guarantees from Greek pols who everyone knows have NO INTENTION of keeping them ! Missed the squawking , take a gander below : 

In an interview with six European newspapers, Merkel expressed doubts about the outlook for Greece, which she called “a special case.” “Despite all the efforts that have been made, neither the Greeks themselves nor the international community have yet managed to stabilize the situation,” she said.
Lagarde, in comments to French radio station Europe 1, said the EU must build a fire wall to contain Greece’s crisis. “In case of contagion, one needs to be able to stop it. Greece, for example is in an extremely difficult situation, let’s be realistic,” she said.
In Brussels, European Economic and Monetary Affairs Commissioner Olli Rehn and EC President Jose Manuel Barroso joined the chorus, insisting that more rescue funding would not be released unless the leader of the two main parties in Greece’s coalition -- socialist PASOK and conservative New Democracy -- clearly commit to reforms.
Prime Minister Lucas Papademos is expected to seek such guarantees from party leaders ahead of Monday’s EU summit.


     But how do we know the edifice has truly begun to crumble  ? Dig the story below - everyone wants to play the role of the sharpie these days. Well , here we go   : 


Germany's Bild tabloid buys Greek debt

Germany’s Bild newspaper said on Wednesday that it has bought two Greek bonds.
Bild revealed that it invested just over 10,000 euros in Greek debt, buying the bonds at less than 50 percent of their face value.
One note matures on March 20, the other on May 20, 2013.
If Greece succeeds in agreeing on a voluntary haircut with its bondholders, then Bild could be among those who hold out and force Athens to pay the full value of the bonds.
This would mean the German daily could more than double its money.



ekathimerini.com , Wednesday Jan 25, 2012 (19:58)  

Morning update - Wednesday Edition !

Well , we have reached January 25th , the Eurogroup Fin min meeting has come and gone with no Greek PSI deal in sight ! What seems to be the case is that the so called private investors have dug the heels into the ground and are attempting to hold the haircut line at 50 percent - which would reflect the deal reached on the Greek haircut from way back in October. In contrast , the IMF and EU have pushed hard for a much  deeper haircut - one which would require a haircut much closer to 75 - 80 , once the coupon on the bond and duration is taken into account. With time  eroding away , a mexican standoff has been reached - of course until one side blinks. well , pit this in the category of a possible trial balloon , it seems the public sector creditors MAY be prepared to take part in the haircuts after all ! Consider the excerpt from Greece's Kathimerini below :


European economy and finance ministers continued to push for a compromise by private holders of Greek debt on Tuesday during the Ecofin meeting in Brussels, but it appears that the European Central Bank will have a key role in the restructuring process.
“The current state of the negotiations with the private creditors is that we are a bit short of where we want to be,” German Finance Minister Wolfgang Schaeuble told reporters after the Ecofin meeting. “As long as we do not have debt sustainability, there will not be a new program,” he added, effectively playing the Greek default card.
However Kathimerini understands that although no such decision has been made by the ECB yet, Monday’s Eurogroup meeting decided in favor of the lender’s participation in the haircut as the only way for talks on the debt restructuring not to fail.
An indication of this came in a statement by Finance Minister Evangelos Venizelos, who argued that among the topics discussed was the search for an indirect way of increasing the participation of the so-called “official” sector -- the Greek government, the European Union, International Monetary Fund and ECB -- in a way that would not entail an increase in loans to Greece.
Although he stopped short of saying it in clear terms, the only such way is the ECB’s participation in the 50 percent haircut. At the moment, the ECB holds 45-50 billion euros in Greek bonds and its participation in the haircut would signify a benefit of 10-12 billion euros for Greece.


     Now the reason I describe this as a trial balloon is based on the report in today's The Telegraph live blog that the ECB remains opposed to losses on its Greek debt holding despite pressures to restructure them - might the position of the ECB just be another example of " comments in the bazaar " , to paraphrase German FM Schauble's apt description of negotiating positions subject to change ? In that regard ( and if one really , really  wonders where the pressure might be coming - also consider which nations outside Europe hold the largest quotas at the IMF  ) , note Christine Lagarde's comment / warning that if a haircut on private sector debt is not enough ( it isn't of course ) , public holders of debt will have to participate in renegotiation - adding that equilibrium between private and public sector in Greek debt renegotiation is  a " concerning question ". Yes Christine , if one is a private investor , why the ECB gets a pass probably is a  concerning question ! 

     Meanwhile GDP in the Uk slipped 0.2 percent in Q4 2011 , construction sector output decreased 0.5 percent in Q 4  2011 and output of the production sector fell 1.2 percent in Q 4 2011  - this makes the call from the Bank of Canada governor that Europe is already in recession plausible , especially Europe Ex- Germany. The contraction of the UK economy follows yesterday's announcement that the debt of the UK exceeded one trillion for the first time ! The combination of expanding public  debt and a contracting economy makes PM Cameron's position dicey regarding any expansion of doling taxpayer money to the IMF or agreeing to any Financial Transaction Tax which may further hamper a weakening UK economic picture. 

     The most important question up to this point has been will Germany continue to be the paymaster of the Eurozone ? A more subtle question is has Germany lost its sway of morale persuasion over the Eurozone and greater 27 Country European Union ? In that regard , consider the following commentary , sourced from Der Spiegel , The Guardian and Naked Capital - and wonder whether Germany has lost its perceived leadership role in guiding europe though the present dark days : 

With Spain also struggling and Italy under increasing pressure, the continuation of contagion appears to be taking its toll on the politics of Europe with Germany’s ability to control the situation diminishing. As Spiegel reports:
Berlin has been unflinching it its efforts to both increase fiscal discipline in the euro zone and to avoid throwing more money at the European debt crisis. Increasingly, though, Germany’s EU partners are unwilling to play along. Chancellor Merkel now finds herself confronted with powerful opponents
….
A large alliance of the finance ministers, heads of government and central bankers from almost all of the 17 euro-zone member states has been calling for the European Stability Mechanism (ESM) to be enlarged — significantly. The permanent euro backstop fund, which will go into effect this year and will ultimately replace the temporary European Financial Stability Facility (EFSF), needs to encompass fully €1 trillion ($1.3 billion) instead of the planned €500 billion, Italian government officials have told their German counterparts.
At the same time, widespread resistance in Brussels to German plans for a new system of financial regulation within the EU is becoming more assertive. Merkel’s proposal for all EU member states to pass balanced budget initiatives — known in Germany as a “debt brake” — has been torpedoed as has the idea to allow the European Commission to bring countries that stubbornly violate deficit rules before the European Court of Justice.
Indeed, the balance of power in Europe has shifted. As long as Italy was ruled by a clown like Silvio Berlusconi, it hardly had any voice in efforts to save the euro. But ever since Monti, a respected financial expert, took over, the front of Merkel opponents is stronger than ever, all the more so because quite a few experts endorse Monti’s position.
….
Sarkozy is now getting the support of prominent economists from around the world. Christine Lagarde, the head of the International Monetary Fund (IWF) is calling for more money for the euro backstop fund as is Mario Draghi, the president of the European CentralBank (ECB), who has been in regular contact with his compatriot Monti. In a Monday appearance in Berlin, Lagarde said “we need a bigger firewall.”
Germany also appears to be losing support from even its strongest allies. Last week the Dutch central banker Klaas Knot gave an interview blaming Germany for the failure of the EFSF in which he stated:
The most important obstacle lies in Germany, not in the Netherlands, we haven’t moved in the right direction and it’s also clear that measures needed are happening too slowly and are too limited in size.
To add to that, Luxembourg’s new foreign minister gave an interview with German media yesterday in which he called the fiscal compact a ‘waste of time and energy’.
Is the failure of austerity-centric policy finally taking its toll on Germany’s ability to steer Europe’s response to the financial crisis? This would certainly explain why Mario Monti seems so sure that his country will be receiving the fiscal and monetary backstops. The outcomes from next week’s EU summit will provide more clues.

http://www.spiegel.de/international/europe/0,1518,811155,00.html  Merkel's Fiscal Pact a Waste of Time and Energy
http://www.guardian.co.uk/world/2012/jan/25/angela-merkel-greece-financial-meltdown  merkel cast doubt on saving Greece from financial meltdown