May 30, 2011

Greek depositors panic while protests grow

Starting early this morning there is a serious pressure on Greek's bank deposits, especially small amounts. The pressure on banks began last Wednesday, culminating yesterday.
Thursday and Friday withdrawals according  to banking sources rose to around 1.5 billion euros in total.
The majority of depositors withdrawing were pensioners and small savers with amounts ranging from 2-3000 up to 10 -15 000 euros. Motivation in most cases it was the fear that country was heading into bankruptcy.

In the meanwhile it seems Europe is going to take complete control of Greece if proposal is passed:

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.

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. 
In the meanwhile the social bomb is ready to explode:

More than 30,000 Greeks in Athens take center inspired by the protests of Spain Some 30,000 people, police said, have gone to the streets Sunday in Athens to protest the Greek political class. The demonstration has been called through social networks, 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!".

May 29, 2011

Greenhouse gas emissions reach highest point ever

And while the global economy is heading toward a double dip recession if we want to be optimists, the relentless burning of fossil fuels is continuing regardless of the crisis, an interesting new report on global warming:

Greenhouse gas emissions increased by a record amount last year, to the highest carbon output in history, putting an end to hopes of holding global warming to safe levels according to unpublished estimates from the International Energy Agency.

This also shows the most serious global recession in80 years has had only a minimal effect on emissions, contrary to some predictions.

Last year, a record 30.6 gigatonnes of carbon dioxide was poured into the atmosphere, mainly from burning fossil fuel – a rise of 1.6Gt on 2009, according to estimates from the IEA regarded as the gold standard for emissions data.

Euro mess going from bad to worse

Germany's Der Spiegel after the breaking news of few weeks ago of a secret meeting that would consider the expulsion of Greece from the Eurozone, it is once again stirring passions with an article claiming that Greece has missed all fiscal targets agreed under its bailout plan, according to a mission from an international inspection team, putting further funding for Athens at risk, Reuters summarizes. "The troika (aka the International Monetary Fund, the European Commission and the European Central Bank) asserts in its report to be presented next week that Greece had missed all its agreed fiscal targets," weekly Spiegel magazine reported in a prerelease.

Also from Reuters:

The mission will be holding meetings next week before an expected finalisation of the report.
"The deficit in the public budget was higher than expected," the magazine said, referring to the report's findings.
"The reason is that the Greek government still spends more than agreed in the aid programme. On top of that tax income is still lower than demanded."
The IMF has already said it cannot release its part of a 12 billion euro aid tranche to Greece next month if fiscal conditions underpinning the bailout are not met and the European Commission's top economic official was quoted as saying the EU was setting the same conditions.
"We Europeans have the same conditions as the IMF," EU Economic Affairs Commissioner Olli Rehn was quoted as saying in the same prerelease for Monday's Spiegel magazine.
"We will decide on the next tranche after the troika's report. The situation is very serious," Rehn added.


There is, however, one possible last ditch rescue, a firesale of Greek assets:

EU officials have asked Athens to step up privatisations urgently and suggested setting up a trustee institution to help oversee the process, similar to the body that privatised East German companies after the fall of communism. Spiegel magazine also said the troika's experts estimated Greece had assets worth 300 billion euros, which it could sell off to meet its targets.

After 1 hour, Greece replied as usual to Der Spiegel:

Greek Finance Minister George Papaconstantinou on Saturday denied a German magazine report that an international inspection team had concluded Greece had missed all its fiscal targets.

"Reports such as the one in Spiegel have no relation to reality. Negotiations continue and will be completed in the next few days. We have every reason to believe the report will be positive for the country," he told Greek Mega TV.


But Juncker is confirming targets are being missed:

Eurogroup head Juncker said yesterday that the IMF would probably not be able to make the next disbursement disbursement, as the re-financing of Greece over the next 12 months is not secured (the €26.7 billion Greece was supposed to get from private investors in 2012). By August 20 the Greek government has to redeem €7 billion in debt falling due, though there are of course other payments the Greek government has to make, implying that Euro-zone governments need to come up with a solution fast.

It is difficult to say at this stage how important it will be to have the participation of the private sector in order to overcome public resistance in some creditor countries to another aid package. In any case, without more credible efforts from the Greek government to reform/privatise, this hurdle could be too high to overcome, and there might be not a second package.

The first task at hand for Euro-zone governments is to find a replacement for the IMF money if the IMF does decide it is not in a position to disburse the next tranche.

Otherwise, we may get a Greek debt restructuring much faster than previously thought.


And if Greece is bad enough the black hole in Ireland is getting worst:

In comments to The Sunday Times newspaper, Irish Transport Minister Leo Varadkar said the country will likely need another "unexpected" loan, after he became the first cabinet member to cast doubt in public on Ireland's ability to raise cash.

Deputy Prime Minister Eamon Gilmore told broadcaster RTE that fears of a domino effect from Greece's problems were overblown. The possibility of a Greek default has sent bond yields rocketing for indebted Ireland, Portugal and Spain.

"It's not a situation that if Greece defaults then there are immediately implications for Ireland," Gilmore said.

"If Greece defaults there are implications for the wider euro zone and obviously we are part of that."


Ireland, meanwhile, wants to tap investors for funding in 2012 before its 85 billion euros EU-IMF bailout runs out the following year.

But investors believe Ireland will be unable to return to the market and instead will have to tap the European Union's permanent rescue fund in 2013, which might require some restructuring of privately held sovereign debt.

Reflecting this medium-term risk, Ireland's two-year and five-year paper are yielding close to 12 percent, more than its 10-year bonds on the secondary market.

At the end of March, the Irish government said the banks needed 24 billion euros to bulletproof their balance sheets but Dublin hopes some five billion euros can be raised from imposing losses on junior bondholders and asset sales, meaning that 19 billion euros of the 35 billion would be tapped.

May 26, 2011

Greece update

Well, as everyone is clear on the fact at this stage that Greece will default the question that remain is how it will happen and if it will remain in the Eurozone.
it seems there are already forces at work to dump Greece and its debt, Reuters launched yesterday the following news:

From Reuters:
  • EU Commissioner Damanaki says Greece's Eurozone membership is at risk
  • EU Commissioner Damanaki says Greece must agree on tough measures or return to Drachma, according to state news agency
A few more interesting graphs from Reuters on the current Eurozone situation