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Post by maxi on Oct 2, 2011 15:44:00 GMT -5
Euro Gap Down Confirmed In Premarket Trade Rally Better Than Expected
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Post by Rich on Oct 2, 2011 15:56:01 GMT -5
1.33 should be strong support....if that goes it could be a quick trip to the bottom of the well Uploaded with ImageShack.usAttachments:
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Post by rex on Oct 2, 2011 15:57:31 GMT -5
Euro Gap Down Confirmed In Premarket Trade Where's a chart of Euro pre market trade?
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Post by Rich on Oct 2, 2011 15:58:33 GMT -5
give it 2 minutes, we'll have the real deal
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Post by maxi on Oct 2, 2011 16:02:13 GMT -5
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Post by Rich on Oct 2, 2011 16:02:56 GMT -5
gap down confirmed, half a penny to 1.33437 currently
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Post by Rich on Oct 2, 2011 16:09:33 GMT -5
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Post by timber on Oct 2, 2011 16:47:26 GMT -5
not sure if shorting the euro or going long the dollar the best trade here
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Post by maxi on Oct 2, 2011 17:20:52 GMT -5
currently in u-turn formation
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Post by Clinton SPX on Oct 2, 2011 18:01:52 GMT -5
gap fill before it continues down
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Post by Clinton SPX on Oct 2, 2011 18:05:01 GMT -5
Greece Approves $8.8 Billion in Austerity to Meet Targets Q
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Post by Clinton SPX on Oct 2, 2011 18:08:05 GMT -5
Currency Peg Causes 50% Surge In Swiss National Bank Balance Sheet, Major FX Losses Submitted by Tyler Durden on 10/02/2011 17:31 -0400 The September Swiss National Bank balance sheet update is out and while it reportedly indicates balances at the end of August, it appears that the SNB intervention in the FX market (i.e. the currency peg) started early, which would make sense as the first peg rumor hit on August 11. As a result, as the chart below shows, the latest central bank balance sheet to be completely devastated as a result of currency wars is that of Switzerland, where both Foreign Currency Investments and the total balance sheet increased by just under 50%, the biggest such monthly increase. In fact, in September, "aggregate short and long positions in forwards and futures in foreign currencies vis-a?-vis the domestic currency (including the forward leg of currency swaps)" increased by $92 billion CHF or just about $100 billion - a whopping 20% of Swiss GDP! And this is the capital at risk for Switzerland to avoid having its currency trading a parity with the euro since the bulk of this increase is due almost certainly purely to EUR purchases. And here is the bad news: since the bulk of the purchases were made in the 1.40+ area, we can't wait to find out just how NZZ and other Swiss financial publications will react tomorrow when they learn that the SNB has experienced an immediate 5% drop in its "assets" courtesy of the subsequent plunge in the EUR. And with the SNB's total balance sheet at a record (?) CHF 365 billion, something tells us that the days of this latest attempt at repegging the Swiss Franc to some arbitrary number are coming to an end, and with that Hildebrand's futile attempts at preventing parity. \
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Post by Rich on Oct 2, 2011 18:12:08 GMT -5
this is trouble for the swiss. They don't have enough money to stop the tumult of currency wars.
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Post by Clinton SPX on Oct 2, 2011 18:17:34 GMT -5
They will unpeg when their citizens read about this. They are crazy if they dont.
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Post by Rich on Oct 2, 2011 18:29:34 GMT -5
if they unpeg it is disaster too.
they're in a no-win situation
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Post by Clinton SPX on Oct 2, 2011 18:43:44 GMT -5
yup, it was stupid to peg it in the first place
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Post by Clinton SPX on Oct 2, 2011 20:09:05 GMT -5
Bernanke Getting Cold Feet On European Bank Bail Out? Submitted by Tyler Durden on 10/02/2011 20:49 -0400
Bank of New York Ben Bernanke CDS Credit-Default Swaps default Federal Reserve Federal Reserve Bank Federal Reserve Bank of New York Global Economy Greece Reality Reserve Currency Sovereign Debt
Two weeks after Bernanke agreed to invest unlimited taxpayer funds in the form of global FX swap lines to prevent a worldwide dollar funding squeeze arising from the Europen financial collapse, the Chairman appears to be getting cold feet. BusinessWeek reports: "The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe’s sovereign debt crisis, according to two people with knowledge of the matter. Regulators held informal talks with some of the largest European lenders about producing a “fourth-generation daily liquidity” or 4G report, according to the people, who asked for anonymity because communications with central bankers are confidential. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person. The U.S. has already increased the number of examiners embedded in these banks, the person said." In other words, not only after Bernanke's pledge to fund as much money as is needed to prevent bank defaults around the world, is he actually going to have enough information to determine if there is any danger of this money not getting repaid. Well, better late than never. But at least we can permanently set aside any latent questions over whether European banks have liquidity problems. When even the Fed no longer believes you, you have far bigger problems than just liquidity (except for Dexia: liquidity there may well be the largest problem, but at least it won't be for long).
From Business Week:
Concern is growing that European lenders may falter as Greece teeters on the brink of default. U.S. Treasury Secretary Timothy F. Geithner has warned that failure to bolster European backstops would threaten “cascading default, bank runs and catastrophic risk” for the global economy. “The Fed is trying to understand what the pressure points are in terms of liquidity and potential risks that are imposed by foreign banks to domestic institutions in our financial system,” said Kevin Petrasic, an attorney at the Washington- based law firm of Paul, Hastings, Janofsky & Walker LLC. “There is a little bit more sense of urgency as a result of what’s going on in Europe.” "The report requires rapid and in some cases daily data on a banks’ assets, liabilities and potential claims to measure the degree to which the bank could be caught in the classic borrow- short, lend-long squeeze,” Petrou said. “The 4G is one of the tools to reveal liquidity risk.” Oh, wait, so there is liquidity risk...because based on the prior set of lies, it didn't seem that way. And it gets better:
Regulators lack access to data on foreign institutions operating in the U.S. that would allow them to “make informed judgments about the adequacy of such firms’ capital and liquidity buffers,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a Sept. 23 Washington speech. But, but, isn't September 23 a week after the Fed pledged however much money is needed to rescue the world? Shouldn't the Fed have had this information before it took the generous decision to risk not only taxpayer capital but the reserve currency status of the dollar. Because based on historical experience, and based on Bernanke and Geithner's repeated promises that the only thing they care about is the stability of the dollar, there may be a modest to quite modest discrapncy between rhetorica and reality.
As for the actual 4G reports, we can't wait to find out just which European bank has bought or sold CDS on itself (because, unlike in the US, in Europe it appears that this is actually not prohibited).
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Post by Clinton SPX on Oct 5, 2011 23:37:33 GMT -5
Merkel Says Europe’s Rescue Fund Is Only Last Resort for Banks October 05, 2011, 6:23 PM EDT
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Merkel Says EFSF Can Be Used as Last Line to Recapitalize Banks IMF Sees Europe Working on Bank Plan as Moody’s Warns of Cuts ECB’s Noyer Says Has $1 Trillion to Fight Sovereign Debt Crisis EU Hints at Extra Investor Burden in Second Greek Bailout Rehn Says Option for Including ECB in EFSF Leveraging on Table By Tony Czuczka and Rebecca Christie (See EXT4 for more on the European debt crisis.)
Oct. 6 (Bloomberg) -- German Chancellor Angela Merkel said that Europe’s rescue fund will only be used as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue.
Merkel’s comments, her most explicit on banks’ role in fighting the debt crisis since the spillover from Greece began to threaten France and Italy, followed talks with European Commission President Jose Barroso in Brussels. Financial shares rose yesterday amid speculation that euro-area policy makers are working on plans to boost bank capital to contain the crisis.
“Time is running out” to establish if recapitalization is necessary, Merkel told reporters. Troubled banks need to first seek capital on their own and national governments will help if that’s not possible, she said.
“If a country cannot do it using its own resources and the stability of the euro as a whole is put at risk because the country has difficulties, then there’s the possibility of using the EFSF,” the European Financial Stability Facility, she said. Using the rescue fund is “always tied to a certain conditionality.”
Signals that European politicians may step up efforts to aid banks and push investors to accept bigger losses as part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition to expanding rescues. Moody’s Investors Service followed its three-level downgrade of Italy on Oct. 4 by warning that euro-area nations rated below the top Aaa level may see their rankings cut.
‘An Adjustment’
Merkel said that “if needed, there will be an adjustment” in investors’ share of a 159 billion-euro ($212 billion) second aid package for Greece, pending a report by international auditors on Greece’s finances due before a meeting of European finance ministers next month.
She said that she supports recapitalizing European banks “if there is a joint assessment that the banks aren’t adequately capitalized” and finance officials develop “uniform criteria.” Germany is ready to discuss possible bank aid at this month’s EU summit, she said.
France’s Credit Agricole SA and Dexia SA led the 46-member Bloomberg Europe Banks and Financial Services Index up as much as 4.8 percent yesterday. Credit Agricole climbed 9.9 percent to 5.17 euros at the close of Paris trading, while Dexia was up 1.3 percent to 1.02 euros.
Capital Needs
European banks may need more than 140 billion euros of capital through a program similar to the U.S. Troubled Asset Relief Program, Morgan Stanley analysts say.
“Policy makers increasingly want to build a large solvency buffer,” the analysts led by Huw van Steenis said in a note. “We think banks in core Europe need to be recession proofed and banks in the periphery depression proofed.”
EU officials are working on plans to boost bank capital to contain the debt crisis, the International Monetary Fund said.
“There is no secret at all that European authorities and the European Commission are all working together on a plan to bring more official capital, more public-sector capital, into the banking sector,” Antonio Borges, the IMF’s European department head, said yesterday in Brussels. “We would recommend that it move to a European approach,” he said. “More should be done on a cross-border basis.”
No ‘Concrete Plan’
EU spokesmen moved to damp speculation triggered by a Financial Times report late on Oct. 4 on progress toward a bank- recapitalization plan.
EU Economic and Monetary Commissioner Olli Rehn “doesn’t speak of a concrete plan in hand,” his spokesman, Amadeu Altafaj, said. “He speaks of an initiative, of discussions in progress and he pleads for a European approach.”
The speculation about efforts to support banks followed a finance ministers’ meeting in Luxembourg in which officials signalled their intent to prod investors to cover more of the cost of bailing out Greece. Finance Minister Wolfgang Schaeuble said that Germany’s Soffin bank-rescue fund, set up in October 2008 during the financial crisis, may need to be reinstated, his spokesman told reporters in Berlin yesterday.
“Many euro countries have now realized that the July deal is too advantageous for investors and there’s too little investor burden sharing,” Finland’s Finance Minister Jutta Urpilainen said in Helsinki. “This was discussed at Monday’s euro group; how can we find a way to increase burden sharing? No solution’s been put forward so far.”
Greek Swap
Banks are negotiating a bond swap with Greece that would cut the nation’s debt load at a cost to investors estimated at about 21 percent. They pushed back at suggesting deeper losses.
It would be “counterproductive” to reopen the Greek deal now that investors have signaled support and the euro area’s 17 parliaments are close to ratifying the agreements, Charles Dallara, managing director of the Institute of International Finance said, said by phone. IIF represents more than 450 banks and took part in the negotiations that led to the second rescue package for Greece.
When the bailout was announced, banks and other bondholders were expected to contribute about 50 billion euros alongside 109 billion euros in public funds and a proposed 20 billion-euro debt buyback.
--With assistance from James G. Neuger in Brussels, Chiara Vasarri in Rome, Kati Pohjanpalo in Helsinki, Elena Logutenkova in Zurich and Brian Parkin in Berlin. Editors: James Hertling, Alan Crawford
To contact the reporters on this story: Tony Czuczka at aczuczka@bloomberg.net; Rebecca Christie in Brussels at Rchristie4@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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Post by Clinton SPX on Oct 5, 2011 23:46:04 GMT -5
Merkel Ally Roesler Takes Insolvency Plan to Baroin in Paris October 05, 2011, 7:43 AM EDT
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ECB’s Trichet Says Europe Must Progress Toward Political Unity Rehn Says Greece Will Have to Meet Or Exceed 2012 Deficit Goal EU’s Rehn Says European Bank Recapitalization Must Continue Rehn Says Option for Including ECB in EFSF Leveraging on Table ECB Says Banks’ Overnight Deposits Reach Highest Since July 2010 By Brian Parkin (See EXT4 for more on the European debt crisis.)
Oct. 5 (Bloomberg) -- German Economy Minister Philipp Roesler travels to Paris today to push his proposals to allow an insolvency in the euro area as soon as next year, a plan he says would avoid the market chaos that would follow a Greek default.
Roesler, the leader of Chancellor Angela Merkel’s Free Democratic Party coalition partner, is due to meet with Economy and Finance Minister Francois Baroin and Prime Minister Francois Fillon to “discuss his proposals for a European stability culture,” the German Economy Ministry said in an e-mail. His trip takes place four days before Merkel hosts French President Nicolas Sarkozy for talks in Berlin.
Roesler, who is also vice chancellor, goes to France armed with a plan to allow indebted euro-area economies to be declared insolvent under the post-2013 permanent rescue fund, while offering them a path back to economic health. His proposal seeks to balance calls within his party to let Greece default with his determination to hold to the FDP’s pro-European ideals and keep struggling euro members in the currency area.
“No one can say with certainty” what would happen if Greece defaults, Merkel told members of her Christian Democratic Union party late yesterday. A default would lead to speculative attacks on other highly indebted euro countries, trigger “a gigantic loss of confidence” in euro-area sovereign bonds and risk sending German economic growth into reverse, she said.
Merkel’s Leap
“Before I make a nifty step into an adventure, I have to ask whether we can really handle this and can we oversee what we are doing?” Merkel said.
Roesler’s proposal seeks to make what he calls resolvency a centerpiece of the permanent rescue fund, the European Stability Mechanism, which Finance Minister Wolfgang Schaeuble has said he would support being brought into force in mid-2012, a year earlier than planned.
Unlike the current rescue fund, ESM rules permit euro- region members to become insolvent. Resolvency acknowledges the precedent while offering those states help to return “to fitness and competitiveness,” Roesler said in a letter to the Finance Ministry distributed to news organizations yesterday. A resolvency could involve restructuring of debt.
The plan envisages setting up tools to establish insolvency and “avoiding political assessment” that can now influence the process. A “European Monetary Fund” would take over control of select fiscal and economic policy in an insolvent state, substituting powers that lie with sovereign governments. Other tools would include negotiating new terms with investors on bond repayments and selling member states’ assets.
Any mention of default may be unwelcome in France, whose banks are the most exposed to Greek debt. It’s also unclear what support Roesler’s plan enjoys from Merkel or Schaeuble, both of whom are Christian Democrats.
Norbert Barthle, the CDU’s ranking member on parliament’s budget committee, said that he backed Roesler proposals over those of his FDP colleagues who urge Greece to exit the euro.
It makes sense “to explore how we can, in constructing the future permanent rescue mechanism, keep any struggling euro region member states in the currency,” Barthle said by phone.
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Post by Clinton SPX on Oct 6, 2011 15:52:17 GMT -5
BBC Does It Again: "In The Absence Of A Credible Plan We Will Have A Global Financial Meltdown In Two To Three Weeks" - IMF Advisor Submitted by Tyler Durden on 10/06/2011 - 16:40 Bad Bank CDS China Counterparties Credit Default Swaps default France Germany International Monetary Fund Ireland Japan Meltdown Morgan Stanley Newspaper Reuters Sovereign Debt United Kingdom A week after the BBC exploded Alessio Rastani to the stage, it has just done it all over again. In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone's mind: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt
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Post by erxtrader on Oct 6, 2011 16:09:38 GMT -5
Why 2-3 weeks?
It seems arbitrary to me.
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Post by Clinton SPX on Oct 6, 2011 16:12:50 GMT -5
from the guardian
Sir Mervyn King expressed fears that Britain is in the grip of the world's worst ever financial crisis after the Bank of England announced it was injecting £75bn into the ailing economy.
The Bank's governor said the UK was suffering from a 1930s-style shortage of money and needed a second dose of quantitative easing to boost demand and prevent inflation falling too low.
Shares rose strongly in the City, posting a rise of almost 200 points, after Threadneedle Street responded to growing evidence of a looming double-dip recession and the deepening crisis in the eurozone with a four-month programme of electronic money creation. Dismissing concerns that the action risked adding to inflationary pressure, King said Britain was now facing a different problem from the days when too much money flowing round the economy pushed up the annual cost of living. "There is not enough money. That may seem unfamiliar to people." he told Sky News. "But that's because this is the most serious financial crisis at least since the 1930s, if not ever."
George Osborne agreed to King's request to be able to expand the asset purchase scheme under which the Bank buys government bonds from commercial banks. The chancellor said further steps would be taken to boost growth in his autumn statement next month.
"Given evidence of continued impairment in the flow of credit to some parts of the real economy, notably small and medium-sized businesses, the Treasury is exploring further policy options," Osborne said in a letter to the governor. "Such interventions should complement the monetary policy committee's [MPC] asset purchases."
Britain's first dose of quantitative easing, also known as QE1, was in 2009/10, with £200bn being injected into the economy. Labour said the launch of QE2 was an admission that the government's economic policy had failed.
Ed Balls, the shadow chancellor, said: "With our economy stagnated since last autumn David Cameron and George Osborne are now betting on a bailout from the Bank of England. The government's reckless policy of cutting spending and raising taxes too far and too fast is demonstrably not working. But rather than change course the government has spent the last week urging the Bank of England to step in and essentially print more money."
Some in the City were caught unawares by the scale and the timing of the Bank's move. Last month, only one of the nine members of the MPC, Adam Posen, voted for more QE, but the mood has changed in response to poor domestic news and concerns that Europe's sovereign debt crisis risks a repeat of the mayhem three years ago following the bankruptcy of the US investment bank Lehman Brothers.
"The pace of global expansion has slackened, especially in the United Kingdom's main export markets," the MPC said in a statement explaining its decision. "Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery."
The MPC said the slowdown in the UK economy, which saw no growth in the nine months to mid-2011, had in part been caused by temporary factors, but added that there was also evidence that the underlying pace of activity had weakened. It said the squeeze on real incomes caused by inflation running well ahead of wage increases and the impact of Osborne's austerity programme were "likely to continue to weigh on domestic spending".
King admitted that inflation could breach 5% next month but said that would be the peak. Analysts said the Bank was now clearly more concerned about the risks of recession than about the possibility of a rise in inflation. Figures released by the Office for National Statistics this week showed that the downturn of 2008/09 was even deeper than originally believed, with gross domestic product dropping by 7.1% in the biggest recession since the second world war. The flatlining of the economy since last autumn has left activity still 4.4 percentage points below its 2008 peak.
The TUC's general secretary, Brendan Barber, said the decision to expand QE was the right one, but added: "While it is better than not doing anything, quantitative easing is no economic magic wand.
"We worry that it does more to help the finance sector than the rest of the economy and could fuel further inflation at a time when living standards are already being squeezed."
Business leaders welcomed the move. Graeme Leach, chief economist at the Institute of Directors, said: "Near-zero GDP and money supply growth made a compelling case and the Bank of England was right to launch QE2. It could be argued that the Bank of England was slow to introduce QE the first time, but thankfully it hasn't made the same mistake twice."
By the end of the four-month programme, the Bank will have bought a total of £275bn in assets from banks, around 20% of GDP. The news prompted alarm in Britain's pension funds, which are concerned that QE pushes down interest rates and reduces the return on their investments, but Threadneedle Street left the door ajar for a further expansion of QE2 should the economy not respond.
Michael Saunders, UK economist at Citi, said the deteriorating outlook for the economy would require the Bank to "do QE on a very big scale". He added: "We expect the cumulative total of QE (now heading to £275bn) will eventually reach £500bn or so. It may go even higher than that."
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Post by Clinton SPX on Oct 6, 2011 16:21:34 GMT -5
REALLY?
(Reuters) - Belgium warned France on Thursday that it was not willing to foot the whole bill for rescuing Dexia as the two states started talks to divide up the Franco-Belgian lender's assets.
Dexia, whose shares were suspended on Thursday, confirmed its board would meet in Paris on Saturday to vote on a break-up plan after Belgium and France pledged to guarantee its financing in the face of a dramatic share-price slide.
Belgian caretaker Prime Minister Yves Leterme told RTL radio that Belgium wanted a fair sharing of the burden.
"It is clear that this is a very sensitive and crucial part of the negotiations -- an equitable split of the costs," said Leterme, when asked what Belgium wanted from France.
The French finance ministry did not reply to requests for a reaction.
Leterme's comments were echoed by Belgian Finance Minister Didier Reynders, who said Belgium did not want the full cost burden of saving, and possibly nationalizing, Dexia's Belgian banking arm as well as supporting a "bad bank" of assets left over from Dexia Group's past business.
"We do not wish to end up holding the whole of Dexia Group," he told reporters as he arrived for a meeting of core members of Belgium's government.
"We need a solution that means we are not just financing the Belgian bank. We also need to finance the past. And we do not want to do that alone."
Belgium is probably mindful of the rescue of Dutch-Belgian bank Fortis three years ago when, within a week of a capital injection, the Dutch abruptly nationalized its part of the bank, leaving Belgium to clear up the remaining mess.
Belgium provided 60 percent of the 150 billion euros ($200 billion) of state guarantees Dexia secured in 2008 to cover its borrowing.
However, sources close to the negotiations between France and Belgium said the two might settle for a 50:50 split to cover the bad bank assets, as this might be the maximum Belgium could afford.
INVESTOR FOUND FOR LUXEMBOURG UNIT
Dexia said it had started talks with an international investor to sell its Luxembourg arm.
Some media reports said the buyer was Qatar and it was set to pay 900 million euros.
The Belgian markets regulator subsequently suspended trading in Dexia's shares, saying the group needed to provide details of the proposed Luxembourg sale.
France and Belgium are expected to finalize the rescue plan on Thursday or Friday so the board can proceed to a vote.
The bank, which lends to thousands of French and Belgian towns, needs help because of its problems accessing wholesale funds, exacerbated by its exposure to Greece.
A source familiar with the situation said Dexia's board might have to choose between a French and a Belgian option if the two sides cannot agree.
Under the rescue, France is leaning toward splitting off Dexia's French municipal funding arm and combining it with French state bank Caisse des Depots and the banking arm of France's post office, Banque Postale.
Belgium would take care of the largely retail business Dexia Bank Belgium, possibly nationalizing it. Business daily De Tijd said that was the route the government had chosen.
A government spokesman declined to comment, but did say French and Belgian financial experts had begun talks, with finance ministers to enter discussions later.
The bad bank would hold 95 billion euros of bonds the group was planning to sell, including some sovereign debt of weaker euro zone periphery states, around 7 billion euros of assets backed by U.S. mortgages, open credit lines and Dexia's public lending arms in Italy and Spain.
However, not everyone is happy with the plans.
Trade union members of French post office La Poste said they opposed combining Banque Postale and CDC with part of Dexia.
"Dexia is a caricature of the kind of damage wreaked by the race toward ever-greater financial profits by any means necessary, including foul ones such as the issuance of 'toxic loans' to local authorities," union CGT said in a statement.
Before the suspension, shares in Dexia last traded down 17.2 percent at 0.845 euros. The STOXX 600 Europe bank index .SX7P was 3.1 percent higher. Traders said Dexia's renewed weakness was due to a sense that a firesale of assets had begun.
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Post by Clinton SPX on Oct 6, 2011 16:26:37 GMT -5
So let me get this straight. The good assetts/bank will be sold for 900 mil the bad bank will have 95 bil of complete crap wow!
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Post by Clinton SPX on Oct 6, 2011 16:30:53 GMT -5
(Reuters) - Juergen Stark is not the kind of man who enjoys drawing attention to himself. But the euro-zone crisis pushed him over the edge.
People who know the career finance official and central banker use words such as "loyal," "reserved" and "solid" to describe the man from a small town in Germany's western wine region. He enjoys the simple things in life, such as the Rindswurst, or beef sausage, on sale each Saturday at the covered market in Frankfurt. A longtime colleague characterizes the 63-year old with a retro-mustache as the classic "Prussian civil servant" - so dedicated that he would never let anything get in the way of his duties.
That explains why his abrupt resignation last month from one of the most important positions at the European Central Bank (ECB) was such a shock. Stark's departure came in the midst of a deepening debt crisis that threatens to tear Europe's single currency apart. The news that he would step down from the central bank's six-member executive board, nearly three years before his term was up, rocked global markets.
Stark is someone who was behind the euro from the very start. As an adviser to former German Finance Minister Theo Waigel he helped write the fiscal rules enshrined in Europe's Stability and Growth Pact. Now he was abandoning his post at the worst possible moment.
In a statement issued on September 9, the ECB said Stark was resigning for personal reasons. But the real trigger, according to more than a dozen central bankers and senior government officials interviewed for this article, was Stark's deep concern about the direction the ECB has taken under its French president, Jean-Claude Trichet, and his conviction that things were unlikely to improve under Mario Draghi, the Italian who will succeed Trichet next month.
"The entire financial and monetary policy in Europe at the moment is completely at odds with the professional beliefs Stark built up over the past 30 years," said one senior euro zone official who is privy to ECB deliberations.
Under Trichet, the central bank has ventured beyond its core goal of fighting inflation, buying up the bonds of floundering euro members such as Greece to prevent the currency bloc from collapsing. For Germany's monetary "hawks" - hardliners brought up on horror stories about hyper-inflation between the two world wars - this foray is misguided and perilous.
Stark is one such man. So is his compatriot Axel Weber, who announced abruptly in February that he was resigning as head of the Bundesbank, Germany's central bank, and withdrawing his name from consideration as a successor to Trichet because of frustration at the ECB's new direction.
Stark's departure, on the heels of Weber's defection, shows that the ECB is at a crossroads. Trichet, the former head of France's central bank, has been a key figure in the euro zone since it was founded 12 years ago. He seemed to bridge the divide between the strict German approach to monetary policy and a looser southern European attitude. Now Draghi is poised to take over on November 1. Some hope he will prove more Germanic than Mediterranean and push the ECB back to its monetarist roots, but it will take time before his intentions become clear.
Little wonder, then, that there is so much angst at the bank. A German official who has known Stark for more than a decade said Stark had felt increasingly isolated on the ECB board and agonized for months before finally submitting his resignation.
"He was in a really bad way. You could see the burden he was carrying on his face," the official said.
EARTHQUAKE
Twelve years after German Chancellor Helmut Kohl pushed through the monetary union over the objections of a majority of his country's citizens, the bloc is crumbling under the burden of huge debts. And the one institution that Germans were told would ensure stability, the ECB, is in deep crisis itself.
In the absence of decisive action from Europe's leaders, the bank has come under enormous pressure to fill the gap. It has bought up 160 billion euros ($211 billion) in Greek, Irish, Portuguese, Italian and Spanish bonds over the past 16 months to ease pressure on the bloc's weakest members.
Both Stark and Weber were critical of the "quantitative easing," or massive bond purchases, made by the U.S. Federal Reserve and Bank of England to protect their economies. And they were dead-set against allowing similar steps in the euro zone. Crisis or no crisis, they believe buying bonds has blurred the line between monetary and fiscal policy, compromising the bank's independence and inflation-fighting credentials. Many Germans agree.
"What is left of the ECB's credibility?" top-selling German tabloid Bild asked last month next to a doctored image of the ECB tower in Frankfurt crumbling into ruins. Its answer: "Just this pile of rubble." This week, a poll conducted for Stern magazine showed that 54 percent of Germans favor a return to their former currency, an identical figure to a poll taken in May, 2010.
But privately many ECB colleagues, including those from stricken southern states, will say that it is the Germans who are short-sighted and out of step, insisting on archaic monetary orthodoxy at a time of unprecedented financial turbulence.
KOHL'S LEGACY
During the negotiations leading up to the currency bloc's founding Maastricht Treaty, Helmut Kohl, who came to power in West Germany in 1982 and then oversaw the end of the Cold War and reunification with the east, used the German public's reluctance to give up the Deutschemark as leverage. For Germany to get on board, he told Europe's other leaders, the future ECB had to be a virtual clone of Germany's own central bank, whose focus on inflation busting was legendary. And Kohl largely got his way. The ECB's structure closely mirrors that of the pre-euro Bundesbank, with a central board and a broader governing council.
The six-member ECB board, which has always included one German, takes care of day-to-day business. The 23-member council, which includes both the board members and the central bank governors of the 17 euro member states, is responsible for setting monetary policy on a monthly basis. Decisions of the ECB council, like those at the old Bundesbank, are taken on a one-person, one-vote principle.
In late 1998 the bank's inflation guidelines were drawn up with a nod to lingering German angst over the destabilizing hyper-inflation of the Weimar Republic. Price stability was defined as an inflation rate "below 2 percent," fine-tuned in 2003 to "below but close to 2 percent."
"The Germans, supported by others, including my own country, were intent on carving the independence of the central bank in marble," former Dutch Prime Minister Wim Kok told Reuters.
POLARIZATION
Fast forward to 2011 and the picture has changed dramatically. The 11 countries that launched the euro in 1999 have expanded to 17, raising the risk that a big fish such as Germany can be outvoted by economic minnows. The five most recent joiners - Slovenia, Slovakia, Malta, Cyprus and Estonia - have a combined population of just over 10 million, compared to 82 million for Germany.
"Economically, Germany outweighs Malta by 500 times - but the president of the Bundesbank has the same vote as the Maltese governor," David Marsh writes in his 2009 book "The Euro - The Politics of the New Global Currency."
In practice, the ECB's governing council does not take decisions by a show of hands. Under both Trichet and his predecessor, Dutchman Wim Duisenberg, the bank has set policy by broad consensus. "The president gets a feeling without counting heads," a euro zone central banker said.
That worked fine until the crisis hit. Then policy differences became more pronounced, forcing Trichet into a more authoritarian role and raising the level of tension on the board, several officials said.
"The tone of the discussions at these board meetings is getting more strained every week," a euro zone central banker said. "There is a kind of polarization."
The ECB declined to comment, when asked about the confidential meetings. Stark, Weber and Trichet also declined to be interviewed for this article.
AT ODDS WITH TRICHET
The Germans have not always been at odds with the bank's recent policies. They supported the ECB's decision to raise interest rates twice this year as inflation levels in the bloc pushed above the 2 percent mark. In retrospect, these steps appear to have been ill-judged. With the bloc now facing the risk of recession, the ECB may soon be forced to shift into reverse and cut rates.
But on other issues, the German official who knows Stark said, Trichet had been stubborn and "refused to listen to others." For example, in early summer he rejected the idea of a second Greek aid package in which banks would take a "haircut," or partial write down, on their holdings. This hard-line stance needlessly exacerbated the bloc's problems, according to this official. Trichet eventually backed down after euro zone governments agreed to provide guarantees for Greek bonds.
Both Stark and Weber objected when Trichet first pushed through a plan in May 2010 to buy Greek bonds on the open market. But while Weber came out publicly against the decision, Stark kept silent.
Less than a year later Weber, the frontrunner to replace Trichet, announced he would step down early from the Bundesbank - a decision that weighed heavily on Stark, according to people who know him.
He was pushed over the edge in August, when Trichet and other ECB colleagues decided to re-open the bond buying program and, in a late night conference call with council members, gave a green light for the purchase of Italian and Spanish bonds.
Behind the scenes, the German government scrambled to convince Stark to delay his resignation because of the acute nature of the euro zone crisis, officials in Berlin told Reuters. Stark, a member of Angela Merkel's right-of-center Christian Democrats, was warned that an ill-timed resignation would make it more difficult for the German chancellor to get conservative allies on board for a make-or-break vote in parliament on boosting the powers of the euro zone's rescue mechanism. But those entreaties failed.
Stark's resignation took some central bank governors by surprise when Reuters broke the news on September 9. Trichet, who had been informed the night before, launched into an unusually emotional defense of the ECB's inflation-fighting record at a news conference that day.
"We have delivered price stability over the first years of the euro - Impeccably! Impeccably!" Trichet roared. "We are in the worst crisis since World War Two. We do our job. It is not an easy job."
ENTER DRAGHI
How the ECB evolves in the post-Stark era has become a source of great concern in Germany. Next month, Trichet will be replaced by Draghi, who as governor of the Bank of Italy has sat in on meetings of the ECB's policy-setting governing council for years but, according to people who have watched him close up, only rarely spoken out.
"He is very discreet, very introverted, very reserved," a senior Italian official who worked closely with Draghi told Reuters. "I don't think you can describe him as hawkish. He is very pragmatic. He has political intuition. He's not dogmatic in his approach. Every move will be very closely calculated."
Complicating Draghi's task will be unprecedented turnover on the ECB board. By the middle of 2012 all six members will have been replaced in a span of just two years. Many Germans fear the changes will mean that Jens Weidmann, who replaced Weber as head of the Bundesbank earlier this year, is the lone remaining inflation "hawk" in the policy-setting council.
This new team will have to navigate through treacherous waters. A Greek debt default, recessions and a backlash against austerity in the southern periphery, and rising euroskepticism in the north are just a few of the immediate challenges. Pressure is also building on the ECB to reverse the rate hikes that it put in place earlier this year, and to adjust the unlimited liquidity taps it turned on for banks after the collapse of U.S. investment bank Lehman Brothers in 2008.
Then there is the controversial bond-buying program. Can the bank count on the euro zone's rescue fund - the European Financial Stability Facility - to take over this task? And what of the ECB's balance sheet, so weighed down with toxic assets that some Germans now refer to the institution as Europe's "bad bank."
"For Draghi it's going to be a very difficult situation," said Guntram Wolff, deputy director of the Bruegel think tank in Brussels and a former Bundesbank official. "He will have a completely new team, a team that is very young with little central banking experience."
The German official was more blunt. "The question is less how he will lead but whether he can lead," he said, pointing to Draghi's silence in recent months on the big questions confronting the central bank and broader euro zone. "On November 1 he will have to spell out where he wants to lead the ECB."
In his first public appearance since announcing he would step down, Stark seemed to have a message for the central bank colleagues he will soon leave behind.
Speaking in Vienna on September 15, he stressed the importance of rules and principles, saying these could not be thrown out the window at the first signs of turmoil. On the contrary, they become "absolutely decisive" in a time of crisis.
"Should I flood the markets only to realize afterwards that the water damage has become bigger than the fire damage?" Stark asked. (Reporting by Noah Barkin, Andreas Framke, Eva Kuehnen and Marc Jones in Frankfurt, Annika Breidthardt and Matthias Sobolewski in Berlin, Michael Shields in Vienna, Martin Santa in Bratislava, Dan Flynn in Paris; editing by Sara Ledwith, Michael Williams and Lee Aitken)
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Post by Clinton SPX on Oct 6, 2011 17:48:06 GMT -5
Euro Rumormill Disintegration Begins As Reality Returns: France, Germany Fail To Reach Agreement On EFSF Submitted by Tyler Durden on 10/06/2011 17:52 -0400
Bond European Union Fail France Germany International Monetary Fund Ireland Newspaper None Portugal Reality
In our previous post we warned, indirectly through the IMF, that the biggest risk for Europe is the inability to reach consensus over anything from the most complicated, to the simplest matter. As noted previously, one of the main initial drivers of the market surge which has since translated into yet another short covering rally of epic proportions was the belief that Europe can actually come together in agreement over the simplest thing - like its own survival. Alas, it appears even that is not the case. As Bloomberg reports, "Germany and France are at odds over whether the European Financial Stability Facility should have limits on government bond purchases, Handelsblatt reported, citing an unidentified high-ranking European Union diplomat. France doesn’t want to restrict the EFSF on how much of its funds it can use for such purchases, the newspaper said in a preview of an article to appear in tomorrow’s edition. Germany wants to limit the amount EFSF can spend for bonds per country and is also considering whether there should be a time limit for bond purchases, Handelsblatt said." Said otherwise, here comes the latest cause of discord within Europe. Unfortunately, it also means that any rumor, innuendo and speculation that Europe has finally reached a coherent union over its own bailout can be promptly discarded. As if there was ever any doubt in the first place.
From Handelsblatt:
In Berlin and Paris argue about EFSF Exclusive The euro rescue package to buy bonds from future debts States. But with how much money? France wants to give the fund a free hand - for the rescue could not stay no longer enough to fear Germany. Brussels is a dispute between Germany and France erupted over the extent to which the euro rescue fund future EFSF may buy government bonds. France wanted to make the EFSF this respect no rules, told the Handelsblatt by a senior EU diplomat. This would theoretically mean that the EFSF could not use its entire volume of funding expended to buy bonds of a single Euro-state. EFSF has a total of 440 billion euros, has been a part of it, however, scheduled for the loan packages to Ireland and Portugal. The federal government wants to limit the amount used for bond purchases per euro government, it said in Brussels. Think Germany will also share in a time limit on bond purchases. The purchase of government bonds is one of three new instruments may have on the future of advanced EFSF. The design of these new instruments will be governed by guidelines to deal with the high officials of the euro finance ministers in Brussels at present. The guidelines must then be approved by the Budget Committee of the Bundestag. The German Parliament has made this a condition for agreeing to extended EFSF. Cue the FT, Liesman, and/or some IMF guy we have never heard of with attempts to deny what is painfully obvious: Europe will never reach a consensus because the ultimate price of a European bailout is the absolutely certain suicide of the currently ruling political class. Alas, none of those bureaucrats wants to (or can) do anything else but "rule"...
And if the IMF advisor is right, Europe has less than a month to prove us wrong.
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Post by Clinton SPX on Oct 6, 2011 18:30:35 GMT -5
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Post by Clinton SPX on Oct 8, 2011 9:41:21 GMT -5
(Reuters) - Germany and France were split ahead of crucial talks on Sunday over how to strengthen shaky European banks and fight financial market contagion to prepare for a possible Greek default.
Under strong U.S. and market pressure Chancellor Angela Merkel and President Nicolas Sarkozy will try to bridge differences on how to use the euro zone's financial firepower to counter a sovereign debt crisis that threatens the global economic recovery.
A ratings downgrade on both Italy and Spain by Fitch Ratings on Friday underscored the grim climate.
A German source said Paris wanted to be able to tap the euro zone's 440 billion euro rescue fund to recapitalize its own banks, which have the largest exposure to peripheral euro zone debt, while Berlin insisted the fund should be used only as a last resort when no national funds are available.
After meeting Dutch premier Mark Rutte, Merkel confirmed the German position was that the European Financial Stability Facility was a backstop to be used "only if that country is unable to cope on its own.
A French Treasury source told Reuters that Paris believed banks unable to raise capital on the open market should be able to tap the fund, but talk of divergences with Berlin was premature since the issue had not yet been debated.
Merkel said struggling banks should look first to the markets, then their national government, and only in the last instance the EFSF, and with reforms as a strict condition.
"This will definitely be discussed at the next summit," she said, referring to an EU leaders meeting on October 17 and 18 for which she and Sarkozy will attempt to set the agenda.
The French government and the Bank of France had dismissed until this week any need to recapitalize French banks and are now wrangling over how to do it in a way that does not put the country's top-notch credit rating at risk.
"I hear that the French are scared that too much bank recapitalization could jeopardize the French AAA and that is why they push for the EFSF solution for French banks. I expect Merkel to stick to national funds for recapitalization," said economist Jacques Delpla, a member of the French government's advisory council of economic analysis.
France has the highest debt-to-GDP ratio of any of the six triple-A countries in the euro zone at 86.2 percent.
If France, the second largest guarantor of the rescue fund after Germany, were to lose its top-notch rating, the whole edifice of financial support for Greece, Portugal and Ireland would crumble.
DEXIA SQUABBLE
A senior European diplomat said that because of its exposure and concern for its credit rating, France was more hesitant than Germany or Britain about the need to restructure Greece's debts and take losses as soon as possible.
Preserving France's AAA status was politically sensitive seven months before a presidential election in which Sarkozy is trailing the opposition Socialists in opinion polls, he said.
Many major European banks continue to insist they need no more capital, although the International Monetary Fund says up to 200 billion euros must be injected.
The chief executive of Societe Generale , Frederic Oudea, told Reuters Insider TV the main problem was not one of capital but liquidity as interbank lending dries up.
"The main issue is a crisis of confidence in the sovereign. ... What is important is to deal with the Greek issue as quickly as possible and then rebuild confidence in the capacity of each bank in Europe to reduce its debt," Oudea said at SocGen's Paris headquarters.
Some banks are clearly in need, however.
France and Belgium are arguing over whose taxpayers should pay to salvage cross-border municipal lender Dexia, which came close to collapse this week and is to be broken up.
Moody's Investor Service on Friday said it may cut Belgium's credit rating.
U.S. President Barack Obama implored European leaders on Thursday to come up with a plan before a Group of 20 major economies summit in Cannes, France, on November 3-4, saying the euro zone crisis was the biggest cloud over the U.S. economy.
Bank of Japan Governor Masaaki Shirakawa said on Friday that the European sovereign debt woes were putting Japan's economy under growing strain.
Shirakawa told a news conference in Tokyo that "global growth is slowing as a trend" and European growth was "stalling" as debt worries mount.
European Commission President Jose Manuel Barroso said on Thursday the EU's executive arm was preparing a plan for bank recapitalization across the 27-nation bloc.
However, other EU officials have made clear it would only be a set of guidelines for national measures and an approach for cross-border banks, and not a common European mechanism or mandatory rules on recapitalization.
The European Banking Authority, which coordinates national regulators, is reassessing banks' capital buffers based on data provided for stress tests conducted in July, which showed that only eight banks failed, requiring just 2.5 billion euros in extra capital.
A euro zone supervisory source said a figure of 180-200 billion euros cited by International Monetary Fund and private economists reflected the impact of writing down sovereign bond holdings to current low market prices and assuming that Greece and perhaps another country would default.
DEFAULT POSSIBLE?
Both Merkel and Sarkozy have reaffirmed in the last week that a Greek default must be avoided because it would have potentially catastrophic consequences for the European and global economy.
The French Treasury source said Paris was open to modifying some elements of a July 21 agreement by euro zone leaders to make private bondholders share the cost of a second bailout for Greece, such as debt maturities and interest rates, but a full-scale rewrite was undesirable.
German and Finnish officials argue that since market conditions have changed, banks may need to take more than the agreed 21 percent write-down on their Greek holdings.
A team of EU and IMF inspectors is continuing negotiations with Greece on reforms required to release a vital 8 billion euro aid installment by mid-November.
Fitch late Friday cut Italy's sovereign credit rating by one notch and Spain's by two, citing a worsening of the euro zone debt crisis and a risk of fiscal slippage in both states.
The downgrades knocked the wind out of the euro, which slipped 0.3 percent to $1.3388, leaving it rooted in a downtrend that began at $1.4548 on August 29.
Italy's rating fell to A-plus from AA-minus, and Spain's was lowered to AA-minus from AA-plus. Both countries, respectively the third and fourth largest economies in the euro zone, were placed on a negative outlook suggesting further downgrades could come in future.
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Post by Rich on Oct 8, 2011 9:53:48 GMT -5
Maybe they should just bicker and bicker and bring the world to it's knees. Like the US did.
Just saw Romney on CNN.
I've kind of been wanting him to step up and grab the bull by the balls.
Man!
He just falls short, doesn't he? It's like he's out of step in a syncopated rhythm. Just a half a beat behind or something.
That's one thing the Texan does well.
He's a good rhythm man.
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Post by Clinton SPX on Oct 8, 2011 10:05:10 GMT -5
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