Today’s FT headline that made the market rally was all conjecture and mis direction out of Europe.Comments »
“They recognize that if you let, as the United States did in the early part of 2008, the momentum of these concerns build, they’re very hard to arrest, much more expensive to arrest,” Geithner said.
“So you’re going to see them act with more force in the coming weeks and months,” he said.
“I am very confident they’re going to move in the direction of expanding the effective financial capacity of that set of financial ring fences because they have no alternative and they recognize that and they’re going to do it,” Geithner said.Comments »
Most markets and U.S. futures trade higher on anticipation the fed will bring relief to equities through operation twist.
Jim Jubak at MSN has out an assessment of the EU crisis and banking issues, in his regular, esteemed form. You really must read the thing in its entirety.
Financial markets are behaving as if they expect a European banking crisis that would require the bailout or nationalization of some European banks. That would feel like a replay of the financial crisis that followed the bankruptcy of Lehman Brothers in the fall of 2008. Only this time, the epicenter would be Europe instead of the United States, and the ripples would expand from the eurozone outward into global financial markets.
How realistic is that fear? Very, I’m afraid. European banks are facing a very real liquidity and capital crisis that could lead to the need for a government rescue of some globally significant banks.
But the crisis isn’t an exact replay of the 2008 crisis. The effects of the crisis would not be limited to Europe, but the likelihood that a European crisis would take down a major U.S. bank — in a mirror image of the 2008 crisis where problems originating in the United States did lead to the bailouts of banks in the United Kingdom, Germany and Belgium — is relatively small. On the other hand, the crisis is potentially worse this time around because the European Central Bank is much less able to intervene as a lender of last resort than the U.S. Federal Reserve was in 2008.
Understanding this crisis
The current European banking crisis is rooted in the Greek, Italian, Spanish, Portuguese and Irish debt crises. But the repeated collapse-bailout-collapse-again pattern of the prices of bonds of those countries wouldn’t have produced the current mess without a series of missteps by banks, bank regulators and central banks.
European banks hold a huge amount of government debt from the countries involved in the crisis. German banks, for example, held $22 billion in Greek government debt at the end of 2010, according to the Bank for International Settlements. If you add holdings of Greek government debt to holdings of private-sector Greek debt, the exposure gets much higher. For example, in May, Fitch Ratings said that French bank Credit Agricole (CRARY +3.59%, news) had $35 billion in exposure to Greek government and private debt. BNP Paribas (BNPQY -0.82%, news) and Société Générale (SCGLY +6.83%, news) had exposure of about $11 billion each.
The exposure of European banks to Greece, however, is small souvlaki compared with exposure to the much larger Italian economy. BNP Paribas, for example, has an estimated $31 billion in exposure to Italian government and private-sector debt. Even where the total for Italy is not as high as for Greece, the additional exposure is big enough to add to worries. Credit Agricole has an estimated $17 billion in Italian exposure.
But the current banking crisis owes as much to the reaction of banks and bank regulators to the problem as to the size of this exposure. Nobody now expects that Greece will be able to avoid a default in the end. Even Sunday’s announcement of new measures to close a $3 billion budget gap just served to convince financial markets that the more Greece cuts, the more the economy will slow, and the fewer taxes the government will collect. Like last year’s rescue package, this year’s deal, if ultimately approved, only buys time.
Spain 5.28%Comments »
Philipp Roesler, Germany’s economy minister, said an “orderly default” for Greece could no longer be ruled out and branded the country’s deficit-reduction measures “insufficient”.
The warning is likely to spook financial markets further and comes despite Greece yesterday announcing a fresh €2bn (£1.7bn) of budget cuts and the introduction of a country-wide real estate tax.
Evangelos Venizelos, the finance minister, said the cuts and tax measure were necessary to allow Greece to meet obligations demanded by the European Union and IMF in exchange for bail-out funds.
Writing in the Die Welt newspaper, Mr Roesler said: “To stabilise the euro, we must not take anything off the table in the short run. That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available.”
He said such a default would mean “re-establishing the affected state’s ability to function, perhaps with a temporary restriction of its sovereign rights”.
Read the rest here.
They will try to raise 18.5 billion Euros. Good luck.Comments »
Andrew Dessler, a Texas A&M atmospheric sciences professor considered one of the nation’s experts on climate variations, says decades of data support the mainstream and long-held view that clouds are primarily acting as a so-called “feedback” that amplifies warming from human activity. His work is published in the American Geophysical Union’s peer-reviewed journal Geophysical Research Letters.
“The bottom line is that clouds have not replaced humans as the cause of the recent warming the Earth is experiencing,” Dessler says.
Dessler adds, “Over a century, however, clouds can indeed play an important role amplifying climate change.”
“I hope my analysis puts an end to this claim that clouds are causing climate change,” he adds.Comments »
BERLIN (Reuters) – Germany’s top court handed its country’s parliament a greater say over euro zone bailouts, potentially hampering Berlin’s ability to act decisively against a debt crisis which Chancellor Angela Merkel said needed a fundamental rethink to solve.
The Constitutional Court rejected a series of lawsuits aimed at blocking the participation of Europe’s biggest economy in emergency loan packages but said the government must get approval from parliament’s budget committee before granting such aid.
“This was a very tight decision. But it should not be mistakenly interpreted as a constitutional blank check authorizing further rescue measures,” the judge told plaintiffs, government officials and members of parliament in the courtroom in Karlsruhe.
The euro briefly rose against the dollar in response.
“Today’s ruling should bring some relief to financial markets as a total chaos scenario has been avoided, but it should not lead to euphoria,” said Carsten Brzeski at ING.
“The ruling confirms our view that the German piecemeal approach on the debt crisis is not likely to change but eventually the German parliament will vote in favor of a second Greek bailout package and the beefed-up EFSF (euro zone rescue fund).”
NOTE: chessNwine Commentary:
While Moammar Gadhafi is indeed a scumbag and likely behind the Pan Am flight 103 bombing that killed many Americans, the West could at the very least say that he is a known quantity, and a KNOWN evil. The headline on the DrudgeReport.com at the time of this writing is a link to THIS STORY detailing how rebel forces and armed civilians in Libya have rounded up and jailed black Africans, accusing them of supporting Gadhafi. There is no telling how ugly this will get, precisely because we are now dealing with an UNKNOWN enemy, not unlike the situation we saw earlier this year in Egypt. The coverage on CNN and other idealistic news networks has been misguided at best, and blindly ideological at worst. To imply that democracy loving, college educated, “OMG social media” using kids have overthrown these dictators should be called a Mickey Mouse operation of yellow journalism, but then again that would be an insult to Mickey Mouse. I have see few people consider the possibility that the events in Egypt and Libya, and throughout the Middle East during Arab Spring, could actually lead to even worse regimes.
At the risk of angering some of you greatly, let me say Turkey would have never dared been so brazen while George Bush was president.
ANKARA, Turkey — Turkey expelled Israel’s ambassador and said Friday it is cutting military ties with the country over its refusal to apologize for last year’s raid on a Gaza-bound aid flotilla that killed nine people.
Turkey’s move came before the anticipated publication Friday of a U.N. report on violence aboard a Gaza-bound protest flotilla. The fatalities included eight Turkish nationals and one Turkish-American activist.
The report, obtained by The New York Times and posted on its website, said Israel’s naval blockade of Gaza is a “legitimate security measure.” But it also said Israel’s use of force against the flotilla was “excessive and unreasonable,” according to the newspaper.
An Israeli official said the report showed Israel’s naval blockade was in keeping with international law. He spoke on condition of anonymity because the report had yet to be officially released. He said Israel expected it to be made public by the U.N. later Friday.
Turkey has made an Israeli apology a condition of improving diplomatic ties. Israeli officials say the report does not demand an Israeli apology, establishing instead that Israel should express regret and pay reparations.