Europe - Economic Data & News 2 (Nov 08 - Feb 10)

[LenaHuat]

Spain, Portgual, Greece and many parts of E European are wilting under the weight of gross unemployment. It's been ard 20% for many months now. It'll be bleak for many years to come.

[millionairemind]

This Evans-Pritchard writes well. I've been following his articles for some time now. Usually pretty insightful.

Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
By Ambrose Evans-Pritchard
Published: 7:29PM GMT 04 Feb 2010
Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”

Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.

Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said.

Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.

Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.

In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that “the biggest trouble spot isn’t Greece, it’s Spain”. He blamed EMU’s one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid’s IBEX index fell 6pc.

Finance minister Elena Salgado said Professor Krugman did not “understand” the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.

Mrs Salgado called the comparison simplistic and imprudent. “In Spain we have time for measures to overcome the crisis,” she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.

Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. “They are working on a different time-horizon from the EU. They don’t think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing,” he said.

“In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before,” he said.

Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of “brinkmanship”. The core issue is that EMU’s credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.

Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.

Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.

[kennynah]

let's see if royce rolls becomes part of geely's offering one day.... man...that will be the day....

[Aspellian]

let's see if royce rolls becomes part of geely's offering one day.... man...that will be the day....

Rolls Royce logo on Geely's car... never say never!!!

<i read that Geely is one of the fastest rising auto car marker in China - Dun pray-play.>

[millionairemind]

* FEBRUARY 6, 2010, 4:40 P.M. ET

UPDATE: Europe Told G-7 That Greece No Matter For IMF -German Fin Min

IQALUIT, Nunavut (Dow Jones)--European members of the Group of Seven nations told their counterparts that budget problems in Greece are "no matter" for the International Monetary Fund, German Finance Minister Wolfgang Schaeuble said Saturday.

Speaking to reporters at the end of a meeting with top G-7 financial officials, Schaeuble said there was "no doubt" that the euro-zone members oppose any outside involvement in helping Greece to solve its problems.

"All our partners outside the euro zone have the firm impression that the Europeans will solve the problem and can deal with it and that we are aware of the problem," Schaeuble said. "But we have strongly and unanimously refused to discuss internal problems." To make that point, he added that Europe isn't discussing problems occurring in the U.S. state of California either.

Greece and Portugal are among the main concerns in the 16 countries sharing the euro currency while the euro has recently hit an eight-month low against the dollar.

Costs of insuring Greek and Portuguese debt against default have reached record high levels amid investors' doubts that the countries can get their deficits under control and concerns about the long-term outlook for the euro zone.

Schaeuble also said that he has invited his counterparts to a conference on financial reform in Berlin on May 20 with the goal of preparing for the June Group of 20 summit in Toronto.

"Several different proposals have been proposed over the past months from different countries," Schaeuble said. "But actually, the goal must be that we will come to a joint solution...Until the G-20 summit in Toronto, we must find a solution."

He said that even if no global solution is reached, at least a coordinated approach must be found in which the Europeans agree on joint moves that will then be adjusted to those in the U.S. and other countries.

Schaeuble said that a kind of standardized solution for other matters, such as derivatives, must be found. He said the two main topics at the Berlin meeting will be how to get the financial sector to help pay the costs of the crisis and how to promote financial regulation.

"It was agreed that the banks would have to pay for the crisis costs," Schaeuble said of the G7 talks.

[millionairemind]

Greek Ouzo crisis escalates into global margin call as confidence ebbs
For the third time in 18 months the global financial system risks spinning out of control unless political leaders take immediate and radical action.
By Ambrose Evans-Pritchard
Published: 5:46PM GMT 07 Feb 2010

Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU's refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece's drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

http://www.telegraph.co.uk/finance/comm ... -ebbs.html

[winston]

U.K. Faces Severe Debt Problems: Ex-IMF Economist

(RTTNews) - The U.K. should be added to the list of nations that faces severe debt problem, Ex-IMF chief economist Simon Johnson told the BBC in an interview. As the country has huge budget deficit it cannot spend enough to support the economy, he said.

"Unless you can persuade the markets that you're really going to bring the budget under control within the foreseeable future and you're going to have some credible actions - and you're going to have to do some persuading - you're going to have big trouble," Johnson warned.

He also criticized G7 nations and called the group a "fundamentally useless organization". He said the group was not reacting immediately to problems, but staying in an out-of-date mindset.

"The G7 countries are completely asleep at the wheel," Johnson said. "They seem to show no awareness at all that much of Europe is facing a serious crisis and it's not limited to Spain, Greece and Portugal, it's also going to include Ireland." He added, "There's a very serious crisis inside the Eurozone."

by RTT Staff Writer

[kennynah]

G7 meetings are holiday retreats....if the world has to depend on these people to make critical decisions at G7 round table, we would all be back in stone age already...

[millionairemind]

The euro's troubles
Rebuilding Greece's finances
The best answer is to bring in the IMF

Feb 4th 2010 | From The Economist print edition
Alamy

SINCE the launch of Europe’s single currency, there have been theoretical worries about profligacy. The main fear was that free-spending countries (ie, Italy) might borrow excessively and pass either higher interest costs or the bill for a bail-out on to their sober, frugal brethren (ie, Germany). Eleven years after the euro’s birth, as Greece skids towards disaster, those vague fears have become an urgent question of policy.

http://www.economist.com/opinion/displa ... d=15452803

[millionairemind]

Greece's sovereign-debt crunch
A very European crisis
The sorry state of Greece’s public finances is a test not only for the country’s policymakers but also for Europe’s

Feb 4th 2010 | From The Economist print edition

SOME would say that tragedy was inevitable from the moment, nine years ago last month, when Greece was admitted to the euro zone. Others would claim that woe was sure to befall such a disparate currency union sooner or later: if not Greece, then some other weak member of the club would have been the cause. Avoidable or not, trouble has arrived. At best, Greece has to undergo a dramatic budgetary tightening. Its fellow Europeans, or the IMF, may yet have to organise a humiliating bail-out. Some even talk—probably mistakenly—of the beginning of the end of the euro area.
http://www.economist.com/world/europe/d ... d=15452594