Europe in a Financial Crisis

[The Virginian]

MADRID (AP) — Spanish civil servants, many dressed in mourning black, took to the streets Friday in angry protest as the government approved new sweeping austerity measures that include wage cuts and tax increases for a country struggling under a recession and an unemployment rate of near 25 percent.

Spain is under pressure to get its public finances on track amid concerns in the markets over the state of the country's banks and the wider economy.

"Spain is going through one of its most dramatic moments," Deputy Prime Minister Saenz de Santamaria said after a Cabinet meeting at which sales tax hikes and spending cuts were approved.

Admitting that the austerity measures were "neither simple, nor easy, nor popular," she said the government would try to enact the measures "with the maximum justice and equity."

The conservative government has come under mounting criticism that the austerity measures are hitting the middle and working classes the hardest.

"The government should go after the big companies that don't pay tax and bankers that have committed fraud and have run this country to the ground," said Pablo Gonzalez, 52, who works for the Madrid regional government. "Instead, we have to pay."

The aim of the latest package of measures is to chop €65 billion ($79 billion) off the budget deficit through 2015, the biggest deficit-reduction plan in recent Spanish history.

As dusk fell, several hundred mainly young protesters marched in Madrid, stopping to jeer outside the headquarters of the ruling conservative and opposition Socialist parties before heading to the parliament.

Though the increase in sales taxes, which risks slowing consumption and worsening Spain's recession, will take effect Sept. 1, other reforms will be left for later in the year, including a plan to speed up the gradual raising of the retirement age from to 65 to 67.

Meanwhile, Economy Minister Luis de Guindos announced the creation of a new mechanism to help Spain's 17 regions finance themselves more easily. Some, such as Valencia in the east, are finding it increasingly difficult to tap capital markets for much-needed cash.

The latest bout of austerity is prompting widespread opposition, not least from civil servants. In Madrid, several hundred government workers blocked traffic briefly in different parts of the city. In Valencia, several hundred Justice Ministry workers shouted "hands up, this is a stick-up" at a protest rally.

The civil servants — whose wages were cut 5 percent on average in 2010 in the first round of austerity cuts — are usually paid 14 times a year. The government is now axing an extra payment made just before Christmas. The prime minister, his cabinet and lawmakers will also suffer the cut. At the local, regional and central level, there are around 3 million public servants in Spain.

In the Puerta del Sol in downtown Madrid, about 500 civil servants gathered, about half dressed in black. Some women wore veils, as if at funerals. Protesters blew whistles and horns. Civil servants are often ridiculed in Spain and seen as lazy, clock-in and clock-out types with the luxury of lifetime jobs. But many earn as little as €1,000 a month.

Isabel Perez, a 40-year-old librarian, said "our wages have already been cut and now they take away the Christmas payment. I don't make it to the end of the month as it is. The extra payment gave some relief. We're not exactly millionaires." She earns €1,300 a month and had already faced a yearly €330 euro wage cut by the Madrid regional government.

The latest austerity package has come after Spain won approval from the other 16 countries that use the euro for the first €30 billion tranche of a bailout of up to €100 billion for its troubled banking sector. Spain also managed to secure an extra year to meet a European deficit reduction target of 3 percent of GDP. The size of Spain's economy in 2011 is estimated to have been $1.5 trillion.

Investors' response has been lukewarm, and the yield on Spain's benchmark 10-year bonds, a measure of investor wariness of a country's debt, remains very high at 6.61 percent, up 4 basis points for the day.

Investors are also becoming increasingly wary of placing money in Spanish banks, which are having to turn to the European Central Bank for financing.

[The Virginian]

Simply Amazing!!!!!


Rick Santelli on Monday tore into the mainstream media for ignoring the London Inter-Bank Offer Rate (LIBOR) scandal and chided them for wasting time on petty and useless headlines.

Wait, what’s the LIBOR scandal?

“LIBOR … is the average interest rate the world’s largest banks pay when they borrow money. And this figure … is used to price hundreds of trillions of dollars worth of financial instruments, from high-yield corporate debt to student loans,” Christopher Matthews writes for TIME Business.

Simply put, LIBOR isn’t just some “financial services sector thing” — it affects the everyday interest rates associated with loans, credit cards, etc.

This is where things start to go downhill.

Barclays, one of the world’s largest banks, admitted two weeks ago that it had submitted false data in order to keep its borrowing rates low. And while that alone is enough to cause concern, the real problem lies in the fact that Barclay’s wasn’t the only bank pulling this kind of stunt.

“We’ve only seen the tip of the iceberg, yet the LIBOR rate rigging scandal has rocked the financial world,” writes Sam Dwyer for BostInno, adding that other banks are involved in the growing scandal.

It gets worse: the New York Fed, headed by none other than Secretary of the Treasury Timothy Geithner, knew as far back as 2007 about the rate rigging. 2007? You know that this means, right? It means that at least a few key players involved in TARP [Troubled Asset Relief Program] knew big banks were understating their borrowing costs!

Complete Story:
www.theblaze.com/stories/where-is-the-press-with-the-outrage-this-major-financial-scandal-has-santelli-up-in-arms/

[ModE98]

Big banks are forever screwing us, one way or another. They should be put on a choker leash....start to get a bit too far out of line and quickly reigned in. Seen too much of this over the years... enough is enough.

[The Virginian]

Stocks fell back today in large part because of what appears to be a worsening Spanish economy. The Spanish government projected its recession will extend into 2013, with unemployment topping 20% throughout 2013.

You can bet the Spanish government is putting their best spin forward so it will probably be much worse. Still looking like a bank collapse in Europe and the Euro probably will not survive.

[ModE98]

Europe is like a deteriorating, leaky dam.... they are keeping it intact for now with little temporary patches that they know are weak and risky. A major dam break, then where goes the Euro? One of these days they must face the full reality and take bold and decisive action to finally resolve the dilemna. Perhaps they will find the way.

[The Virginian]

FRANKFURT, Germany (AP) — The Europe debt crisis is flaring up again. Bad news about Spain's economy and finances are feeding fears it will be the next European country to need a bailout.

The Spanish government's borrowing costs hit an alarming 7.56 percent Monday for its 10-year bond. That's a key benchmark suggesting Spain may soon find itself unable to borrow affordably — and need outside loans.

On top of that Greece is heading into tough negotiations with other eurozone countries about whether it deserves more bailout money. Greece has lagged on making the reforms demanded in return for the money. An aid cutoff could mean leaving the euro.

Markets don't like what they see. Stocks are down all over Europe after sliding on Friday. Wall Street futures are down. The euro fell too.

[The Virginian]

One of these days they must face the full reality and take bold and decisive action to finally resolve the dilemma. Perhaps they will find the way.

Unfortunately I don't think they have enough Euros to cover their debt Mod, They all owe each other Trillions ( and lord knows what they owe the US) Even if every penny went to paying their debt it would still take them twenty years to pay it off. In other words it's just not possible and at some point they will have to admit it.

[ModE98]

One of these days all hell will break loose. Then what? There is no White Knight to charge in and save the day. Forgive and forget, then start all over again? They are going to have to face the problem and work together to put Humpty Dumpty back together again.... but will they? Can they? Dark Ages return?

[ModE98]

Guess one really needs to take the attitude of Alfred E. Newman..... "Me Worry?" It's a mad, mad, mad world anyway.

[ModE98]

wxyz ... Just going to hang on to my "package" of REITs and collect the dividends until interest rates begin to rise. Whatever happens, happens, and not going to sweat Europe, that's their problem. No matter what, I will survive, until it's time to "go" to the great beyond.

[The Virginian]

No matter what, I will survive, until it's time to "go" to the great beyond

I hear they have the ultimate retirement plan! ;D

[ModE98]

Yes, luxury suites with fantastic view, room service, daily massage, pool, and life just like floating on a cloud. No pain, worries, or other concerns to fret about. And no Europe to screw things up.

[tyfighter3]

I'm so glad that I can still see Optimistic people that really can understand what real retirement is all about. LOL That it doesn't matter what happens in between but only what you do and think that makes it worthwhile.

[dothedd]

Jun 12, 2012 23:29:22 GMT -5 tyfighter3 said:

You might as well have some Ice-Cream with your cake too. LOL

Butter Pecan would be good with Italian Cream Cake!
www.google.com/search?q=italian+cream+cake&hl=en&rlz=1T4GGHP_enUS438US438&prmd=imvnse&tbm=isch&tbo=u&source=univ&sa=X&ei=As4OUImxKImw8ASHvoGgDw&ved=0CGIQsAQ&biw=1280&bih=690


HI TY,

b

[Driftr]

Well. At least Finland still stable according to Moodys.

Euro-area bonds fell today after Moody’s lowered the outlook to negative for the Aaa credit ratings of Germany, the Netherlands and Luxembourg. Moody’s cited “rising uncertainty” over Europe’s debt crisis. It left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking.

business.financialpost.com/2012/07/24/germany-pushes-back-against-moodys-downgrade/

[The Virginian]

More protesting in Greece as they are resisting the require cuts, not much being reported here about it though.

[Deleted]

For now that is and that fact is a gift from the Media. May be the Media is finally getting a clue as to the fact they can and do crash the Markets here?

[The Virginian]

.S. stocks are soaring at the opening bell after the president of the European Central Bank vowed to do what it takes to preserve the continent's monetary union.

The Dow Jones industrial average was up 234 points to 12,913 and the broader S&P 500 index added 23 points at 1,361 early Thursday. The Nasdaq composite index is up 50 points at 2,904 despite more disappointing news from the technology sector.

ECB President Mario Draghi said that the bank "will do whatever it takes to preserve the euro," providing the assurance markets needed to rally. Draghi spoke at an investor conference taking place at the Olympics in the U.K.

Disappointing earnings in the U.S. and signs of some trouble in the economy did not curb the strength of the rally.

Problem is - They don't have enough money to cover all of Europes debt - mindless words - but hey it helped the market for now!

[The Virginian]

Well it looks the Market bought into their rhetoric! ;D

[The Virginian]

Let's see what next week brings! I am so sick of this Market reaction to the EU !

[The Virginian]

ATHENS, Greece (AP) — The Greek statistical authority says the country's deep recession has eased slightly, although the economy still contracted 6.2 percent in the second quarter from the same period last year.

In the first quarter, the contraction was 6.5 percent.

No quarterly figures were provided in the figures published Monday.

Debt-crippled Greece has been in recession for five years, and the cumulative shrinkage is expected to reach 20 percent at the end of this year. The government has said the recession could exceed seven percent in 2012.

Greece is being kept solvent by international bailout loans, granted in return for a harsh austerity program.

[The Virginian]

MOVED - See Mergers, Acquisitions, Splits & Spinoffs thread.

[Driftr]

Moved ... MODE. Thanks Driftr

[ModE98]

Today's latest.....
Eurozone economy contracts as German growth slows. Eurozone GDP fell a quarterly 0.2% in Q2, which was in line with forecasts but was down from unchanged in Q1. Germany's GDP growth slowed to 0.3% from 0.5%, with the meager growth helped by exports and private and public consumption. However, the Bundesbank said there are signs of a "certain decrease in growth" for H2. Meanwhile, France continued to stagnate as GDP stayed unchanged in Q2 for the third quarter in a row.

[The Virginian]

Rioting in France - Why don't we see this on mainstream news reports?



Smoldering ruins
During a night of disturbances, rioters set fire to a number of vehicles, in some cases hauling the drivers out of their cars before burning them, mayor Demailly said.

The riots on Monday night actually began Friday and continued every night since then.

From 2005: France finds that not all Frenchmen feel French

Gutted buildings, including a nursery school, and burnt out cars were still smoldering early Tuesday, though the streets were otherwise calm. No-one has been arrested so far.

Valls, a law and order hardliner who irks some fellow Socialists, was dispatched to Amiens from southern France where he was on official business with Hollande.


Pascal Rossignol / Reuters

A man on a bicycle looks at a car destroyed in overnight clashes where groups of youths set cars, trash cans and a school ablaze in Amiens on Tuesday.
"This violence towards police, these buildings that were burned down, these people gripped by fear - this is unacceptable," Valls told reporters.

Some leftwing critics say his tough talk bears uncomfortable parallels with the strong line taken by Sarkozy.

From 2005: France to extend state of emergency

As mayor of a racially mixed suburb before being appointed to Hollande's government, Valls served more than 10 years ago as a spokesman for Socialist former Prime Minister Lionel Jospin, whose 2002 presidential election defeat was partly put down to his image as soft on law and order.

Tensions remain high in many French suburbs, where poor job prospects, racial discrimination, a widespread sense of alienation from mainstream society and perceived hostile policing have periodically touched off violence.

Weeks of rioting in 2005, the worst urban unrest in France in 40 years, led to the imposition of a state of emergency by the then center-right government. Incidents involving police provoked disturbances in 2007 and 2010.

The repeat bouts of violence have provoked agonized debate over the state of the grim housing estates that ring many French cities and the integration of millions of poor whites, blacks and North African immigrants into mainstream society.

NBC News' Nancy Ing and Reuters contributed to this report.

[The Virginian]

Business
Investors Brace for Euro Collapse

When Otmar Issing joined the European Central Bank Executive Board in 1998, free market advocate and Nobel Prize-winning economist Milton Friedman sent him a friendly note: “Dear Otmar, congratulations on an impossible job.”

Friedman, of course, had no faith in ability of the Euro to stand the test of time. Today, long after Issing’s retirement, it looks like investors are finally beginning to understand what Friedman was talking about.

“Banks, investors and companies are bracing themselves for the possibility that the euro will break up — and are thus increasing the likelihood that precisely this will happen,” Martin Hesse writes for Spiegel Online (as translated from the German by Paul Cohen).

“There is increasing anxiety, particularly because politicians have not managed to solve the problems. Despite all their efforts, the situation in Greece appears hopeless. Spain is in trouble and, to make matters worse, Germany’s Constitutional Court will decide in September whether the European Stability Mechanism (ESM) is even compatible with the German constitution,” the report adds.

This anxiety has been exacerbated by the growing tension between lender and borrower countries. Prominent German officials have called for the expulsion of Greece from the 17-nation union while France’s socialist government has called for more “shared sacrifice.” Meanwhile, in the financial markets, the back-and-forth bickering between eurozone officials has accomplished one thing: It has weakened the euro.

And you better believe the banks are worried.

“Banks and companies are starting to finance their operations locally,” said former chief economist at Deutsche Bank Thomas Mayer.

In fact, a growing number of euro banks have drastically reduced their investments in risky EU countries and, as the report notes, the flow of money across borders has dried up.

“According to the ECB, cross-border lending among euro-zone banks is steadily declining, especially since the summer of 2011. In June, these interbank transactions reached their lowest level since the outbreak of the financial crisis in 2007,” Spiegel reports.

Adding to the growing financial storm is the fact that the fear of a collapse isn’t unique to Euro banks. Major private companies are also wary.

“There’s been a shift in our willingness to take credit risk in Europe,” announced Shell CFO Simon Henry, adding that the company had opted to invest in U.S. bonds and use U.S. bank accounts rather than risk anything in Europe.

“Many companies are now taking the route that US money market funds already took a year ago: They are no longer so willing to park their reserves in European banks,” said Uwe Burkert, head of credit analysis at the Landesbank Baden-Württemberg.

And although the U.S. dollar isn’t exactly in the best place right now, many investors believe it’s far preferable to what’s going on in the EU.

“We notice that it’s becoming increasingly difficult to sell Asians and Americans on investments in Europe,” asset manager Vorndran told Spiegel, adding that although the U.S., Japan, and the U.K. “are all lying in the same hospital ward,” as he puts it, “it’s still better to invest in a weak currency than in one whose structure is jeopardized.”

But more than market reactions and more than private companies shying away from the struggling currency, the one thing we should probably keep our eyes on are the old “short-selling” pros, that is, John Paulson (who made millions off the U.S. real estate crash) and, of course, billionaire philanthropist George Soros.

“Paulson, who is now widely despised in America as a crisis profiteer, announced in the spring that he would bet on a collapse of the euro,” Hesse writes.

At the same time, George Soros said in April that — were he still active trader — he would bet against the euro if EU officials failed to establish a central authority to deal with the crisis (as he so graciously suggested they should).

So far, neither Paulson’s nor Soros’ predictions have come true, but, as Spiegel puts it, “the deciding match still has to be played.”

www.theblaze.com/stories/investors-brace-for-euro-collapse/

[ModE98]

YIKES!

[The Virginian]

“We notice that it’s becoming increasingly difficult to sell Asians and Americans on investments in Europe,”

I cut exposure to Europe, Banks and Bonds the best I could some months ago. I try to keep every thing close to home. Of course many of our stocks sell and conduct business in Europe so almost impossible to isolate entirely.

[ModE98]

Interesting read....
www.foxbusiness.com/markets/2012/08/16/report-finland-preparing-for-possibility-euro-breakup/

[The Virginian]

Not hearing much on Europe lately. I'm not sure what this means?