2015 And EU Future Economic Predictions

[Joseph C.]

http://trueeconomics.blogspot.ie/2015/07/4715-timeline-for-greece-and-some.html

Link above has graphs and charts that make better sense of the figures. ELA is Emergency Liquidity Assistance.

4/7/15: Timeline for Greece and Some Anchoring
Posted by Constantin Gurdgiev

Greece timeline for the weekend:

Greece has missed the IMF and ECB payments this week with both non-payments having potential for triggering a mother of all defaults for Greece: the ESM/EFSF loans call-in (EUR145bn worth of debt).

The EFSF/ESM decision so far has been to 'ignore' the arrears, noting that non-payment to IMF qualifies as "an event of default":

"The Board of Directors of the European Financial Stability Facility (EFSF) decided today to opt for a Reservation of Rights on EFSF loans to Greece, after the non-payment of Greece to the International Monetary Fund (IMF). Following the IMF Managing Director's notification of the IMF Executive Board, this non-payment results in an Event of Default by Greece, according to EFSF financial agreements with Greece."

Greece owes the EFSF EUR109.1bn in "Master Financial Assistance Facility Agreement" loans, plus EUR5.5bn in "Bond Interest Facility Agreement" loans and EUR30bn more in "Private Sector Involvement Facility Agreement" loans.

For now, EFSF decided not to call in loans, preferring to wait for Sunday vote outcome. Per EFSF statement: "In line with a recommendation by the EFSF's CEO Klaus Regling, the EFSF Board of Directors decided not to request immediate repayment of its loans nor to waive its right to action – the other two possible options. By issuing a Reservation of Rights, the EFSF keeps all its options open as a creditor as events in Greece evolve. The situation will be continuously monitored and the EFSF will consider its position regularly."

A 'No' vote in the Sunday referendum can change that overnight.

This adds pressure on Greece to pass a 'Yes' vote - a pressure that is most publicly crystallised in the form of ECB refusal to lift ELA to Greek banks. Athens imposition of capital controls (limiting severely cash withdrawals from the banks) has meant that the current level of ELA (CHART below) is still sufficient to hold the bank run, but the ELA cushion remaining in Greek banks was estimated at EUR500mln at the start of this week. Even with capital controls in place, this would have dwindled to around EUR250-300mln by the week end.

Again, a 'No' vote in the referendum risks crashing Greek banks as ECB will be unlikely to lift ELA any more. In an indirect sign of this, the ECB appears to be setting up swap lines and euro credit lines for EU member states outside the euro area. For example, as reported by Bloomberg, "European Central Bank is set to extend a backstop facility to Bulgaria and is ready to assist other nations in the region to ward off contagion from Greece, according to people familiar with the situation". Such a move is a clear precautionary measure to put into place firewalls around Greek system.



Meanwhile, here is a report suggesting that Greek banks are preparing for an aggressive bail-in of deposits in the case of a 'No' vote (assuming ELA cut off):



The Government denied the reports of preparations of bail-ins, and continues to insist that the banks will reopen on Tuesday, a day after the referendum results are published, but it is hard to imagine how this can be done (unless the banks start trading in drachma) without ECB hiking ELA, and it is even harder to imagine how ECB can hike ELA in current conditions.


Source: TheodoreZ

So far, public opinion polls in Greece show very tight vote for Sunday. The latest GPO poll has the "Yes" vote at 44.1% and "No" at 43.7%. Alco poll puts the “Yes” figure at 41.7% against 41.1% for “No”. All together, four opinion polls published yesterday put the 'Yes' vote marginally ahead, another poll fifth put the 'No' camp 0.5 percent in front. All polls results were well within the margin of error. At the same time, majority of polls also show Greeks favouring remaining in the euro by a roughly 75 percent margin.

REFERENDUM TIMELINE
Sunday 5th July:
Polls open – 0500BST/0000EDT
Polls close – 1700BST/1200EDT

First exit poll – Shortly after 1700BST/1200EDT

~20% of votes counted – 1900BST/1300EDT
~50% of votes counted – 2100BST/1600EDT
~70% of votes counted – 2200BST/1700EDT (markets open)
~90% of votes counted – 0000BST/1900EDT

Timeline source: Trading Signal Labs

The build up of tension ahead of the Sunday poll has been immense. Even international bodies are being convulsed by the potential for a 'No' vote. So much so, that, as reported by a number of media outlets, there was a major cat fight between European members of the IMF and other IMF board members.

As reported by Reuters at Wednesday board meeting of the IMF, European members of the board attempted to block IMF from publishing its analysis of debt sustainability for Greece.

Quoting from the report: ""It wasn't an easy decision," an IMF source involved in the debate over publication said. "We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives." The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum. "Facts are stubborn. You can't hide the facts because they may be exploited," the IMF source said."

If only European members of the IMF Board were as concerned with the reality of the Greek crisis on the ground as they are concerned with the appearances and public disclosures of that reality.

A neat reminder of how bad things are in Greece today, via @RBS_Economics


Source: @RBS_Economics

As numbers tell, Greece has posted one of the worst collapses in economy for any advanced economy since 1870, fourth worst for periods outside WW1 and WW2.


So what to expect?

In the event of a 'Yes' we are likely to see a significant bounce in the markets from the current levels, with euro strengthening on the news in the short run. But real re-pricing will only take place when there is more clarity on post-referendum bailout agreement. The key risk to that outlook is that a 'Yes' vote can trigger early elections - which will (1) extend the current mess for at least another 1-2 months, and (2) put new sources of uncertainty forward - as outcome of such elections will be highly unpredictable. I do not expect the EU to re-start new deal negotiations until after the elections, which means that there will be mounting, not abating pressures on the Greek voters to vote in 'the right' Government, acceptable to the Troika.
In the event of a 'No' we are likely to see serious run on the markets in Greece and some 'peripheral' states, especially Italy. Greek capital controls will have to be stepped up significantly. Euro is likely to weaken in the short run, especially if ECB aggressively moves to monetise risks via both accelerated QE purchases and lending to non-euro banks.

Beyond these two possible scenarios, everything else is in the realm of wild speculation.

 

[arkmundi]

 

[Joseph C.]

Figures put the number at 61 per cent who voted no - a landslide result for Syriza. The polls were off by a good margin. It would be good if we could also get rid of the international embarrassment that is Juncker. This is type of idiot we are dealing with: http://www.telegraph.co.uk/news/worldnews/europe/eu/10967168/Jean-Claude-Junckers-most-outrageous-political-quotations.html.

http://www.telegraph.co.uk/finance/economics/11719688/Defiant-Greeks-reject-EU-demands-as-Syriza-readies-IOU-currency.html

Defiant Greeks reject EU demands as Syriza readies IOU currency

Europe suffers biggest bloody nose since failed French and Dutch referenda a decade ago in Greek landslide revolt

Greek voters have rejected the austerity demands of Europe's creditor powers by a stunning margin, sweeping aside warnings that this could lead to the collapse of the banking system and a return to the drachma.

Early returns in the historic referendum showed the No side -Oxi in Greek =- running at 61pc versus 39pc for the Yes side as the Greek people turned out en masse to vent their anger over six years of economic depression and national humiliation. A volcanic revolt appeared to have swept through Greek islands.

Greek referendum results live

The shock result effectively calls the bluff of eurozone leaders and the heads of the European Commission and Parliament, forcing them either to back down or carry out drastic threats to eject Greece from monetary union.

The European Central Bank faces an immediate decision over whether to continue freezing emergency liquidity assistance (ELA) for Greek banks at €89bn, a stance that would amount to liquidity suffocation.

"If they do that, the situation would be very serious. That would be pretty close to trying to bring down the government," said Euclid Tsakalotos, the country's chief debt negotiator.

The Bank of Greece (BoG) said on Sunday evening that it will make a formal request to the ECB for fresh support.

The EU's leadership was in utter confusion as it became clear during the day that support was swinging back to the "No" camp, despite blanket coverage from the private TV stations warning that a "No" meant Armageddon.

"The Greek people have proven that they cannot be blackmailed, terrorized, and threatened," said Panos Kammenos, the defence minister and head of the coalition's ANEL party.

French president Francois Hollande said he would bend over backwards to keep Greece in the euro despite voting no. He is to meet German Chancellor Angela Merkel in Paris on Monday to draw up a joint response to what has turned into the biggest EU fiasco since the rejection of the European constitution by France and Holland in 2005.
Martin Schulz, head of the European Parliament, was still insisting on Sunday that a "No" vote must mean expulsion from the euro, but his view is becoming untenable.
Jean-Claude Juncker, the Commission's chief, is equally trapped by his own rhetoric after warning last week that a No vote would be a rejection of Europe itself, leading to calamitous consequences.

Top Syriza officials say they are considering drastic steps to boost liquidity and shore up the banking system, should the ECB refuse to give the country enough breathing room for a fresh talks.

"If necessary, we will issue parallel liquidity and California-style IOU's, in an electronic form. We should have done it a week ago," said Yanis Varoufakis, the finance minister.

California issued temporary coupons to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008. Mr Varoufakis insists that this is not be a prelude to Grexit but a legal action within the inviolable sanctity of monetary union.

Mr Varoufakis and ministers will hold an emergency meeting tonight with the private banks and the governor of the Greek central bank, Yannis Stournaras, to decide what to do before the cash reserves of the four big lenders dry up tomorrow.

Louka Katseli, head of the Hellenic bank Association, said ATM machines will run out of money within hours of the vote. One official say that Eurobank was "flat out of money" late on Sunday, even though Greek depositors have been limited to €60 a day since capital controls were imposed a week ago.

There were mounting signs that the creditors are stepping back from the brink, conceding that they may have to renew talks with Syriza after all, though it is far from clear what this means. Senior German officials were briefing last week that Greece will not get another cent as long premier Alexis Tsipras and Mr Varoufakis remain in power.
There is now a clear rift between Germany and France, perhaps serious enough to cause long-term damge to the coherence of monetary union.

Sigmar Gabriel, deputy German chancellor, said a No vote means "the last bridges between Europe and Greece to move towards a compromise will have been torn away."
"With the rejection of the rules of the euro zone, negotiations about a programme worth billions are barely conceivable," he said. His hardline position was echoed by Slovak finance minister, Peter Kazimir, who tweeted: "The nightmare of the "euro-architects" that a country could leave the club seems like a realistic scenario after Greece voted No today."

Such an approach appears irreconcilable with the views of the French economy minister, Emmanuel Macron, who said the EMU creditors are equally to blame for the crisis and must resist the temptation to "crush" the Greek people. "It is our responsibility to avoid a Versailles Treaty within the eurozone," he said.

Italy's Matteo Renzi said the sight of pensioners weeping in front of banks was a black mark on the conscience of Europe. "We must start to speak to each other again, and nobody knows this than better than Angela Merkel," he said.

Yet matters will be decided by handful of people in Berlin, Frankfurt, and Brussels over coming days, with the ECB in the unwelcome position of having to decide by its actions whether or not to bring the crisis to a head.

Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings - reportedly a 'bail-in' above a threshhold of €8,000 - and to prevent any banks being shut down on the orders of the ECB.
Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza's attitude at this stage is that their only defence against a hegemonic power is to fight guerrilla warfare.

Hardliners within the party - though not Mr Varoufakis - are demanding the head of governor Stournaras, a holdover appointee from the past conservative government.
They want a new team installed, one that is willing to draw on the central bank's secret reserves, and to take the provocative step in extremis of creating euros.

"The first thing we must do is take away the keys to his office. We have to restore stability to the system, with or without the help of the ECB. We have the capacity to print €20 notes," said one.

Such action would require invoking national emergency powers - by decree - and "requisitioning" the Bank of Greece for several months. Officials say these steps would have to be accompanied by an appeal to the European Court: both to assert legality under crisis provisions of the Lisbon Treaty, and to sue the ECB for alleged "dereliction" of its treaty duty to maintain financial stability.

Mr Tsakalotos told the Telegraph that the creditors will find themselves be in a morally indefensible position if they refuse to listen to the voice of the Greek people, especially since the International Monetary Fund last week validated Syriza's core claim that Greece's debt cannot be repaid.

"It would be a pretty extreme position for Europe to say that the vote didn't matter. That is not what they did when Ireland voted 'No' to the Lisbon treaty," he said.
Mr Tsakalotos said Syriza's mood hardened a month ago when the talks turned nasty. "A lot of people were outraged when we gave them a 47-page document and they gave us a 5-page document. It was a slap in the face. They were not even taking the negotiations seriously," he said.

Mr Tsakalotos said Syriza is now in a much stronger negotiating position and the creditors will gain nothing from digging in their heels. "The process has now gone for so long in Greece that we haven't got a hope in Hell of delivering on our promises unless there is a regime change, and by that I mean that people have to feel that Grexit is off the agenda," he said.

To those who complain that his government refuses to reform, he called this a canard. Syriza are the outsiders shaking up a fossilized system.

"Even in they forgave all the debt and gave us €300bn we would still be in deep trouble, if we didn't push through deep reform. No-one in Syriza thinks that everything was hunky-dory in 2008 and we all can go back to that," he said.

 

[arkmundi]

Yet on Sunday evening, many said that the country had united around the referendum, in which 62 percent of the voting population had cast a ballot.

62% vote, 61% voting vote NO. Pretty amazing turnout. Equally astounding vote. Now what?

 

[Joseph C.]

http://trueeconomics.blogspot.ie/2015/07/5715-votes-are-in-whats-next-for-greece.html

5/7/15: Votes are in... What's next for Greece?
Posted by Constantin Gurdgiev

With over 75% of votes counted in the Greek referendum, 61.6% of the votes counted are in favour of 'No'.



So what's next? Or rather, what can [we speculate] the 'next' might be?

Possible outcome: Grexit

This can take place either as a part of an agreement between Greece and Institutions (unlikely, but structurally less painful, and accompanied by debt writedowns, a default or both), or
It can take place 'uncooperatively' - with Greece simply monetising itself using new currency (more likely than cooperative Grexit, highly disruptive to all parties involved and accompanied, most likely, by a unilateral/disorderly default on ECB debt, IMF debt, EFSF debt and Samurai debt. Short term default on T-bills also possible).
Either form of Grexit will be painful, disruptive and nasty, with any positive outcome heavily conditional on post-Grexit policies (in other words, major reforms). The latter is highly unlikely with present Government in place and in general, given Greek modern history.

Grexit - especially disorderly - would likely follow a collapse of the early efforts to get the EU and Greece back to the negotiating table. Such a collapse would take place, most likely, under the strain of political pressures on EU players to play intransigence in the wake of what is clearly a very defiant Greek stance toward the EU 'Institutions' of Troika.

Key to avoiding a disorderly / unilateral Grexit will be the IMF's ability to get European members of the Troika to re-engage. This will be tricky, as IMF very clearly staked its own negotiating corner last week by publicly identifying its red-line position in favour of debt relief and massive loans package restructuring. The EU 'Institutions' are clearly in the different camp here.

EU Institutions will most likely offer the same deal as pre-referendum. Greece will be 'compelled' to accept it by a threat of ELA withdrawal, but, given the size of the Syriza post-referendum mandate, such position will not be acceptable to Greece. In the short run, ECB can allow ELA lift to facilitate transition to new currency, but such a move would be difficult to structure (ELA mandate is restrictive) and will result in more debt being accumulated by the Greek government that - at the very least - will have to guarantee this increase.

Problem with Grexit, however, is that we have no legal mechanism for this, implying that we might need a host of new measures to be prepared and passed across the EU to effect this.

Which brings us to another scenario: Status Quo

In this scenario - no player moves. We have a temporary stalemate. Greece will be cut off from ELA and within a week will need to monetise itself with new currency.

Why? Because July 10th there is a T-bill maturing, default on which would trigger a cascade of defaults. Then on July 13th there is another IMF tranche maturing (EUR451 million with interest). Non-payment of either will likely force EFSF to trigger a default clause. Day after, Samurai bonds mature (Yen 20bn) - default here would trigger private sector default. More T-bills come up at July 17th and following that interest on private bonds also comes up on July 19th (EUR225 million). And then we have July 20th - ECB's EUR3.9 billion due, with additional EUR25mln on EIB bonds. Non-payment here will nearly certainly trigger EFSF cross-default.

Most likely scenario here would be parallel currency to cover internal bills due, while using euro reserves and receipts to fund external liabilities. Problem is - as parallel currency enters circulation, receipts in euro will fall off precipitously, leading inevitably to a full Grexit and a massive bail-in of depositors prior to that. Political fallout will be nasty.

Most likely outcome is, therefore, a New Deal

This will suit all parties concerned, but would have been more likely if Greece voted 'Yes' and then crashed the current Government. This is clearly not happening and the mandate for Syriza is now huge. Massive, in fact.

So there will have to be a climb-down for the EU sides of the Troika. Most likely climb-down will be a short-term bridge loan to Greece (release of IMF tranche is currently impossible) and allowing use of EFSF funds for general debt redemptions purposes.

The New Deal will also involve climb-down by the Greek government, which will, in my view, be forthcoming shortly after Tuesday, especially if ECB does not loosen ELA noose.

Bad news is that even if EU side of Troika wants to engage with Greece, such an engagement will probably require approval of German (and others') parliament. Which will require time and can risk breaking up already fragile consensus within the EU. In fact, only consensus building tendency in the wake of today's vote is for a hard stand against Greece. Even in an emergency, EU is very slow to act on developing new 'bailouts' - in Cypriot case it took almost a year to get a deal going. For Portugal - almost 1.5 months. Urgency is on Greek side right now, not EU's, so anyone's guess is as good as mine as to how long it will take for a new deal to emerge.

That said, short-term approach under the status quo scenario above might work, as long as:
Greece engages actively, signalling willingness to deal;
Greece does not monetise directly via new currency (IOUs will do in the short run);
IMF puts serious pressure on Europe (unlikely);
ECB plays the required tune and keeps ELA going (somewhat likely); and
There is no fracturing of the EU consensus (if there is, all bets are off).
In a rather possible scenario, EU does opt for a new deal with Greece, which will likely involve pretty much the same conditions as before, but will rely on removing IMF out of the equation altogether. In this case, EUR28.7 billion odd of Greek debt held by the IMF gets transferred to ESM. The same will apply to ECB's EUR19 billion of Greek debt. The result will be to cut Greek interest costs (carrot), and involve stricter conditionality and cross-default clauses (stick). Euro area 'Institutions' therefore will end up holding ca 73% of all Greek debt in that case. Terms restructuring (maturities extension) can further bring down Greek costs in the short run.

The negative side of this is that such a restructuring & transfer will be challenged in Germany and Finland, and also possibly in the Netherlands.

It is. perhaps, feasible, that a new deal can involve conversion of some liabilities held by the euro area institutions into growth-linked bonds (I am surprised this was refused to start with) and/or a direct conditional commitment (written into a new deal) to future writedowns of debt subject to targets on fiscal performance and reforms being met (again, same surprise here). Still, both measures will be opposed by Germany and other 'core' economies.

Either way, two things are certain: One: there will be pain for Greece and Europe; and Two: there will be lots of uncertainty in coming weeks.


As a reminder of where that pain will fall (outside Greece):

Interesting interview with the Greek Finance Minister a few weeks ago.
http://mpegmedia.abc.net.au/rn/podcast/2015/06/lnl_20150601_2220.mp3

 

[arkmundi]

Finance Minister Varoufakis resigns, saying "his departure would be helpful in finding a solution to the country's debt crisis." A useful and productive step, signalling to the Troika that Greece wants to remain in the Eurozone and to do so, they require a fresh start at the negotiations. Very conciliatory.

The Fallout, day 1
* U.S. stock index futures fell on Monday after Greece rejected debt bailout terms, throwing the future of the country's euro zone membership into further doubt.
* World markets fell, but less sharply than expected and analysts attributed the relatively muted reaction to expectations the European Central Bank would act to limit any damage.
* The ECB's governing council began a conference call at 1000 GMT (6 a.m. ET) Monday to decide how long to keep Greek banks afloat. German Chancellor Angela Merkel and French President Francois Hollande will meet in Paris in the afternoon.
* Greece's finance minister quit and Prime Minister Alexis Tsipras said his government was ready to return immediately to negotiations with creditors in a bid to open shuttered banks.
* Some analysts say the combination of the Greek crisis and tepid employment data puts off a September rate hike by the Federal Reserve. The Fed has said it will raise rates only when it sees a sustained economic recovery.

No contagion, yet!

 

[dnmun]

greek banks will never reopen. i find it amazing that tsipras thinks he can force the german people and the french and the hungarians,irish, and poles and all the other people in europe to give them a buncha free money after they had to suffer to get their guvment spending in line in order to stay solvent.

Greek banks to remain shut in coming days: Reuters
By Sara Sjolin
Published: July 6, 2015 9:55 a.m. ET

Greece's banks won't reopen on Tuesday as earlier planned, but remain shut for a few more days, Reuters reported on Monday. Greece's government will issue a decree later on Monday, ordering the country's banks to extend the bank holiday for a few extra days, bankers told the news-wire service. The government ordered banks to close their doors for all of last week and Monday, to avert a deposit flight in the run-up to Sunday's bailout referendum. More than 60% of Greeks voted against the lenders' proposed austerity measures, increasing the risks of Greece leaving the eurozone, analysts said. The European Central Bank is set to meet later on Monday to determine whether to keep its emergency funding line to Greek banks open. If it could also decide to shut funds off or to increase the required haircut on collateral.

 

[dnmun]

Greece’s ‘no’ vote is really no vote at all
By Satyajit Das
Published: July 6, 2015 5:01 a.m. ET
A new round of economic and social troubles is just beginning
Reuters
The Greek referendum has changed little, and the troubles of the Greek people are likely to intensify.
>>>>>>>>>>>>>>
The first question in the referendum was largely irrelevant, as it was on a plan that had already lapsed. The second question on the International Monetary Fund debt sustainability analysis was based on projections of the ability of Greece to service its debt under different scenarios. It is certainly the first time, as one Greek observer noted, that a national referendum has been conducted about a spreadsheet.

It is not clear what the “no” vote signifies, especially as both the Greek people and their government want to remain within the euro. The result was less a considered deliberation of the issues than a reaction against European arrogance, illustrated by heavy-handed threats by several politicians and functionaries.

After massive market losses, Beijing tries more ideas(1:55)
Over the weekend Beijing cranked up efforts to stem a three-week stock-market selloff that has wiped out $2.4 trillion of value, but is the government really in control?

The Syriza government believes that the vote gives them a popular mandate to negotiate a new agreement which will provide a new 29 billion euro two-year bailout — one less onerous and more favorable to Greece. European creditors, who considered the result “regrettable,” claimed that “no” was a vote for the Hellenic nation to leave the euro EURUSD, -0.6388%

Greece now has to confront several issues:

First, the immediate problem is the reopening the closed banking system, which remains, as it has been since late 2014, dependent upon funding from the European Central Bank. Without an increase in Emergency Lending Assistance, currently frozen at 89 billion euros, the Greek banks cannot operate and are likely to run out of cash shortly. An additional complication is that Greece must make a 3.5 billion euro payment on a bond held by the ECB on July 20.

The ELA rules are helpfully vague, providing considerable scope for action. National central banks can extending ELA funding unless “the Governing Council of the ECB [with a majority of two-thirds of the votes cast] considers that these operations interfere with the objectives and tasks of the Eurosystem.”

If Greece defaults on its payments, then it would become difficult for the ECB to continue assistance. Even before that, the ECB has the option of maintaining its current freeze or tightening collateral requirements, which would reduce the funding available to the Greek banking system.

If the entire ELA was called in by the ECB, then the Greek banking system would collapse. This might trigger losses for depositors, as Greece’s deposit insurance scheme is underfunded. Greece’s persistent desire to remain in the eurozone means that it does not have the capacity to create currency to recapitalize its banking system.

Second, the lengthy negotiations, the banking restrictions, and capital controls have crippled the Greek economy. Tourist traffic over the critical summer period may be badly affected, falling by up to 40% as holiday-makers switch to Turkey, Spain, or Portugal. Critical shortages have exacerbated pre-existing problems, reducing activity with further layoffs and closures.

The Greek economy, which is around 25% smaller than in 2007, may contract further. According to the IMF, Greece may need a further 50-60 billion euros, including around 30-40 billion euros in new financing, simply to make it through to the end of 2018. This amount may significantly underestimate the funds required.

Third, a new agreement appears unlikely to be on more favorable terms than that on offer prior to the referendum. The Greek Prime Minister had conceded on most of the creditor’s demands and reports suggest that prior to the breaking off negotiations the difference between the parties was a modest 60 million euros.

Greek demands for debt relief at the same time they request further funding may not be sympathetically received by many creditors. In any case, the German position remains that there can be no agreement without the IMF, which now cannot participate until its payment arrears are remedied.

Fourth, the political environment is now poisonous, with minimal sympathy for Greece outside of perhaps France and the European Union. The French government is concerned about the effect of a Greek exit from the euro, given the political threat posed by the National Front. The EU cannot risk the damage to its power and prestige from a Grexit. Countries including Italy and Slovakia have made it clear that they cannot support pension arrangements sought by Greece, which are better than that available to their own citizens.

Domestic considerations in countries like Germany make it increasingly difficult to support a new agreement and the inevitable provision of further funding.

Fifth, there are unknowns. For example, Greece might force its central bank to print and circulate more euros unapproved by the ECB, a suggestion made by some Greek politicians. In this unlikely event, the ECB may retaliate by repudiating all euros (around 45 billion) printed for the Greek central bank, which are identified by a serial number commencing with a “Y,” causing further chaos.

Whatever the trajectory, nothing is likely to happen quickly. The Greek government has stockpiled oil and food for an expected siege. It might get one as both creditors and the ECB apply relentless pressure to strangle the Greek economy, looking to force concessions.


>>>>>>>>>>

if the greek guvment does follow through on their threat to start printing free euros then it will totally ruin all of the savings that the greeks have already saved and set aside so the country will become totally destitute when the guvment resorts to that. just to do more to threaten the europeans who object to greeks having better pensions than they do.

 

[arkmundi]

Whoops....
Washington Post: European Central Bank opts not to expand funds for flailing Greek banks

The move put a swift crimp on Greek leaders’ jubilation after winning a landslide endorsement from their citizens to reject Europe’s austerity demands and seek a new bailout bargain. Now they must seek a bargain before the money runs out within days, which would likely force them off the euro.

... The Syriza government and people of Greece want to stay in the Eurozone. See my previous posts - I'd like to see a so-called Grexit, move back to the Drachma, and opening of a Public Banking system in Greece. Along with radical re-localization of the economy and re-stabilization. So I see this latest development as perhaps forcing Greece onto that path. Think of it as chemotherapy for a dying patient that may lead to remission ... or they just die. The concoction being offered by the Troika promises a cure but would likely do nothing good, so the patient dies anyway. Options are death by A, death by B, or radical therapy.

 

[kd8cgo]

The Byzantines went down this same road before, funny to see their descendants on the exact same path. Their ancestors felt the pain of debasement, and the solutions back then were just as austere. The difference now, there *are* a few hands that can rain money down, but whether or not they do, will certainly play a large hand in the eventual outcome. For someone building a house of cards the likes of which we've never seen, these mega banks sure are... sure of themselves!

 

[Joseph C.]

The Byzantines went down this same road before, funny to see their descendants on the exact same path. Their ancestors felt the pain of debasement, and the solutions back then were just as austere. The difference now, there *are* a few hands that can rain money down, but whether or not they do, will certainly play a large hand in the eventual outcome. For someone building a house of cards the likes of which we've never seen, these mega banks sure are... sure of themselves!

Virtually every single European country has gone down this road in the last century or so. Some, like Germany, many times.

http://www.davidmcwilliams.ie/2015/07/06/greek-crisis-debt-forgiveness-must-be-part-of-the-healing-process

Greek crisis: Debt forgiveness must be part of the healing process

It is difficult to overestimate the seriousness of the Greek crisis, not just for Greece, but for Ireland too. Let us be very clear, the choice being presented is between amputation or recuperation.

The German plan, which is what the rest of the eurozone governments are supporting, sometimes gleefully, is to kick Greece out of the euro if it defaults. This is the amputation solution.

The other choice is the recuperation approach favoured by the IMF – and you would expect most reasonable people. This revolves around more debt relief and a plan to keep Greece in the euro and give the country time to try to turn the economy around.

The cold financial fact is that the Greeks don’t have the money to pay, so they will default again. In reality, the credibility problem for Greece is not that it has already defaulted – as argued by mainstream European politicians – but that it hasn’t defaulted enough.

The IMF has already said that Greece needs another €50 billion of debt relief. The US is privately supporting that view, not least because the US has seen these default crises before, notably in Mexico, and understands that debt forgiveness is part of the economic healing process.

But Germany is digging its heels in and is behaving as if only the reckless debtor is responsible – rather than the reckless creditor too. Unfortunately, this narrative is not only false, but for a country like Ireland – with, let us not forget, the highest total debt-to-income ratio in the world – very dangerous. If interest rates were to rise sharply, for example, do you think the 400,000 people on tracker mortgages would be able to pay? Where would we stand on debt deals then?

As has been the case in Ireland, getting into too much debt didn’t happen overnight. It took years of appalling government, here and in Greece, to go bust. We have only managed to grow because Ireland isn’t really a European economy at all. We are part of the Anglo-American economy – that’s where we trade, that’s where investment comes from and that’s where our people go to in an economic crisis.

Because Britain and the US and the likes of Canada and Australia grew strongly from 2012 onwards, they dragged us with them.

Our big bet is that the English-speaking world continues to grow and we will be okay, more or less, because we earn revenues by exporting to these countries and some of that revenue can be used to pay down debt.

If you don’t have revenue from the growing Anglo-American world, you are snookered – which brings us nicely to the European continent.

On the continent, things are much more complicated. Greece has been going slowly bust for years and German political opinion has been slowly becoming more unforgiving towards its debtors.

Ironically, because there is always a surplus for a deficit and a creditor for a debtor, the extent of Germany’s foreign debts is a reflection of its own massive current account surplus. It really is a victim of its own success.

As the German surplus got bigger and bigger, the amount of money available to German banks to lend also got bigger and bigger and they lent more and more to countries that were not getting stronger, but actually getting weaker and weaker.

Then suddenly, echoing Hemingway’s observation that you go bust two ways – “gradually, then suddenly” – Greece went bust. However, it is important to appreciate that the process took years of bad decisions on both sides. The Greeks are doubtless culpable, but so too is the EU for allowing this debt spiral to happen.

Now we have a stand-off between a bankrupt country and a German political elite, which has backed itself into a corner by promising the German people that Germany will not tolerate a default. In essence, Merkel has promised the German people that she will get all their money back, but now she is realising that there is no money.

As a consequence, the only way she can win politically is to turn Greece’s Great Depression-style catastrophe into an easily digestible morality tale for her electorate. So we end up with a piece of theatre pitting the feckless, lazy Greeks against the stoic, efficient Germans. Like all theatre there is an element of truth to the yarn, but a yarn it is.

For the German electorate, hard-working Germany must be seen to punish indolent Greece if it votes today to default. But how can Frau Merkel do this?

The only way Germany can be seen to win politically is if it pushes Greece out of the euro. At least then, Merkel can sell a “don’t frock with us” story to her electorate. (Sorry I couldn’t put it more politely.)

Unfortunately for the Germans, they don’t seem to want to admit that it is actually illegal to force Greece out of the euro and Germany, much as it would like to be rid of Greece, has a small issue of democracy and legally binding treaties to get around.

For a country that was destroyed by a strange little man with an odd moustache who stated that treaties were “nothing more than pieces of paper”, such a high-handed approach to international law might appear, at best, forgetful.

When you stand back, you can see that if the Greeks can’t be forced legally to leave the euro, they won’t. This means that the IMF view should prevail, but in the next few days, the Germans have the Greeks by the short and curlies and the pressure is being felt in the collapsing Greek banking system.

The Germans know they have only one chance to force the Greeks to leave, which is by collapsing the Greek banking system with rumours that a No vote means leaving the euro – which it doesn’t.

Doesn’t it strike you as distasteful that the richest country in Europe should try to destroy the poorest country in the eurozone by actively encouraging a bank run which would eviscerate Greek people’s meager savings?

And furthermore, doesn’t it make you a bit queasy to know that our government has become Europe’s most vocal pom-pom girl, cheerleading this grisly spectacle?

In addition, doesn’t this approach strike you as particularly odd when the entire strategy upon which this government was elected was to get “retrospective bank debt relief” for Ireland?

Ireland has most to gain from the IMF view that, in countries where there is far too much debt – personal and governmental – the only way out of a crisis is co-responsibility, where debtors and creditors do deals.

Quite why we are taking up the German cause with such gusto when it’s not in our interest is beyond me. Can you figure it out?

 

[Joseph C.]

Gurdgiev reckons its Grexit.

http://trueeconomics.blogspot.ie/2015/07/8715-latest-round-of-greece-talks-smoke.html

8/7/15: Latest Round of Greece Talks: Smoke, Fire, Grexit
Posted by Constantin Gurdgiev

Summit / Eurogroup takeaways:

1. No progress of any variety beyond the usual agreement to have more talks
2. Short term deal 'weighing in' for Sunday is rumoured - effectively a bridge loan based on Greek acceptance of pre-referendum proposals. One of proposals involved a 3-4 months long bridge financing deal (Bailout 2.1) followed by 3-4 year deal (Bailout 3.0). This was rejected by Finland.
3. Any 'possible' new deal being discussed is 2-3 years in duration - a can kicking of weak variety, in other words.
4. No haircuts on debt will be allowed.
5. Sunday - full EU heads summit (not euro alone), which indicates something serious brewing - at least in terms of applying pressure on Tsipras. Also, possible Grexit push. Summit can be 'avoided' if Greece presents an acceptable plan on Thursday. Decision to be finalised on Saturday.
6. Overall, Bailout 3.0 package of measures is now being pushed out to tougher conditionality for Greece than in previous talks.
7. Juncker stated that the EU Commission has prepared a detailed Grexit plan, inclusive of humanitarian aid. Juncker plan also includes balance of payments support scheme for non-euro states with big exposures to Greek banks: Bulgaria, Romania. Big questions are also about Macedonia and Serbia.
8. At least in theory (detailed theory per Juncker) we have the end of 'irreversibility' of the euro (for now - at single state level).
9. IMF is back in the Troika 'Institutions' pairing.
10. No parallel currency discussions - left to Finance Ministers discussions.

My take: Overall, Greek position is now nearly toast. Contrary to many expectations, a No vote did not produce a stronger playing hand for Greece. Possibly because Tsipras failed to deliver any new proposals. Sunday EU Council would be required for a treaty change. This implies two possibilities: haircuts (ruled out) or Grexit. We are leaning toward Grexit, heavily.

The acceleration in Eurogroup and council demands on Greece suggests that prior to the Referendum there was already a strong consensus that Grexit is the preferred direction for further talks.


Serious sidelines:

Italy position is optimistic on the deal, but no debt relief in sight. Still remains hard-line on Greece.

Merkel takes harder stance than anyone else: strikes down bridge agreement: "Bridge financing didn't play any role in our talks tonight." Stance on conditions: "The proposals we are expecting now encompass what we put forward for second programme plus more for third programme." Haircuts: "A haircut is not up for debate. That is a bailout under the treaties and that will not happen." Merkel isn't even keen on discussing ESM programme resumption. Tougher thing still: "The situation has become much worse. I have to take 3rd programme proposals to Bundestag - hence need detail." Which means serious hurdles to cover here.

France is the lead in Greek side support and Hollande is not impressed: "It is true that if there were no agreement, the situation would be serious. Other options would have to be sought."

Spain's Rajoy "New Greek programme will have conditions attached. Will have to be approved by institutions, then Eurogroup, then leaders". Meaningless, surprisingly.

Donald Tusk: "Our inability to find an agreement may lead to the insolvency of Greece and the bankruptcy of its banking system". Says the Greek government is to present its proposals by Thursday, July 9. Juncker put deadline at 8:30 am Friday, July 10. So lots of confusion.

Finland: ruled out Bailout 3.0 for Greece on any terms.

Belgium: Finance Minister Van Overtveldt: "very disappointed" by today's Eurogroup meeting. New Greek Finance Minister made "very good explanation" of situation, but "had no new proposals to show us". "I had the strong impression that everybody really feels the sense of urgency, except the Greek government." His boss: Belgian PM Michel: has “more and more difficulty to understand the logic of Tsipras. On the one hand he says 'we want to stay in the eurozone'. On the other hand, he's not taking any initiative, zero, nothing, to stay in the eurozone.”

Lastly - a link worth reading: http://www.capx.co/the-eurocrats-are-punishing-greece-to-scare-other-countries/

 

[arkmundi]

Reuters, 7-July: Euro zone gives Greece until Sunday for debt deal

Euro zone members have given Greece until the end of the week to come up with a proposal for sweeping reforms in return for loans that will keep the country from crashing out of Europe's currency bloc and into economic ruin....

.... Merkel said she was "not exaggeratedly optimistic" for a solution.

At an emergency summit in Brussels on Tuesday, representatives of the 19-country euro zone said all 28 European Union leaders would meet on Sunday to decide Greece's fate. ...

... He <Tsipras> promised to work for a socially just deal that would bring a "final exit" from the crisis, return Greece to growth and restructure Greek debt to make it viable.

Failure, Tusk warned, would undermine the EU's standing in the world and said the six-decade-old bloc may face "the most critical moment in our history"....

..."The ball is in Greece's court," Italian Prime Minister Matteo Renzi said, calling Sunday "the final meeting on Greece".

.... She <Merkel> did not rule out rescheduling Greek debt in the longer run by extending loan maturities, lowering interest rates and allowing a longer moratorium on debt service payments, but she said a "haircut", or writedown, was impossible because it would be illegal.

Austrian Chancellor Werner Faymann warned that if there were no deal on Sunday, euro zone governments would have to prepare "Plan B," code for Greece losing all access to euros and finding itself excluded from the currency bloc.

... At stake is more than just the future of Greece, a nation of 11 million that makes up just 2 percent of the euro zone's economic output and population.

If Greek banks run out of money and the country has to print its own currency, it could mean a state leaving the euro for the first time since it was launched in 1999, creating a precedent and fuelling doubts about the long-term viability of an incomplete European monetary union.

"Even if it did not trigger a short-term domino effect, the integrity of the euro zone would come under fresh threat with each episode of political uncertainty within member countries," said Thibault Mercier, an analyst at BNP Paribas.

Even in France, the euro zone country most sympathetic to Athens, an opinion poll published on Tuesday showed one in two people want Greece to leave the euro zone.

I'm one of those two, for all the reasons I've previously posted. Just saying there is a Plan C, the public bank option. Growing up, my family had a "time out", when something bad happened, when you'd be sent off to be alone and only be allowed back to the "good company" of the family after a "calming down." Plan C says it'd be good for all concerned for a time out of the Eurozone. That would force the Greeks to take full control of their local economy and get it working again. At some latter time, and it could be decades, when Greece is solvent, their Drachmas could always be exchanged for Euros and let back into the Eurozone.

That is if contagion doesn't set in, the so called doubts about the long-term viability of an incomplete European monetary union, mentioned. In finance, perception is everything. Its why currency has printed all sorts of strange symbols on it, eliciting the "trust" of the people.

But a Plan C, with all the parties working to make that successful, could lead to a more hopeful solution than either Plan A or B. Success would bring with it much needed faith & trust, alleviating "doubts", inoculating against contagion.

 

[Punx0r]

I can't offer any intelligent input on this issue but I am following it with interest. Monday morning should be a revealing time.

 

[arkmundi]

Reuters poll-median 55% probability of Greece leaving the Euro zone: economists (45% last week; first ever over 50%). But there is only a Plan A - negotiate with the Troika, reach accommodation, and stay in the Eurozone (which everyone prefers, including Greece), and a Plan B - leave the Eurozone. Plan C - leave the Eurozone with terms coming back and a plan to do that, and all parties agreeing to those terms in advance. In the meantime, Greece prints the Drachma, and re-establishes their own central bank. A variation of that is an all public banking system. That would be more in accord with the socialist leanings of the Syriza.

 

[Joseph C.]

It seems like the tipping point is about to occur.

http://businessetc.thejournal.ie/china-stock-market-crash-2204292-Jul2015/

China could be slipping into a crisis ‘far bigger than anything in Greece’

More than half of companies have suspended trading on the stock market.

ASIAN STOCK MARKETS have tumbled again this morning as a collapse in Chinese shares began to contaminate other markets, and after European leaders slapped Greece with a deadline to submit fresh bailout reform proposals.

With markets buffeted by two global crises, traders ran for the cover of investments considered safe in times of upheaval such as the yen.
Shanghai plunged almost 7% and Hong Kong lost 4.74% soon after opening, despite Chinese leaders announcing fresh measures to staunch a correction that has wiped trillions off the country’s markets.

By late afternoon both were down in the region of 5%.

The South China Morning Post reports that 51 per cent of mainland Chinese stocks have asked for voluntary suspensions from trade.
Most other regional markets – Toyko, Seoul, and Sydney – were also hit by the spillover effects, with many hosting companies with links to China.

“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch,” said Zheng Ge, an analyst at Wanda Futures Co.

Shanghai is down more than 30% from its closing peak on June 12, when it had risen by more than 150% in 12 months in a borrowing-fuelled frenzy enhanced by hopes for economy-boosting government measures.

However, analysts said new restrictions on margin trading and concerns about the overvaluation of many stocks have forced mainland investors — mostly individual retail traders — to cash out.

There are now fears that the hammering to stock markets will hit the wider Chinese economy, the world’s second biggest, which is already struggling with slowing growth.

Wednesday’s falls came despite the government announcing new measures to support the market.
Alex Wong, Hong Kong-based asset-management director at Ample Capital, added:
Gradually this will drag other markets lower because the magnitude of a China crisis would be far bigger than anything happening in Greece.
- © AFP, 2015, additional reporting by Business Insider.

 

[arkmundi]

AlJazeera America, 8-July: Greece decries 'austerity experiment' but vows reform plan for creditors

Applause rose from leftist quarters in the EU Parliament when Tsipras said aid to Greece only helped out banks, not ordinary Greeks.

He promised to deliver on detailed reform proposals by the end of Thursday, but slammed attempts to “terrorize” Greeks into voting for “never-ending austerity.”

.... Greece as having been used as an “austerity experiment” for the last five years of bailout reforms imposed on the country that led to spiraling unemployment and poverty, and a contraction of the economy by a quarter.

Sound familiar? Isn't that what happened during the great recession of 2007-8 and continuing. Remember the Too Big To Fail Banks. Remember the OccupyMovement and the 99% mime?

 

[Joseph C.]

Sound familiar? Isn't that what happened during the great recession of 2007-8 and continuing. Remember the Too Big To Fail Banks. Remember the OccupyMovement and the 99% mime?

The problem with the Occupy Movement is it lacked a cohesive narrative and a leader that could galvanise public opinion.

Despite what the other Eurozone members have been rabbiting on about - they can't force Greece to leave the Euro. That would be illegal and against the treaties they all signed.

I can see a large pan-European anti-austerity movement being voted in at the upcoming elections. Syriza were the first but they won't be the last. I just hope it is centre left. But we have had nothing but right-wing governments for so long now that something has to give.

Here is an interesting timeline for the key national European elections:

Portugal has to be before the 12th of October this year.
Spain is up on the 20th of December.
Ireland's has to be before the 3rd of April next year.
Italy isn't up until sometime in 2018.

Now that's just the well-know PIIGS. Then you have the other Eurozone countries that have massive external debt that have so far avoided turning private banking debt into public debt. Latest figures puts the Netherlands banking debt at 650 billion. If they have to convert that to public debt - immediately their debt-to-GDP ratio goes up by nearly 80 per cent.

External Debt to GDP (includes public, household and financial going by the McKinsey Study from Q2 2014):

Euro Debt-to-GDP
Belgium 327
Netherlands 325
France 280

Non Euro Debt-to-GDP
Denmark 302
Sweden 290
UK 252

Obviously with all the borrowing that has been going on those figures will only have worsened since then.

http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging

 

[kd8cgo]

Virtually every single European country has gone down this road in the last century or so. Some, like Germany, many times.

Precisely my point - developing a currency union amongst sovereigns with history easily telling us that the one not-unlikely spoiler, the main thing that could unwind the Eurozone, was not accounted for in its formation. At the time it was left as a problem for the future, as true measures to deal with just that one problem would have been politically impossible, and would have pierced the veil of national sovereignty, leaving exposed the view of an empire in all but name. Banksters thought the political will would eventually come, bringing with it the power to back up a true centralized monetary power capable of autonomous debasement. And this, harkens back to the days of our Romans - who with their already formed empire made similar mistakes but of course quite in reverse, debasement first, austerity second - which once the illusion of money has been broken, is the only choice left. (The Americans are following the Roman playbook to a 'T' however, having centralized their empire's power quite long ago.)

The problem with the Occupy Movement is it lacked a cohesive narrative and a leader that could galvanise public opinion.

Despite what the other Eurozone members have been rabbiting on about - they can't force Greece to leave the Euro. That would be illegal and against the treaties they all signed.

I can see a large pan-European anti-austerity movement being voted in at the upcoming elections. Syriza were the first but they won't be the last. I just hope it is centre left. But we have had nothing but right-wing governments for so long now that something has to give.

The Occupy Movement had an extremely cohesive narrative, and concise list of demands - the fact that so few know this is a testament to the means by which citizens of democracy are controlled through manipulation of information. It's no great wonder why, as someone obviously thought enough of it to marginalize the reporting that would have informed the citizenry of such matters. I think given a fuller picture, the movements lack of a leader, and coincident disdain for hierarchy, would not have been seen as such a shortcoming in the public eye. If only there was some institution dedicated to informing the public!

I had once assumed the right-wing governments of Europe would be the ones to cede power to the ECB, granting them ability unchecked for centralized Q.E. and currency debasement - but with the utter failure and pain of harsh, faux-austerity fresh in the minds of the people, it would not surprise me to see such an idea now rise from the left, as a solution to the Greek problem while keeping the Eurozone intact. The cynic in me still ponders the original idea (that so many western neo-liberal economists said would not work) of Eurozone austerity, was perhaps not intended to fail, opening up the public to the idea of a centralization route far beyond emergency loan powers. The eventual outcomes on a continental, and indeed global scale, are what make Greece so interesting - to me.

 

[dnmun]

the real problem is that it is not austerity that the ECB seeks to pursue. they want the greeks to cut back on the overgenerous pensions that are draining the little money that the guvment has. the greeks have very low age of pension collecions and they provide a huge cash payment in terms of the local economy and all of the other eurozone populations deeply resent having to pay taxes to their guvment so there guvment can give the money to the greek guvment so the greek guvment can pay off their volters who support them.

you should read what the hungarians and the irish guvments have said and what the maltese guvment has said.

i would be surprised if the greek guvment ever is able to borrow any more money from the ECB with the current guvment. i think it is over and the greeks will not come back into the euro until the comunists are voted from office and the normal popular guvment is restored and wins back some credibility from the eurozone commissioners.

in the meanwhile many people will starve and many will commit suicide in desperation because of the grandstanding by these charlatans who run the greek guvment now. the word for them is demagogue. the blood of their people is on their hands.

 

[arkmundi]

The blood has been running in the streets for the better part of 5 years. The Greeks wanted a regime change and got one. They have far better voter turnout that 'merica - its democracy at work. Sometimes its messy.

 

[Joseph C.]

The IMF know what the real situation is with Greece and that debt restructuring is imperative and have been making that case for ages now. Lagarde has been mentioning this in all her press interviews. The Greeks know that too - which is why they have been hard-balling the EU out of necessity.

As for the Irish Government - a school teacher with no grounding in economics and a Taoiseach that's a coward (whenever anything serious comes up he goes into hiding and can't be found) - well they shouldn't be listened to. And the German MEP Weber giving Tsipiras the finger in EU parliament.

Malta have got skin in the game. Any idiot knew Greece would never be able to repay those loans in 2010 their debt burden was already far too great - therefore they shouldn't have been made. If the German, French and Italian banks had taken losses for their poor investments we would haven't been in that situation. Besides in the scheme of things 50 million is pocket change even for a tiny country with a really small economy like Malta.

But to pretend that Greece is a problem nation when most of Europe has got severe problems is a farce. Ireland, Portugal, Italy, France, Belgium, Denmark, UK, Spain, Netherlands, Sweden and Belgium (basically most of Western Europe) all have severe structural problems - some of those countries have transferred private debt into public debt but no let's pretend that this is just a Greek quandary. Whereas all the other countries have done is accumulate more debt to make their inevitable defaults or private losses even greater. And those nations like Ireland are receiving plaudits? Give us a break.

Anyway BRIC economies getting worse and worse - year-on-year.

http://trueeconomics.blogspot.ie/2015/07/9715-bric-composite-pmis-june-2015-2q.html

Thursday, July 9, 2015
9/7/15: BRIC Composite PMIs: June 2015 & 2Q 2015
Posted by Constantin Gurdgiev

In the previous post covering Manufacturing & Services PMIs for BRIC economies, I promised to provide a separate summary of composite PMI-signalled activity.

Here is the summary of both Services and Manufacturing PMIs moves in June:



On a simple cumulative basis (unweighted by sector weights, not to be confused with Markit's Composite PMI):

Brazil composite activity stood at 86.4 in June, down from 88.4 in May. 2Q 2015 average was 88.5 against 98.4 for 1Q 2015 and down from 99.7 for 2Q 2014. In short - we have ongoing and worsening slowdown in activity across both sectors combined, with the fourth consecutive month of the combined reading below expansion line (100).
Russia composite activity stood at 98.2 in June, down from 100.4 in May. 2Q 2015 average was 99.4 - an improvement on 92.2 for 1Q 2015 and better than 96.4 recorded for 2Q 2014. The ongoing slowdown is moderating, with activity across both sectors combined showing slower rates of contraction in 2Q 2015. That said, combined activity has been posting contractionary signals in 8 out the last 9 months.
India composite activity fell to 99.0 in June, posting the first month of sub-100 reading since April 2014, down from 102.2 in May. 2Q 2015 average was 101.6 against 105.4 for 1Q 2015 and down from 102.4 for 2Q 2014. This implies that Indian economic activity growth was posting a significant slowdown q/q and y/y in 2Q 2015.
China composite activity stood at 101.2 in June, down from 102.7 in May. 2Q 2015 average was 101.9 virtually unchanged against 102.0 for 1Q 2015 and up slightly on 101.1 for 2Q 2014. China's economy was the only economy in the BRIC group that remained above the 100 line in June.

Charts below illustrate the latest trends:





In summary, things are getting worse, progressively across the BRIC economies, with Russia, surprisingly, presenting an upside momentum to the overall group growth dynamics. That said, the trends are yet to be fully established for Russia. Overall, BRICs have now running along the negative growth trend for some time and BRIC combined (weighted by each economy share of total group GDP) momentum is at 99.0 in June, marking the first sub-100 reading since May 2014. 3mo average through 2Q 2015 is at 100.3, down on 1Q 2015 average of 101.4 and down on 2Q 2014 average of 100.8.

 

[dnmun]

i think the greek parliament may vote down the attempt the negotiators are making to finalize a deal. so sunday will be the end for greece. the greek parliament is now controlled by the communist bloc and they are determined to shove it in the european systems face because they are brainwashed into thinking the europeans are evil bankers sucking their blood:

from reuters:

WRAPUP 5-Greece sends reform plan to EU, sets parliament voteFont size: A | A | A
5:15 PM ET 7/9/15 | Reuters
WRAPUP 5-Greece sends reform plan to EU, sets parliament vote
* Greek parliament to vote to authorise "prior actions" for loan

* Schaeuble concedes Greece needs some debt restructuring

* Tsipras cabinet said to finalise tax hikes and pension reforms

* Race to get agreement on Greece's third bailout

By Renee Maltezou and John O'Donnell

ATHENS/FRANKFURT, July 9 (Reuters) - The Greek government sent a package of reform proposals to its euro zone creditors on Thursday in a race to win new funds to avert bankruptcy and will seek a parliamentary vote on Friday to endorse immediate actions.

The chairman of Eurogroup finance ministers, Jeroen Dijsselbloem, confirmed receiving the documents and said through a spokesman that he would not comment until they had been assessed by experts from the European Commission, European Central Bank and International Monetary Fund.

A Greek official said lawmakers would be asked to authorise the leftist government to negotiate a list of "prior actions" it would take before any fresh aid funds are disbursed, a key step to convince sceptical lenders of its serious intent.

Leftist Prime Minister Alexis Tsipras spent the day with his cabinet drafting a last-ditch package of tax rises, pension reforms and economic liberalisation measures on which Greece's survival in the euro zone hinges.

A further vote would be needed to turn them into law next week if euro zone leaders agree at a summit on Sunday that the proposals are a basis for starting negotiations on a three-year loan and releasing some bridging funds to keep Greece afloat.

Greek banks have been closed since June 29, when capital controls were imposed and cash withdrawals rationed after the collapse of previous bailout talks. Greece defaulted on an IMF loan repayment the following day and now faces a critical July 20 bond redemption to the ECB, which it cannot make without aid.

The country has had two bailouts worth 240 billion euros from the euro zone and the International Monetary Fund since 2010, but its economy has shrunk by a quarter, unemployment is more than 25 percent and one in two young people is out of work.

Germany, Athens biggest creditor, meanwhile made a small concession by acknowledging that Greece will need some debt restructuring as part of the new programme to make its public finances viable in the medium-term.

The admission by hardline German Finance Minister Wolfgang Schaeuble came hours before the midnight deadline for Athens to submit its reform plan.

Schaeuble, who makes no secret of his doubts about Greece's fitness to remain in the currency area, told a conference in Frankfurt: "Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that.

But he added: "There cannot be a haircut because it would infringe the system of the European Union."

He offered no solution to the conundrum, which implied that Greece's debt problem might not be soluble within the euro zone.

But he did say there was limited scope for "reprofiling" Greek debt by extending loan maturities, shaving interest rates and lengthening a moratorium on debt service payments.

Schaeuble also complained that he had not seen any sign of "prior actions" by the Greek government. Friday's vote should go some way towards disarming such criticism, although a further vote will be required to turn the "prior actions" into law next week if an agreement is reached, the Greek official said.

DEBT RELIEF CHORUS

European Council President Donald Tusk, who will chair an emergency euro zone summit on Sunday to decide Greece's fate, joined growing international calls for Athens to be granted some form of debt relief as part of any new loan deal.

Tusk said a realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors.

"Otherwise, we will continue the lethargic dance we have been dancing for the past five months," he said.

Failure to reach a deal on Sunday, including releasing some money to enable Athens to cover debt service over the next few weeks, could lead to a collapse of Greek banks next week.

If there is no agreement, all 28 European Union leaders will discuss measures to limit the damage from a Greek collapse, including humanitarian aid, possible border controls and steps to mitigate the impact on neighbours, EU officials said.

Just how uncertain the coming days are was highlighted when ECB President Mario Draghi voiced highly unusual doubts about the chances of rescuing Greece.

Italian daily Il Sole 24 Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as saying he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens' rescue.

Asked if a deal to save Greece could be wrapped up, Draghi said: "I don't know, this time it's really difficult."

The ECB is keeping shuttered Greek banks afloat with emergency liquidity capped until the weekend.

Even France, Greece's strongest supporter in the euro zone, acknowledged it was working on scenarios for a Greek exit from the currency area if weekend efforts to clinch a deal fail.

Under the agreed timetable, the three creditor institutions will deliver their initial assessment by Friday evening. If it is broadly positive, Eurogroup finance ministers will decide on Saturday whether to recommend opening negotiations with Athens on a conditional loan from the European Stability Mechanism bailout fund. The decision requires the assent of countries representing 80 percent of the ESM's capital, so talks can go ahead even if one or two smaller member states vote against it.

Having won a thumping referendum majority to reject the austerity terms of a previous bailout plan, fired his turbulent finance minister and secured support from opposition party leaders, Tsipras is in a stronger position to impose tough measures and face down resistance at home.

But in a sign of the some of the challenges he will face, the leader of the far-left wing of his Syriza party came out to denounce any imposition of harsh measures on Greeks.

"We don't want add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country," Energy Minister Panagiotis Lafazanis said.

According to Athens daily Kathimerini, the reform package will be worth 12 billion euros over two years, more than previously planned to offset a return to recession after months of difficult negotiations with creditors.

Instead of growing by 0.5 percent this year, months of uncertainty and almost two weeks of capital controls mean "there are estimates of a recession of about 3 percent", Kathimerini said. Greece emerged only last year from a deep recession that shrank its economy by a quarter over six years.

European officials told Reuters on Wednesday that some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country.

One official said Greece's four big banks - National Bank of Greece, Eurobank, Piraeus and Alpha Bank - could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens.

German Bundesbank chief Jens Weidmann said capital controls should remain in force in Greece until there was any deal, and that the ECB should not increase its liquidity assistance for Greek banks, without which they may collapse next week. (Additional reporting by Alastair Macdonald in Brussels, Agnieszka Flak in Milan, Deepa Babington, Angeliki Koutantou and Michele Kambas in Athens, Balasz Koranyi and Frank Siebelt in Frankfurt, Julien Ponthus and Laurence Foster in Paris; Writing by Paul Taylor; Editing by Catherine Evans, Toni Reinhold)

 

[Joseph C.]

i think the greek parliament may vote down the attempt the negotiators are making to finalize a deal. so sunday will be the end for greece. the greek parliament is now controlled by the communist bloc and they are determined to shove it in the european systems face because they are brainwashed into thinking the europeans are evil bankers sucking their blood:

The communist bloc? I think you have been watching too much Fox News. They have 15 seats in the Greek parliament and they are the opposition party - nothing to do with the Greek Government.

Syriza are barely centre left never mind far left. American politics ,where hard right parties like the Democrats are somehow viewed as left wing (when they would be classed as closer to far right in Europe) and the far right Republican party as centre right (most European nations would have no party that extreme perhaps France's Front National would be the closest), is clouding your perspective.

I'm fond of a bit of hyperbole myself, now and then, but claiming the fascist left (surely an oxymoron) and that Greek banks will never open again has to be among the most outlandish things ever committed to digital ink on this forum.

 

[arkmundi]

The deciding factor in the Greek vote: AlJazeera, 9-July: Europe has lost the confidence of young people

Greece’s resounding “no” came down to demographics. Of the 63 percent of the population that voted, polling shows “yes” enjoyed a majority only among those 55 or older. Over 70 percent of voters 18 to 25 said “no.”
... and so did students — by an astounding 83 percent.

So its a generational shift as the young try to imagine a different future than the one they're inheriting.