Sovereign debt bubble thread

[Sheilbh]

Sheilbh, who is that in your profile picture?

A young Thom Gunn.  One of my favourite poets and I'm reading a lot of him lately.

[Sheilbh]

Fitch update:

Fitch: Greece and Europe: Back from the Brink, Crisis Unresolved   Ratings   Endorsement Policy
18 Jun 2012 10:16 AM (EDT)
Fitch Ratings-London-18 June 2012: The narrow victory of New Democracy in the Greek parliamentary elections means the near-term risk of a Greek disorderly debt default and exit from the euro has fallen. A new government that is supportive of the EU-IMF programme is likely to be in place prior to the EU Leaders Summit on 28-29 June.
Consequently, Fitch will not place all eurozone sovereigns on Rating Watch Negative as it had indicated would be the case if a Greek euro exit were a probable near-term event.

The crisis in Greece and the eurozone remains intense. Fiscal austerity and painful structural reform combined with a strong parliamentary opposition led by Sryzia means that the new Greek government is likely to be fragile.

The pace of economic contraction is almost certainly accelerating. The country's liquidity position is fast deteriorating, underscoring the urgency of forming a new government and the resumption of disbursements under the EU-IMF programme. It will be challenging to significantly ease the austerity programme without receiving additional funds, although there is some room for manoeuvre on the financing profile of the existing programme.

While the risks from Greece have fallen for now, the severity of the systemic crisis engulfing the eurozone is unlikely to diminish until European leaders articulate a credible road-map that would complete monetary union with much greater fiscal and financial integration.

Downward pressure on the sovereign credit profile and ratings of eurozone sovereign governments will intensify so long as a credible path to closer union and a more coherent and united policy response are absent. This includes further boosting the financial backstops against contagion.

[Syt]

http://www.abc.net.au/news/2012-06-19/europe-fires-back-at-g20/4079008

Europe fires back over G20 criticism

European leaders have fired back at criticism from G20 countries about their handling of the economic crisis.

Prime Minister Julia Gillard and Treasurer Wayne Swan wrote to world leaders ahead of this week's G20 summit in Mexico, urging them to adopt policies designed to stimulate the economy while also implementing austerity measures.

The US and Canada are also pressuring Europe to act, with Canadian prime minister Stephen Harper calling on eurozone leaders to make structural changes to solve the debt crisis.

But European Commission president Jose Manuel Barroso has hit back at those critical of Europe's approach, telling reporters: "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy".

"By the way, this crisis was not originated in Europe," he said.

"This crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market."

Mr Barroso said he expected G20 leaders to "speak very clearly in favour of the approach the EU is following."

The G20 talks have so far been dominated by a focus on how to deal with the debt-laden economies of European nations.

Ms Gillard has told delegates they should follow Australia's lead in dealing with the financial crisis, by putting in place carefully targeted stimulus measures and spending cuts aimed at restoring budgets.

Speaking in Australia, Opposition Leader Tony Abbott has ridiculed the Prime Minister's offer of "wisdom" for other countries.

"A Government that has delivered the four biggest deficits in Australian history hardly has the credentials to lecture the G20," Mr Abbott told a conference in Canberra.

"[The] Prime Minister would be better advised to actually deliver a surplus, as opposed merely to forecast one before she starts giving lectures to other countries on economic and fiscal rectitude."

Mr Abbott said Australia's economy remained vulnerable to further setbacks in the economies of Europe and the United States, and also the possibility of slower growth in China.

"The Government can't assume that everything is going well. It shouldn't assume that the $1.5 billion surplus is in the bag," he said.

At the last election, the Coalition promised to make budget savings of $50 billion - although some of the measures were rejected by Treasury officials - and is promising to take a similar approach at the next election.

"It will be tougher to get savings this time than last time because the stimulus programs that we were able to cut last time largely won't be available to cut this time," Mr Abbott said.

He says the Coalition is going through the budget "line by line" looking for wasteful spending.

[Sheilbh]

And Americans think Obama's bad for blaming the last guy

It reminds me of the almost surreal tweets the official European Commission account churns out.  Some recent gems:
'Did you know? in 2011 EU27 had a lower govt debt (83% of GDP) than the #USA (102.9%) and #Japan (229.8%) http://bit.ly/ECPresidentG20 #G20'
'Did you know? in 2011 EU27 had lower govt deficit (-4.5% of GDP) than the #USA (-9.6%) and #Japan (-8.2%) http://bit.ly/ECPresidentG20 #G20'
'Did you know? EU GDP grew by nearly 35% over 1995-2008 and reduced by less than 1% over 2008-2010 http://bit.ly/ECPresidentG20 #G20'

Maybe this is decent PR in Portugal

Edit:  Also is the President of the European Commission really in a position to lecture anyone about democracy.  I mean that selection process is about as transparent  as the National People's Congress

Edit:  The video's even worse:
http://www.bbc.co.uk/news/business-18496985

[DGuller]

Sometimes blaming the last guy is perfectly understandable.  I'm sure Adenauer was justified in blaming the last guy.  Of course, ideally praising the last guy when the economy is booming should be done as well, but, oh, well.

[Sheilbh]

This combo of news, from the Guardian, looks ominous for coming weeks:

Spain, meanwhile, has sold €640m of 18-month bills with an average yield of 5.1%, compared with 3.3% at the last auction. It also sold €2.4bn of 12-month bills with an average yield of 5.07%, compared with 2.98% at the last auction.
...
German business confidence fell in June at its fastest rate since October 1998, with uncertainty over the Greek elections likely to blame for the drop. The ZEW survey fell to -16.9 from 10.8 in May, way below forecasts for a drop to 4.
A ZEW economist said this was not just a monthly fluctuation in sentiment; the slide is too pronounced to interpret it as a temporary fluctuation. The survey results came in mainly before the Greek elections, but the results coming in after the elections were not significantly better.
The think-tank said diminishing exports, global growth and eurozone rescue packages were the main reasons for the slide in expectations. It does not, however, expect Germany to go back into recession.
...
Still the key point is that if Spain is paying those kind of levels for its debt, it needs not only an ESM package to recapitalize its banks, it also needs an outright bail-out package, and it is becoming very difficult to see how it can manage without that beyond the end of Q3, unless yields fall dramatically!
...
The full audit of the Spanish banks has been delayed from July to September, fuelling fears that the banks may need more than originally thought (see 8.25am). Spain's central bank has apparently agreed the delay with the government, the IMF and the ECB. Accendo Markets' head of research wonders what's keeping them.

I'm also reading more chatter about Italy which is scary 

Edit: Apparently the Cypriots need a bailout to bailout their banks.  They say they need it by 30th of June.  That should be manageable though.

[Richard Hakluyt]

"But European Commission president Jose Manuel Barroso has hit back at those critical of Europe's approach, telling reporters: "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy"."

...........and how many votes did you get Mr. President?

[Crazy_Ivan80]

"But European Commission president Jose Manuel Barroso has hit back at those critical of Europe's approach, telling reporters: "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy"."

...........and how many votes did you get Mr. President?

can't have been more than 25 or 27

[Zanza]

Sometimes blaming the last guy is perfectly understandable.  I'm sure Adenauer was justified in blaming the last guy.  Of course, ideally praising the last guy when the economy is booming should be done as well, but, oh, well.

What was wrong with Lucius D. Clay? 

[Zanza]

"But European Commission president Jose Manuel Barroso has hit back at those critical of Europe's approach, telling reporters: "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy"."

...........and how many votes did you get Mr. President?

345 of 345 in the EU Council
382 for, 219 against, 117 abstained in the EU Parliament

Do British prime ministers usually get more support in the House of Commons?

[Richard Hakluyt]

They have to win their own seat, so usually need around 30,000 actual voters to vote for them.

[Zanza]

They have to win their own seat, so usually need around 30,000 actual voters to vote for them.

Okay. But then he only needs the confidence of the House of Commons not both parliamentary chambers like in the EU, right?

As the president of the EU commission is nominated by the upper chamber (the Council) as opposed to the lower chamber as usual in most parliamentary democracies, he doesn't have a constituency to win first. But I am not sure whether that alone is a democratic deficit. Our federal chancellor theoretically doesn't have to be a member of the lower chamber either, but I don't consider that a major democratic deficit as that office, like the EU commission president has to command the confidence of the lower chamber.

Where I see a democratic deficit is how the lower chamber of the EU, the parliament, is elected as Maltese votes count much more than German votes. That's a good point for criticism in my opinion.

[Richard Hakluyt]

The European parliament is a broken reed and can hardly be compared to the House of Commons in terms of its prestige and authority, or the Bundestag for that matter.

Voter participation rates in Euro elections, throughout the EU, are low and on a downward trend; so I don't think that my concerns about the levels of democratic accountability within the EU are some peculiar insular foible.

But I have to leave it at that, we are off-topic in an already huge thread and the Cold War beckons in the form of Smiley's People (the TV series) 

[Zanza]

I generally agree with your criticism of the EU parliament.

[DGuller]

Sometimes blaming the last guy is perfectly understandable.  I'm sure Adenauer was justified in blaming the last guy.  Of course, ideally praising the last guy when the economy is booming should be done as well, but, oh, well.

What was wrong with Lucius D. Clay?