From GoldCore Spain The Latest Domino To Fall In The Eurozone Bailouts? Today's AM fix was USD 1,571.50, EUR 1,298.12, and GBP 1,011.91 per ounce. Friday’s AM fix was USD 1,583.00, EUR 1,291.30and GBP 1,007.83 per ounce. Silver is trading at $26.98/oz, €22.36/oz and £17.94/oz. Platinum is trading at $1,396.00/oz, palladium at $564.80/oz and rhodium at $1,190/oz. Gold climbed $2.90 or 0.18% in New York on Friday and closed at $1,583.90/oz. Gold initially traded sideways in Asia and then began to fall about 0.75% by the open of trading in Europe. Gold edged down on Monday due to the pressure from a stronger dollar, as worries about the Eurozone debt crisis grew after Spain looked like the next candidate for a sovereign bailout. Spain has two regions seeking aid from the central government and El Pais reported that six Spanish regions may ask for aid from the central government while Spanish bonds yields continue to rise. As the 4th largest economy in the Eurozone Spain looks likely to follow Greece, Portugal and Ireland seeking an international bailout. Greece’s creditors meet this week as many doubt they will meet their bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. China’s economic expansion may fall for a 7th straight quarter to 7.4% in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee. Technical analysis suggested that spot gold would be neutral in the range of $1,567.34 - $1,597/oz said Wang Tao a Reuters market analyst. Investors are favouring safe haven assets such as the dollar, yen and U.S. Treasuries while some just sit on cash until more clearer signals from the US Fed are given. For breaking news and commentary on financial markets and gold, follow us on Twitter. NEWSDollar, yen rally on raging Greece, Spain fears - MarketWatch Gold eases as heightened Spain worries boost dollar - Reuters African Barrick gold production declines - MarketWatch COMMENTARYSpecial report: After Libor, where will the next scandal be? – The Independant LIBOR Scandal And Its Effects On Gold And Silver Lease Rates – Seeking Alpha The Economic Collapse For Dummies – Zero Hedge Will the LIBOR scandal be the one to take down the banking system? - MSN
The eurozone's government debt to GDP ratio stood at 88.2% at the end of Q1, up from 87.3% at the end of Q4. For Spain, the ratio was 72.1% vs. 68.5% previous, which looks pretty healthy compared to Greece's 132.4%, Italy's 123.3%, Portugal's 111.7% and Ireland's 108.5%. At the other end of the spectrum were Estonia (6.6%), Bulgaria (16.7%) and Luxembourg (20.9%). (eurostat report .pdf)
The eurozone's government debt to GDP ratio stood at 88.2% at the end of Q1, up from 87.3% at the end of Q4. For Spain, the ratio was 72.1% vs. 68.5% previous, which looks pretty healthy compared to Greece's 132.4%, Italy's 123.3%, Portugal's 111.7% and Ireland's 108.5%. At the other end of the spectrum were Estonia (6.6%), Bulgaria (16.7%) and Luxembourg (20.9%). (eurostat report .pdf) 6 comments!
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With Valencia bust, Spanish bonds at all-time record spreads to bunds, and yields at euro-era record highs, Spain's access to public markets for more debt is as good as closed. What is most concerning however, as FAZ reports, is that "the money will last [only] until September", and "Spain has no 'Plan B". Yesterday's market meltdown - especially at the front-end of the Spanish curve - is now being dubbed 'Black Friday' and the desperation is clear among the Spanish elite. Jose Manuel Garcia-Margallo (JMGM) attacked the ECB for their inaction in the SMP (bond-buying program) as they do "nothing to stop the fire of the [Spanish] government debt" and when asked how he saw the future of the European Union, he replied that it could "not go on much longer." The riots protest rallies continue to gather pace as Black Friday saw the gravely concerned union-leaders (facing worrying austerity) calling for a second general strike (yeah - that will help) as they warn of a 'hot autumn'. It appears Spain has skipped 'worse' and gone from bad to worst as they work "to ensure that financial liabilities do not poison the national debt" - a little late we hesitate to point out. Franfurter Allgemeine: Now Burns Spain (Via Google Translate) Spain has no "Plan B" more. The money will last until September. Then you have to spend the Treasury after a break in August and again fresh government bonds. However, if the interest and the risk premium on the record highs of the past "Black Friday" hold, is the fourth largest economy in the Euro zone - to Greece, Ireland and Portugal - the fourth rescue candidate. How much has shaken the unrelenting storm in financial markets and alarmed the country's government can be seen in an almost desperate sounding aggressive opinion of the Spanish foreign minister. At a conference with other European leaders in Palma de Mallorca attacked José Manuel García-Margallo, the European Central Bank (ECB) with unprecedented severity as Tunix bank. García-Margallo accused the ECB, which has reportedly bought for five months, no more Spanish government bonds and thus the pressure on Spain not reduced before, to keep "hidden". Literally, he added. "It does nothing to stop the fire of the (Spanish) Government debt," his claim on the ECB in the sign of European solidarity now to intervene in favor of his country, was not all. When asked how he saw the future of the European Union and its common currency, he replied that it could "not much longer go on," that countries such as Germany, debt free could, while others such as Spain standing water up to his neck. What had happened 20 at that July 2012, the Black Friday signaled as early as the Thursday night by the images of nationwide protest rallies "Greek standards." Here, the organized power of protests by the unions were run primarily employed by the public service with the exception of a few final acts of violence in the capital peacefully everywhere. But the union leaders called the warnings of a "hot autumn", wants a second general strike this year wore on waking certainly not to reassure international investors in regard to the soundness and solvency in Spain. Then came the early afternoon of the next big bang: Valencia asked the first of the seventeen regions of Spain for help from the newly created National Salvation Fund (FLA), because it has serious liquidity problems. Since it did not help that a quarter of an hour later from Brussels came the news that the Euro Group have released the more than 100 billion euros to recapitalize ailing Spanish banks and the first installment of disposable 30 billion for the already partly nationalized banks until the end of July were. The faces of government officials fossilized Of this and of the parliament on Wednesday adopted drastic austerity program of 65 billion unfazed, overthrew the Spanish stock market fell by almost six percent. At the same time increased the risk premium on Spanish government bonds already well above the Greek-Irish-Portuguese rescue addition to a record level of 610 basis points above German reference value. The interest rates for ten-and thirty-year bonds ended the trading day at around 7.3 percent is also acute in the danger zone. The faces of government officials who had to announce on Friday itself even more bad news fossilized rapidly. Even the hard from her left Façon to be brought Deputy Prime Minister Soraya Sáenz de Santamaría called it "incomprehensible" that the markets in Spain punished in such a way where his government produce it for six months in the timing of the reform and austerity at a time. In desperation sought the Deputy Prime Minister verbal refuge with federal Finance Minister Wolfgang Schaeuble said, "I fully agree with him. The situation we are experiencing is so because of the large uncertainty that exists in the euro zone. "Then dodged all questions, whether on the bank bailout now inevitably will come to the whole country, but closed already no longer sufficient. At the two major ghosts in the background, namely the possible insolvency of Spain or a breakup of the euro, was at that time then stir no more. Six other regions are in need of help The bad news flipped finally on his own Finance Minister Cristobal Montoro. He admitted that the recession will extend to a negative growth of an estimated 0.5 percent of gross domestic product (GDP) in 2013 for one year. Given falling tax revenues and rising social expenditure - unemployment is expected later this year rising to over 25 percent - is no longer with the previously approved mini growth of 0.2 percent expected. This year it will just as it has several foreign analysts, including the International Monetary Fund (IMF), have predicted to go down significantly: minus 1.5 percent. Then had Montoro, the best pen-pushers in the cabinet of Prime Minister Mariano Rajoy, another piece of bad news: Because of rising interest rates and unemployment benefits would have to increase government spending in the coming year and by 9.2 percent. As an upper limit for the next budget, he called 126 billion euros (116 this year) and estimated the proportion of debt service on up to 39 billion. So this would be the largest budget item in general. As the Minister of Foreign Affairs in Palma went out of his skin diplomats and deposed the emergency call to the ECB, the swirling dust of Valencia had not only not set, but spread to other regions. The six other candidates are called rescue Catalonia - the former "engine" of the Spanish economy alone corresponds approximately to the volume of Portugal - Balearic Islands, Canary Islands, Castile-La Mancha, Murcia and Andalusia may have. It is the largest and most populous region. You scrape all of the insolvent and can along without help from the central Wages Liquidez Autonómico (FLA), neither their use nor pay for the bonds maturing their suppliers. Monti comes to Madrid 18 billion euros to put the government in the FLA pot. Of which 6 billion a called dormant "advance" the government agency with the best credit rating: the National Lottery. Valencia, a stronghold of the conservative People's Party, whose representatives are there over the years contributed megalomaniac buildings and even a new airport, which is never a plane has landed, is expected to require first aid as two billion. In Catalonia, there should be a bit more expensive. Perhaps the most obvious may be the last three decades Socialist-ruled Andalusian black hole, no one even dares to predict. Prime Minister Rajoy also remained true to its strategy over the weekend not to step into self-publication. But it became known that he for the second Mario Monti, has been invited to Madrid - august his Italian neighbors - and co-conspirators against Chancellor Angela Merkel at the last European summit in Brussels. This will enable the two friends in Berlin alone at the thought of causing goose bumps "Euro Bonds" on a common approach and probably speak a new attempt to lure the ECB from its "hiding place". Some doubt now, though, that Monti wanted to identify themselves too closely with the Bredouillenspaniern, yet there is Italy, the 'risk premium' now suspended well. Vice Premier Sáenz de Santa María was meanwhile from the exchange. "Now we need to work to ensure that the financial liabilities (the banks) do not poison the national debt" That's easier said than done if the EU and the ECB is not Spain under the arms . access Brussels to act from the perspective of Madrid always a snail's pace, where the Spanish crisis but is now viewed primarily as a "euro crisis" for which one - need new, credible supporting stability mechanisms - with central bank help. Be if Spain, which this year will have around 60 billion euros to repay loans due rescued, would have, there are two variants: the already "traditional" with loans to macroeconomic conditions and visits to the "Men in Black" or the use of Other funds from the bank bailout fund. In almost all European capitals, including Madrid, has been in the past week vehemently denied that the 100 billion euros would be used not only to clean up the banks. But somewhere in the agreements is a smooth passage in which this kind - would allow - after approval of the euro group, and probably also of the German Bundestag. Perhaps as soon as a Foreign Minister García-Margallo hard to knock.
There exist those pathological Economics 101 acolytes who say that no matter what happens in the global economy, since it is all supposedly a closed system, whether one incurs leverage at the sovereign or private-sector level is largely irrelevant, and that is all translates into economic growth as long as the system is experincing a net leverage increase. Usually these same acolytes come up with economic theories which attempt to validate and justify infinite sovereign debt incurrence, usually to explain why socialism can be funded (if only in various formerly capitalist societies). At the heart of their thinking is the Kalecki profits equation which says that: Profits = Investment – Household Savings – Government Savings – Foreign Savings + Dividends Or in other words, as long as the non-government sector is expanding its savings (reducing leverage), aggregate economic output remains the same as long as the government is doing the opposite. Of course, as we explained before this equality breaks immediately in a real world in which one evaluates the impact of asset age, amortization, depreciation and otherwise the impact of reality on profitability. But does that mean that every economics theory that says corporate deleveraging is offset by sovereign leverage is wrong? Not necessarily. it just says that there is far more to the final outcome than what an Neo-Keynesian Econ 101 textbook alleges. To evaluate the impact of private sector deleveraging on economic growth/GDP in the context of a rapidly releveraging sovereign, we present the following analysis from Citi which observes various European countries and analyzes the "credit intensity" of GDP growth, or in other words which country has preserved, or even grown its GDP even as its private sector has seen substantial deleveraging. The results are interesting and may present a framework for evaluation the winners and losers in Europe in the era of "great sovereign leveraging", permitting a reverse engineering of the success stories, and applying their lessons to the losers. Citi has compiled data analyzing private sector leverage and cross referenced it to countries who have seen massive sovereign debt expansion in the past 5 years, however offset with various degrees of private sector deleveraging. The results are as follows : Given the persistent tensions from the financial sphere and the precarious situation of some banking systems, it is interesting to compare how much leverage has been accumulated in the last ten years in various euro area member states and how much economic activity was generated during the same period (see Figure 4). This allows us to measure the ‘credit-intensity’ of GDP growth. In particular, we concentrate on the last five years to see whether the relationships have evolved. In peripheral countries such as Spain, the last two years (Q4 2009 to Q4 2011) saw a 16-point drop in the real credit outstanding without triggering a contraction in the level of economic activity. Over the same period, Ireland was perhaps the most successful peripheral country, with real credit outstanding shrinking by 57 points while the real GDP level rose by 4 points. In Portugal, while the reduction in real credit outstanding was more limited, worth 12 points in the last two year, the level of real GDP still declined, albeit by a modest 2 points. Italy is the only country within the peripheral group that experienced an increase in the amount of private sector real credit outstanding, with a gain of 5 points. Yet, the corresponding increase in real GDP was limited to just 2 points. Core and soft core countries recorded GDP gains, with Finland (7pt) and Germany (6pt) clearly in the lead, compared to Austria (5pt), Belgium (4pt) and France (3pt). Interestingly, Belgium managed to grow its GDP despite experiencing a clear deleveraging phase. Note that Germany is the only euro area member state to have recorded an increase in its GDP level since 2002 while its level of private sector credit outstanding has declined during the last decade . So while the occasional success story may exist, the danger is as always one of extrapolating into the future too far, especially a future in which private sector growth will very likely be even more constrained in the coming years. The danger is that expanding sovereign leverage will no longer be private sector offset, which it obviously is not in the general case, and will simply become a headwind to growth, at both the macro as well as micro levels. Looking ahead to the next few quarters, there is a clear risk that banks operating in peripheral countries will either maintain tight lending standards or restrict lending even more in the event of further increases in the proportion of non-performing loans. Unless those countries implement sufficiently comprehensive structural reforms to lift potential growth, economic activity is at risk of contracting further in the coming quarters, increasing investors concerns about debt sustainability.
Nouriel Roubini : " Indeed it looks like a free fall abyss... [[ This is a content summary only. Visit my website : www.nourielroubini.blogspot.com for full story! ]]
Как и Президенту Путину, многим из нас нужны экономические советники. Как и Путину, нам не надо ставить себя в неприличную зависимость от кого-то одного :). В отличие от Путина, у читающих на английском языке выбор экономических советников гораздо богаче. По ситуации в Европе - а значит и в мире, и на рынке энергоносителей, и на российском финансовом рынке, и в российской экономике - мне лично очень-очень нравится советоваться с Даниэлом Гросом, руководителем CEPS, одного из лучших танков мыслей Европы. Грос регулярно (раз в месяц) пишет на project-syndicate, но почему-то его практически никогда не переводят на русский. Это упущение СМИ. Часто заметки Гроса появляются на voxeu, и все они собраны на сайте его танка.Грос родился и вырос в Германии, учился сначала в Италии, затем получил докторскую степень по экономике в Чикагском университете. Призвание свое он нашел в брюссельском танке, который уже давно возглавляет. Здесь в записях есть отдельная метка "грос", но вчера я подумал, что многие из его очень интересных популярных заметок каким-то образом ускользнули из поля зрения, а жаль...Советоваться с Гросом мне нравится скорее всего потому, что я с ним очень-очень часто согласен. Например, не верю я в обвинения Кругмана и Ко. антикризисной политики Латвии и их оценки громадного ущерба, нанесенного экономике страны. Можно было почитать заметку Гроса "From pain to gain in the EU frontier". В ней он поясняет, что кредитный бум и огромный импорт ведет к очень значительному завышению роста ВВП по сравнению с потенциалом. А быстро переучить всех импортеров, дилеров и строителей в высокопроизводительных работников экспортного сектора не получается.Или ознакомились с манифестом Кругмана и Лэйарда "Долой бюджетную дисциплину!" и не помним, о чем Рогофф предупреждал. Читаем сегодняшнюю заметку Гроса. Или удивились пренебрежительному мнению Юдаевой об отказе Батьки приватизировать в угаре кризиса, читаем прошлогоднее объяснение Гроса, почему в такой ситуации приватизировать не надо.Если задумались о нежелании немцев раскошеливаться ради спасения периферии, читаем заметку Гроса о недостатках европейской демократии.Заметили, что Антон Табах удивился негативным ставкам на гособлигации Бельгии и считает эту страну экономической развалюхой, читаем Гроса о том, что надо не на госдолг смотреть, а на разницу между иностранными активами и пассивами страны, на баланс по текущему счету. Про Бельгию, чтобы не искать: The fact that Belgium doesn’t have a crisis despite its poor fiscal position serves to illustrate the importance of external debt from the other side. Belgium’s debt-to-GDP ratio is well above that of Portugal (around 100%) and its political system is hopelessly divided. It has been over a year since the last election and the country still doesn’t have a new government. But despite these negatives, it faces a risk premium of only around 100 basis points over German debt. The reason, I assert, is that Belgium is a net creditor towards the rest of the world to the tune of 50% of its GDP, much more than even Germany.Но хватит примеров. Тезис понятен: про Италию и Германию, про еврооблигации, европейскую кубышку и про многие другие вещи можно посоветоваться с экономистом Дэниэлом Гросом. В заключение желающие могут посмотреть на недавнее выступление Гроса во Флоренции. (Там же, кстати, Барри Эйхенгрин воодушевленно объяснял, почему он продолжает верить в европейский проект):