Saturday, July 28, 2012

The Ballooning Cyprus Fiasco....

The government of Cyprus is desperate. It is deliberately slowing down paying its contractors. “We are talking about final payments and settling of bills for work that was carried out and passed through the inspections, and for which an order was issued for payment,” said Nicos Kelepeshis, head of the Federation of Associations of Building Contractors. 120 days, and more. The government also told inspectors to delay inspections in order to slow down payments.

In June, Cyprus had held its nose and requested aid from the Troika, those despised austerity thugs made up of the European Union, the European Central Bank, and International Monetary Fund that have, in Cypriot eyes, wreaked havoc in neighboring Greece. And this week, once again, these despised Troika inspectors are swarming over Cyprus to find out how much money the banks would need to deal with their putrefying balance sheets, and how much the government would need to stay afloat.

If a deal is reached—sticking point are the conditions, namely structural reforms, budget cuts, privatizations, and tax increases—the first bailout money might arrive in October. But Cyprus is bankrupt now! So, the government is raiding the “semi-state“ sector. Last week, it pilfered €101 million from the Cyprus Telecommunications Agency, €50 million from the Ports Authority, and €24 million from the Human Resource Development Authority. Now it’s going after the pension fund of the Electricity Authority to get a couple hundred million. This place is seriously out of money.

At first, it was just a funding crisis. After markets closed the door, Cyprus went begging to Russia and got €2.5 billion late last year. That money has now evaporated.

Then it was the banks. In June, the Bank of Cyprus needed €500 million and Popular Bank €1.8 billion—in total €2.3 billion. A black hole in their regulatory capital had developed when they were forced to write down the defaulted Greek government bonds on their balance sheets [“We owed it to our children and grandchildren to rid them of the burden of this debt,” sneered Greek Finance Minister Evangelos Venizelos at the time as private sector investors got whacked with a 74% loss. Read.... “A harder Default To Come”].

But the banks were joking about the €2.3 billion. They’ve also been eviscerated by Greek corporate debt—40% of the loans on their balance sheets. They’re turning to trash as Greece slithers deeper into its fifth year of recession. Then there are the loans left over from the real estate bubble and title-deed scandal that the banks themselves colluded in. An estimated 130,000 properties are without title deeds—in a country with only 838,000 souls. Those who think they own these properties don’t legally own them. A nightmare gumming up the future of the country [I warned about it in October.... Another Eurozone Country Bites the Dust].

And so in June, as bailout talks with the Troika took off, the €2.3 billion were declared a joke. “Eurozone sources” mumbled something about €10 billion, including a government bailout, which hadn’t needed one before.

Cyprus has been trying to triangulate its bailout negotiations by adding China and Russia. They’re ogling the vast natural gas reserves found off the coast. Awash in natural gas, Russia is the major supplier to the EU through a system of pipelines, and it wants to keep control over its export market. China wants to grab resources around the world. And on July 6, Russian Finance Minister Anton Siluanov confirmed, “Yes, we have a request from Cyprus. They’re looking for €5 billion.”

So since Monday, the despised Troika inspectors have been plying their trade. And it didn’t take long for it to seep out that the banks alone would now need a bailout of €9 billion—a stunning amount for the banks in such a tiny country. Plus, the government would need €4 billion. For total package of €13 billion.

But the €9 billion for the banks is likely to grow even further—because bad debt isn’t bad debt in Cyprus. Under Cypriot rules, loans on the banks’ books that are over 90 days past due aren’t considered bad debt, and no losses have to be recognized, if the loans are secured. Hence, a mortgage that is in default doesn’t have to be written down because the bank might eventually obtain the property, which takes many years, and then sell it to recuperate its money. But property values have collapsed. And worse: the title-deed fiasco resulted in banks securing two or more mortgages with the same property—and only one of them has any value at all. But they’re all “secured”; hence, none have been written down.

The Troika inspectors are circling. They want those loans written down. Government and banks resist. The outcome of this clash will be a big factor in determining the bailout amount for the banks. And the government bailout of €4 billion will certainly rise. The first time is only the beginning—Greece, if it were to stay in the Eurozone, would require a third bailout. Standard and Poor’s tacked on some extra billions and came up with €15 billion. 83% of GDP. €18,000 ($22,000) per resident. Another bottomless pit. Is that why Russia and China haven’t jumped into the fray?

In the run-up to this crisis, people have gotten rich and taken their money to Switzerland. What’s left is debt. But instead of letting it blow up and disappear, wiping out creditors and equity holders in the process, it’s being replaced with new money, but from taxpayers elsewhere: 29% from Germany, 22% from France, even from teetering Italy and Spain....

But Spain is on the brink. The word is out: default. Or bailout. Read.... The Extortion Racket Shifts to Spain.

And here is a great perspective by George Dorgan, a portfolio manager in Switzerland who used to live in Italy. Read.... Italian Euro Exit: why it might come in 2-3 years and why it will help the Eurozone and Italy.....

Thursday, July 26, 2012

Debt crisis: Greece to run out of money by August 20.....

Debt crisis: Greece to run out of money by August 20.....

Greece may run out of money and go bankrupt by Aug 20, a British government analysis of the ongoing eurozone crisis has warned....

By , Political Editor;

The beleaguered country will have to refinance billions of euros worth of government bonds in less than a month and requires international assistance — which may not be forthcoming — to repay the money.

International inspectors arrived back in Greece on Tuesday to assess the country’s austerity programme with European officials warning that it was “hugely off track”.

David Cameron is now receiving daily written updates on the deteriorating situation and was warned earlier this week that a Greek bankruptcy in the next month is now a serious possibility.

Official economic figures to be published today are expected to show that Britain suffered from a third successive quarter of negative economic growth — suggesting that the country is still in recession. If the figures are negative, it will be the longest double-dip recession for more than 50 years.

Ministers are expected to blame the continuing economic turmoil in ZIOCONNED Europe for this country’s failure to recover from the last slump.

One senior source said: “Europe is now paralysing almost every economic initiative.

“The daily analysis of the situation is filled with doom and gloom. Spain is in turmoil and Greece may run out of money by Aug 20.”

The crisis has dropped down the political agenda in this country, but behind the scenes it is still the major issue facing Whitehall officials and the Prime Minister as problems once again come to a head.

International Monetary Fund experts arrived back in Greece this week but may be reluctant to authorise the release of further funds to the new government without seeing evidence that the country’s austerity programme is progressing.

There are also growing fears that Spain will soon need a full-scale bail-out after its government borrowing costs rose above seven per cent this week. Reports in Spain on Tuesday said the country had not ruled out leaving the euro.

The cost of Italian borrowing has also risen to the highest level since Mario Monti took over from Silvio Berlusconi as the country’s prime minister last autumn.

On Tuesday, credit ratings agency Moody’s warned that it may cut the creditworthiness of Germany amid renewed concerns it will have to bail out southern European countries.

The eurozone crisis is entering a dangerous new phase as most European leaders are preparing for lengthy summer breaks. Mr Cameron is expected to be on holiday on Aug 20 and now faces the prospect of a second successive interrupted summer break.

On Tuesday, Ed Miliband, the Labour leader on a visit to Paris to meet François Hollande, the new French President, suggested that an emergency European summit may be necessary.

Mr Miliband said: “I think it is very, very important for countries to work together not just at each summit but between summits. It is a grave and urgent situation we are seeing in Europe and it can’t simply wait until the next summit in October.”

Spain is now widely expected by City experts to require a full-scale international bail-out, following the recent assistance offered to its banks. “It’s a desperate situation they’re in and markets are slowly closing to them so I don’t think there’s much doubt they’ll need an international package at some point soon,” said Robin Marshall, a director of Smith & Williamson Investment Management.

European officials said yesterday that a visit to Greece by international inspectors was likely to conclude that the country was unable to repay its debts, despite a previous restructuring programme. The IMF and EU are likely to face trying to renegotiate the deal with Greece, a move likely to be resisted by some countries.

“Greece is hugely off track,” said one European official. “The debt-sustainability analysis will be pretty terrible.”

“Nothing has been done in Greece for the past three or four months … the situation just goes from bad to worse, and with it the debt ratio.”

Monday, July 23, 2012

Why France is on the road to becoming the new Greece....

This is France, not Greece

Why France is on the road to becoming the new Greece....

By ;

The Euro is headed south today against all comers except The Great British Krona (as FT Alphaville calls sterling) which is engaged in a nosedive of its own. The reason this time? Spanish 10 year debt is yielding 7.5pc, half of what it ought to yield but enough to spook markets not yet ready to face the inevitable deflation of what has long been a bond super-bubble.

This bubble is particularly evident in Zioconned France. The debt levels which the country has are as unsustainable as Britain’s, yet its policies are more irresponsible and its remedies more restricted. Although it is considered a core country in the eurozone, France’s economic profile now bears more resemblance to Greece’s the Germany’s.

Public debt in France is at 86.1pc of GDP (146pc if ECB liabilities and bank guarantees are included). The projected budget deficit this year is 4.5pc, with France having exempted itself from the EU’s instruction to bring deficits down to 3pct by the end of the year.

These numbers are not unusual in the context of eurozone economies in general. What distinguishes France is the lack of political will to address them and, as a consequence, a projected debt to GDP ratio which would place it firmly amongst the PIIGS grouping,

A 2010 paper by the Bank of International Settlements – cited by economist John Mauldin in his brilliant recent dispatch on ‘hidden lions’ – sought to model the likely effects of three separate policy paths by European governments. These range in severity from governments essentially carrying on as they are, to the most extreme austerity the authors believe to be politically possible, a gradual downwards movement in government spending while age related entitlements are frozen.

The results are captured in the graphs below, which show public debt/GDP projections:

At first glance you would be forgiven for thinking that the authors had simply copied and pasted the French graph into the Greek column:

Even under the most savage of these austerity models, French public debt reached 200pc of GDP within 30 years. Using the baseline scenario, debt reaches 400pc of GDP in the same time frame thanks to an aging population, relatively high structural unemployment and perpetual over-spend in government.

The worst case scenario is not unique to France. Of the eurozone countries both the Dutch and Greece would fare as badly as France were the base case to turn out to be correct. Unlike France, the Dutch are able to exert significant control on their own destiny through austerity measures. The best case scenario sees Dutch debt under 100pc of GDP.

The figures also outline the extent of the British problem. Not only will current spending and demographic patters leave Britain facing a similar debt to GDP ratio to the French 30 years down the line, but interest payments alone would reach 26pc of GDP.

That said, the British and the Americans both have two options not open to eurozone France. Firstly, they can continue to print paper to honour their debts and thus sustain otherwise impractical debt payments. I suspect both will do this, although it will devalue the savings and wages of their citizens.

Secondly, both have the option of cancelling the bond issues purchased by their central banks using Quantitative Easing. In a stroke, this would reduce public debt back to less than 50pc of GDP. This is politically impossible for the eurozone given that costs and benefits would be felt very differently across the different sovereigns.

Japan, the other vitally important debtor state in the global economy, also has a get out which is closed to France. While its debt levels are out of control, its borrowing costs are low thanks to Japanese pensioners investing their life savings in government bonds. Irrespective of global demand, domestic appetite for debt will keep rates low.

France has access to none of these remedies – it must therefore rely on making cuts domestically. This is why the euro arrangement is so difficult for many eurozone countries – Germany will not allow them to 'cheat' in the way that Britain and the US are doing by debasing their currencies.

Enter stage left Monsieur François Hollande. At a time when France is in dire need of a plan to re-invigorate private industry, reduce spending and encourage the return of capital, the French have elected a man committed to driving capital from the country and increasing government spending still more.

Mr Hollande’s attempts to rectify the French problem have so far involved the following:

These reforms may have had some chance of working in the 1960s, when there were sufficient exchange rate and immigration controls in Europe to prevent the mass exodus of people and capital overseas. They have not the slightest prospect of working now.

Britain discovered, when it raised taxes on what it termed the ‘super-rich’, that these do not raise any additional income. The very wealthy now are too footloose to submit to any taxation regime they decide in iniquitous. Those who get hammered tend to be the mid-level operatives nearing the end of their career. The really big catch often gets away.

As it is, ZIOCONNED Hollande’s policies rely on the political view that Orwell believed he discerned in Dickens, the notion that rich people should be nicer and more amenable to taxation, and that were this the case all would turn out for the best.

This is not likely to happen soon. France’s economic course makes bankruptcy under the present system likely, her political course makes it inevitable. She is too large to be bailed out, but will eventually need to print currency to honor her debts. To do that she will need to leave the euro.

France's economy can and will survive for some time yet in its present form. The sharks are circling other bodies in the water, and until the bond markets make borrowing costs today's problem and not tomorrow's, the issue can be deferred. The time will come, however, when France's domestic inaction will translate into a break-up of the currency as a whole. The hour is not yet known, but the course seems set....

Sunday, July 8, 2012

Al-Qaeda or more like Al-CIAda is the neocon's Zioconned gift that keeps on giving....

From Libya to Syria, from Lebanon to Quetta to Indonesia to Mali, Al-Qaeda or more like Al-CIAda is the neocon's Zioconned gift that keeps on giving....


In what has become a self-fulfilling prophecy by the US Africa Command (AFRICOM) and various neo-conservative think tanks, the Pan-Sahel region of North Africa is rapidly falling under the control of extremist forces, most notably Ansar Dine in Mali, Boko Haram in northern Nigeria, and “al Qaeda” in the Maghreb (AQIM). However, it has become apparent that the funding for these groups originates in the Wahhabist-ruled potentates of Saudi Arabia, Qatar, and the United Arab Emirates.

When the Libyan rebellion against Muammar Qaddafi first began in Benghazi, the capital of Wahhabist-influenced Cyrenaica, the Libyan leader was ridiculed for claiming that “al-Qaeda” rebels were involved with the uprising. However, it has become quite clear that the core group of the Libyan rebels in Benghazi and surrounding towns, were, in fact, composed of Libyan and other mujaheddin guerrillas from Afghanistan, many of whom fought for Osama Bin Laden and the Taliban.

French intelligence and exiled Saudi democratic opposition leaders in London pinpointed the current Saudi Crown Prince, Salman bin Abdulaziz al Saud, as the major nexus for mujaheddin traveling to Pakistan and Taliban-controlled Afghanistan to fight on behalf of bin Laden and the Taliban in the years prior to the 9/11 False Flag attack, a barbaric inside Job wall to wall on United States chosen targets by the ZIOCONS.... Salman, as Governor of Riyadh, allegedly provided air tickets, hotel rooms, and cash to mujaheddin transiting through Riyadh on their way to Peshawar and across the border into Taliban Afghanistan. Later, a few of the veterans of Afghanistan traveled to Iraq, where they engaged US and allied forces after the ouster of Saddam Hussein. After Iraq, some of the mujaheddin ended up in Benghazi as the vanguard in the rebellion against Qaddafi.

Libyan rebel commander Abdel-Hakim al-Hasidi admitted in an interview with the Italian newspaper, Il Sole 24 Ore, said they had fought in Iraq and were al-Qaeda veterans. Al-Hasidi told the paper that the al-Qaeda veterans, who fought with the Libyan Islamic Fighting Group, were “good Muslims and are fighting against the invader.” Al-Hasidi was captured in 2002 in Peshawar, Pakistan and handed over to the United States. The US released Al-Hasidi in 2008 and he eventually showed up in Libya to lead the uprising against Qaddafi. Al-Hasidi’s connections to Al Qaeda and the NATO-backed uprising in Libya provide yet more evidence of collusion between the United States, Al Qaeda, Saudi Arabia, and, considering the support for the rebels offered by leading French Zionist, Bernard-Henri Levy, Israel. The Libyan Fighting Group and al-Qaeda veterans are known to have received the financial backing, as well as arms, from Saudi Arabia, Qatar, and the UAE.

The al-Qaeda connection with the NATO-backed Libyan rebels means that Qaddafi was spot on when he stated that al-Qaeda was a major participant in the Libyan uprising. Many of the al-Qaeda guerrillas later traveled from Libya to Syria to participate in the Syrian uprising against President Bashar al-Assad.

Currently, the same mujaheddin forces that have gained a firm footing in Libya, are providing support to like-minded extremists in Nigeria, Mali, Niger, Mauritania, and other states in the Sahel.

From new bases in Libya, these mujaheddin, who continue to receive support from the Wahhabist regimes in the Persian Gulf, are taking part in operations in support of Boko Haram in Nigeria and Ansar Dine and AQIM in Mali.

The Tuareg-led and secularist Movement for the National Liberation of Azawad (MNLA), which has declared the independence of northern Mali as a Tuareg state, has appealed to the West to help it defeat Ansar Dine, AQIM, and Boko Haram forces who have been busy destroying Islamic sites honoring Muslim saints in Timbuktu (known as the City of 333 Saints), Gao, and Kidan that are protected as World Heritage sites by the U.N. Educational, Scientific, and Cultural Organization (UNESCO). The pillaging is reminiscent of the Wahabbist destruction of Islamist shrines of saints and grave sites in Medina following the Saudi takeover of Hejaz after the fall of the Ottoman Empire.

However, the United Nations has shown no interest in authorizing intervention in northern Mali by the Economic Community of West African States (ECOWAS), AFRICOM, or anyone else. The United States and NATO, which have found themselves not only allied with, but supporting Al Qaeda in Libya and Syria, are content to allow the Wahhabist-backed extremists destroy ancient Muslim shrines, just as they took no action against the Saudi and Emirati-backed Taliban’s destruction of the ancient Buddha statues in Bamiyan, Afghanistan in March 2001, six months before the 9/11 attack.

It is clear, once again, that the West is using Al Qaeda as a proxy force to destabilize the Sahel in the interest of a later full-scale military intervention on the terms of NATO and the [Persian]Gulf Cooperation Council. The casualties will be the people of the region, not the billionaire potentates who direct such activities from their luxurious palaces in Riyadh, Jeddah, Doha, Abu Dhabi, and Dubai.