Portugal

EU: EFSF & ESM … A Whole Lot Of Nothing!

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– EU – EFSF & ESM – A Whole Lot Of Nothing (ZeroHedge, Mar 28, 2012):

A quick look at the headlines:

€200 billion already committed. So the EFSF has already committed €200 billion.  So far I only see €63 billion of debt issued by the EFSF, so they have at least another €137 billion to fund.  The bulk of their issuance so far is back to back with a they made to Greece, hardly the best collateral.  For now I’m going to assume that there is no overcollateralization requirement and just €200 billion has been committed, but if the 165% overcollateralization is in place, then that would really be €300 billion of “guarantees” used up.

Read moreEU: EFSF & ESM … A Whole Lot Of Nothing!

European Solidarity: ‘Everybody Knows The Spanish Are Lying About The Figures’

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– European Solidarity – “Everybody Knows The Spanish Are Lying About The Figures” (ZeroHedge, Mar 2, 2012):

Back in October, when Greece was rewarded with further bond haircuts for progressively missing its economic targets, even after having gotten caught on at least one occasion making its economy appear worse than it was, we said that it is only a matter of time before “Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece.” In the aftermath of this statement, we got the Irish and the Portuguese proceeding to slowly but surely do just that. Today, it was Spain’s turn to make it 3 out of 4 after as Reuters noted so appropriately, “Spain defies Brussels on deficit target” clarifying that “Spain set itself a softer budget target for 2012 on Friday than originally agreed under the euro zone’s austerity drive, putting a question mark over the credibility of the European Union’s new fiscal pact. Prime Minister Mariano Rajoy insisted he was acting within EU guidelines because the plan was still to hit the European Union public deficit goal of 3 percent of gross domestic product (GDP) in 2013.” That Italy is sure to follow is absolutely guaranteed, however just because the ECB is now indirectly monetizing BTPs the true impact will be delayed far more, and instead of taking prompt steps to remedy the situation, the European complacency will be accentuated by the fact that bond yields are very low, and supposedly indicates the true state of the economy. No. All it indicates is the conversion of future inflation (courtesy of €1 trillion in new money in the past 3 months) for a very temporary respite before all hell ultimately breaks loose as countries pretend everything is ok as bond yields are pushed artificially low. And in doing nothing, the fundamentals in the economy only get worse and worse. Germany knows this very well, and the Economist explains the reaction to Spain’s surprising statement today perfectly…

A novice in European summits, Mr Rajoy has been playing a strange game. He was careful not to discuss specific figures with fellow leaders. But as soon as he emerged from the summit he declared that Spain’s deficit this year would be 5.8%, rather than the agreed target ratio of 4.4%. He insisted, though, that Spain would still fall below the 3% deficit limit in 2013, as planned.

Germany, moreover, seems to be in an intolerant mood. There is irritation that the Spanish government is delaying its budget pending regional elections in Andalusia that Mr Rajoy’s party hopes to win, and suspicion that it is inflating last year’s deficit figures to blame its Socialist predecessor. The commission says it wants to double-check the numbers. But a senior source in Berlin puts it more bluntly: “Everybody knows the Spanish are lying about the figures.”

Funny. And yet the people are supposed to believe in the mumbo jumbo that is Europe’s fiscal pact, or frankly anything else? Perhaps the senior source in Berlin should have just stepped up and told the outright truth: “Everybody knows that everyone in Europe is lying about everything.”

Read moreEuropean Solidarity: ‘Everybody Knows The Spanish Are Lying About The Figures’

‘America’s Per Capita Government Debt Worse Than Greece’, As Well As Ireland, Italy, France, Portugal And Spain (Chart)

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– Chart: ‘America’s Per Capita Government Debt Worse Than Greece’ (The Weekly Standard, Feb. 23, 2012):

The office of Senator Jeff Sessions, ranking member on the Senate Budget Committee, sends along this chart, showing that ‘America’s Per Capita Government Debt Worse Than Greece,’ as well as Ireland, Italy, France, Portugal, and Spain:

As Greece Crashes And Burns, Troika Arrives In Portugal With ‘Soothing Words Of Support’

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Full article here:

– As Greece Crashes And Burns, Troika Arrives In Portugal With “Soothing Words Of Support” (ZeroHedge, Feb. 15, 2012):

What is better than a one-front European war on insolvency? Why two-fronts of course. But not before many “soothing” words are uttered (no really). From Reuters: “Portugal’s international lenders arrived in Lisbon on Wednesday to review the country’s bailout, with soothing words of support likely to dominate as Europe gropes for success stories to counteract its interminable Greek headache. As the euro zone’s second weakest link, Portugal’s ability to ride out its debt crisis will be key to Europe’s claim that Greece is a unique case. Despite a groundswell of concerns that Portugal – like Greece – may eventually have to restructure its aid programme, the third inspection of Lisbon’s economic performance in the context of its ongoing 78-billion-euro rescue should make that contention clear. “The review will be all about peace and harmony,” said Filipe Garcia, head of Informacao de Mercados Financeiros consultants. “The important thing for Europe is to isolate Portugal from Greece, to put it out of Greece’s way in case of a default or even an exit from the euro.” That makes sense – after all even Venizelos just told Greece that the country is not Italy. And if that fails, the Don of bailouts, Dr Strangeschauble will just give the country will blessing to use a few billion in cash. Oh but wait. It can’t. Because as as we pointed out in late January, and as the market has so conveniently chosen to forget, Portugal, unlike Greece, has simple, clean and efficient negative pledge language in its non-local law bonds. Which means “no can do” to any additional bailouts under its current capitalization. Which may very well mean that Portugal is stuck with its existing balance sheet unless the country succeeds in doing an exchange offer which takes out all UK- and other strong-protection bonds. All of them. And as Greece has shown, that is just not going to happen.

Mass Downgrade: Moody’s Cuts Credit Ratings Of Italy, Spain, Portugal, Slovakia, Slovenia And Malta, WARNS UK, France And Austria On AAA-Rating

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– Moody’s warns may cut AAA-rating for UK and France (Reuters, Feb. 14, 2012):

Rating agency Moody’s warned it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.

– Moody’s cuts ratings on Italy, Portugal and Spain (Washington Post, Feb. 14, 2012):

NEW YORK — Ratings agency Moody’s Investor Service on Monday downgraded its credit ratings on Italy, Portugal and Spain, while France, Britain and Austria kept their top ratings but had their outlooks dropped to “negative” from “stable.”

Moody’s also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta. All nine countries are members of the European Union.

London, 13 February 2012 — As anticipated in November 2011, Moody’s Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries’ own specific challenges.

– Rating Action: Moody’s adjusts ratings of 9 European sovereigns to capture downside risks (Moody’s, Feb. 13, 2012):

Moody’s actions can be summarised as follows:

– Austria: outlook on Aaa rating changed to negative

– France: outlook on Aaa rating changed to negative

– Italy: downgraded to A3 from A2, negative outlook

– Malta: downgraded to A3 from A2, negative outlook

– Portugal: downgraded to Ba3 from Ba2, negative outlook

– Slovakia: downgraded to A2 from A1, negative outlook

– Slovenia: downgraded to A2 from A1, negative outlook

– Spain: downgraded to A3 from A1, negative outlook

– United Kingdom: outlook on Aaa rating changed to negative

Priceless!!! Banco de Portugal Offers … ‘Seminar: Optimal Sovereign Debt Default’

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You can’t make this stuff up!

– Friday Humor Part Dois – Banco de Portugal “Wink Wink” Edition (ZeroHedge, Feb. 3, 2012):

… the following seminar announcement from the Banco de Portugal, of all places, is truly priceless…

Source: Banco de Portugal

45% Of Greeks Have Never Used The Internet

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Now who will tell them to protect their assets with physical gold and silver?

– 45% Of Greeks Have Never Used The Internet (ZeroHedge, Feb. 3, 2012):

If one were to consider that nearly half the population of a given country has never had the pleasure of killing otherwise efficient time with the likes of Facebook, and other fad internet sensations, one would assume that the efficiency of the population would be far higher than other places whose citizens spend every waking hour gazing at a monitor. One would be wrong. As the following chart from Eurostat via Goldman shows, about 45% of the Greek population has never used the internet. Surprisingly the balance of the PIIGS is not far behind, with Portugal, Italy and Spain hot on Greece heels (which 5 years ago had two thirds of its population never interact with the web). Is it possible that sitting in front of a computer, uploading millions of pics and “liking” this and that does indeed do miracles for globalization and corporate efficiency? Was Zuckerberg’s letter, gasp, 100% correct?

Europe’s Scariest Chart

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– This is Europe’s Scariest Chart (ZeroHedge, Jan. 30, 2012):

Surging Greek and Portuguese bond yields? Plunging Italian bank stocks? The projected GDP of the Eurozone? In the grand scheme of things, while certainly disturbing, none of these data points actually tell us much about the secular shift within European society, and certainly are nothing that couldn’t be fixed if the ECB were to gamble with hyperinflation and print an inordinate amount of fiat units diluting the capital base even further. No: the one chart that truly captures the latent fear behind the scenes in Europe is that showing youth unemployment in the continent’s troubled countries (and frankly everywhere else). Because the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be “someone’s” fault that there are no job opportunities for anyone. Below we present the youth (16-24) unemployment in three select European countries (and the general Eurozone as a reference point). Some may be surprised to learn that while Portugal, and Greece, are quite bad, at 30.7% and 46.6% respectively, it is Spain where the youth unemployment pain is most acute: at 51.4%, more than half of the youth eligible for work does not have a job! Because the real question is if there is no hope for tomorrow, what is the opportunity cost of doing something stupid and quite irrational today?

It’s Official: German Economy Minister Demands Surrender Of Greek Budget Policy, Says It Is First Of Many Such Sovereign ‘Requests’

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– It’s Official: German Economy Minister Demands Surrender Of Greek Budget Policy, Says It Is First Of Many Such Sovereign “Requests” (ZeroHedge, Jan. 29, 2012):

While over the past 2 days there may have been some confusion as to who, what, how or where is demanding that Greece abdicate fiscal sovereignty (with some of our German readers supposedly insulted by the suggestion that this idea originated in Berlin, and specifically with politicians elected by a majority of the German population), today’s quotefest from German Economy Minister Philipp Roesler appearing in Germany’s Bild should put any such questions to bed. And from this point on, Greece would be advised to not play dumb anymore vis-a-vis German annexation demands. So from Reuters, “Greece must surrender control of its budget policy to outside institutions if it cannot implement reforms attached to euro zone rescue measures, the German economy minister was quoted as saying on Sunday. Philipp Roesler became the first German cabinet member to openly endorse a proposal for Greece to surrender budget control after Reuters quoted a European source on Friday as saying Berlin wants Athens to give up budget control.” And some bad news for our Portuguese (and then Spanish) readers: you are next.

More:

“We need more leadership and monitoring when it comes to implementing the reform course,” Roesler, also vice chancellor, told Bild newspaper, according to an advance of an interview to be published on Monday.

“If the Greeks aren’t able to succeed themselves with this, then there must be stronger leadership and monitoring from abroad, for example through the EU,” added Roesler, chairman of the Free Democrats (FDP) who share power with Chancellor Angela Merkel.

Read moreIt’s Official: German Economy Minister Demands Surrender Of Greek Budget Policy, Says It Is First Of Many Such Sovereign ‘Requests’

Has The ECB Given Up On Portugal?

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– Has The ECB Given Up On Portugal? (ZeroHedge, Jan. 16, 2012):

Despite disappointing auction results in France, the downgrade hangovers (sell the rumor, buy the news?), and increasingly likely Greek PSI talk epic-fail, most European sovereigns are rallying modestly on the day. Given the expected shift in the AAA benchmark used for margining (dropping higher yielding France ‘AAA’s as they are downgraded will lower AAA benchmark significantly and implicitly widen the yield differential for other sovereigns), it is perhaps no surprise that TPTB are active in BTPs (Italian bonds) but it appears that Portugal (admittedly illiquid) has been left to its own devices. Portuguese 10Y bond spreads to bunds just broke 1250bps, +180bps on the day and at record wides. Given the subordination concerns as ESM is accelerated, it is perhaps no surprise that the ECB’s SMP has seemingly decided that Portugal has crossed the Rubicon into Greece territory.

S&P Cuts France’s Credit Rating – 9 EU Nations See Ratings Cut

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See also:

– Marc Faber’s Latest Rant On Global Monetization Wars (Video)

… the majority of European nations deserve a CCC rating …

– The Real Dark Horse: S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market

– France’s credit rating downgraded in latest blow to euro zone (The Globe and Mail, Jan. 13, 2012):

The euro zone’s worst-case scenario of recession and default is looming larger after a mass debt downgrade of France and several other countries, and stalled Greek debt restructuring talks.

Standard & Poor’s stripped France of its prized triple-A rating and slashed the ratings of Italy, Spain and six other European countries Friday, continuing a disturbing pattern of the feared becoming reality in Europe’s smouldering debt crisis.

The move Friday crushed nascent hope that the region’s debt woes might finally be easing after successful bond auctions by Spain and Italy earlier in the week.

The most immediate problem for the euro zone is that France – its second largest economy – will now face significantly higher borrowing costs just as the region slides into recession.

Equally important, the downgrade makes it more expensive for the European Financial Stability Fund to raise cash because France is the fund’s No. 2 backer behind Germany. The EFSF, set up in 2010, is due to raise money in the markets on Tuesday.

Read moreS&P Cuts France’s Credit Rating – 9 EU Nations See Ratings Cut

The Real Dark Horse: S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market

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From the article:

S&P may have just killed the European sovereign market by saying out loud what only “fringe bloggers” dared suggest in the past.

– The Real Dark Horse – S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market (ZeroHedge, Jan. 13, 2012):

All your questions about the historic European downgrade should be answered after reading the following FAQ. Or so S&P believes. Ironically, it does an admirable job, because the following presentation successfully manages to negate years of endless lies and propaganda by Europe’s incompetent and corrupt klepocrarts, and lays out the true terrifying perspective currently splayed out before the eurozone better than most analyses we have seen to date. Namely that the failed experiment is coming to an end. And since the Eurozone’s idiotic foundation was laid out by the same breed of central planning academic wizards who thought that Keynesianism was a great idea (and continue to determine the fate of the world out of their small corner office in the Marriner Eccles building), the imminent downfall of Europe will only precipitate the final unraveling of the shaman “economic” religion that has taken the world to the brink of utter financial collapse and, gradually, world war.

Here are the key take home messages from the FAQ (source):

Read moreThe Real Dark Horse: S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market

Is This 2008 All Over Again? No, It’s Worse. Much Worse. Get Ready For Worldwide Currency Devaluation!

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Recommended:

– Worse Than 2008 (ZeroHedge, Dec. 21, 2011)

Prepare for collapse.

Got physical gold and silver?

Don’t miss:

– Max Keiser And Gerald Celente On MF Global Bankruptcy Implications – The JP Morgan Connection – Goldman Sachs – CME (‘Chicago Mafia Exchange’) – Gold, Silver – Syria, Iran – Entire Financial System Collapsing, One Big Global Ponzi Scheme – False Flag, WW III – Bank Holiday, Economic Martial Law – ‘YOUR MONEY ISN’T SAFE’ (Video)


Of Imminent Defaults And Self Deception: Hedge Fund Manager Kyle Bass Prepares For The Worst

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Flashback:

– University of Texas Takes Delivery Of $1 Billion In Gold Bars After Cue From Hedge Fund Manager Kyle Bass, Storing It In New York Vault

– Of Imminent Defaults And Self Deception. Kyle Bass Prepares For The Worst (ZeroHedge, Nov. 30, 2011):

In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.

Whether it is Kahneman’s “availability heuristic” (wherein participants assess the probability of an event based on whether relevant examples are cognitively “available”), the Pavlovian pro-cyclicality of thought, or the extraordinary delusions of groupthink, investors in today’s sovereign debt markets can’t seem to envision the consequences of a default.

His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.

Hayman_Nov2011

German Push For A ‘Hard’ Greek Default Risks EMU-Wide ‘Snowball’

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See also:

– IMF Advisor Robert Shapiro: Could See Eurozone ‘MELTDOWN’ in 2 Or 3 Weeks, Crisis ‘More Serious Than The Crisis In 2008?

– Germany ‘Won’t Give More To EU Bailout Fund’ – Finance Minister Wolfgang Schäuble Rules Out Larger German EFSF Contribution

– Germany Must Hit The Eject Button (Stratfor)

– Former White House Advisor & UBS Global Strategy Deputy Head And CFR Member: The Germans Announce They Are Re-Introducing The Deutschmark – They Have Already Ordered The New Currency And Asked That The Printers Hurry Up

– British Foreign Secretary William Hague Condemns Crumbling Euro As A ‘Historical Monument To Collective Folly’, Says Euro Is A ‘Burning Building With No Exits’ Claim Is Correct

– The Dangerous Subversion Of Germany’s Democracy (Telegraph) – Wolfgang Schäuble’s Lies Exposed


Bilderberg German Chancellor Angela Merkel and Bilderberg Greek Prime Minister George Papandreou. Officials in Berlin told The Telegraph it is ‘more likely than not’ that investors will suffer fresh losses on holdings of Greek debt Photo: AFP

– German push for Greek default risks EMU-wide ‘snowball’ (Telegraph, Oct. 10, 2011):

Germany is pushing behind the scenes for a “hard” default in Greece with losses of up to 60pc for banks and pension funds, risking a chain-reaction across southern Europe unless credible defences are established first.

Officials in Berlin told The Telegraph it is “more likely than not” that investors will suffer fresh losses on holdings of Greek debt, beyond the 21pc haircut agreed in July.

Read moreGerman Push For A ‘Hard’ Greek Default Risks EMU-Wide ‘Snowball’

Greece To Default: Interest Rate On 1-Year Greek Government Debt At Whopping 60 Percent!!!

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See also:

– The Second Bailout Has Now Failed: Greece Activates Last-Ditch Liquidity Rescue Package To Preserve Its Financial System

– Germany’s Top Court To Rule On Legality Of (Unconstitutional) Euro Bailouts

And all taxpayer bailout money went to the banksters for NOTHING in return (except more destruction and chaos. Exactly as planned by the elitists.).

From the article:

“Greece failed long ago. It is only stubborn idiots at the ECB, EU, IMF, and leaders of various countries who insist otherwise.

They insist otherwise to protect their banks. Yet, by throwing more money into the pot that will now clearly be defaulted on, they have made matters far worse.”

As intended by the elitists.

Got gold, got silver? (BTFD!)

Don’t wait for the dollar and the euro to collapse on you.

– Greece 1-Yr Rate 60%; Finland Retains Collateral Demand; Multiple Veto Points; ECB “Litmus Test” Coming Up; Germany Accuses ECB of Treaty Violations (Global Economic Analysis, August 28, 2011):

Once again the bond markets have spoken, and once again the message is the same: default. Greek two-year bonds are near 44%, having touched as high as 46%. The interest rate on 1-year Greek government debt is a stunning 59.8%.

Greek 1-Year Government Bonds

Greek 2-Year Government Bonds

44% a year, for two years or whopping 60% for one year, unless of course there is a default.

Not only does the bond market say Greece will default, but the implied haircuts are huge given those interest rates.

Greece Not Saved

Supposedly “Greece was Saved” on that blue circle when yet another bailout (throwing more good money after bad) was approved.

The deal unraveled for numerous reasons but demands by Finland for collateral are at or near the top of the list. Austria, Slovakia, and the Netherlands now want collateral as well.

Under great pressure from Germany, the EU, and IMF, Finland allegedly dropped those demands. It was a lie. Finland did not drop demands for collateral, and that shows you the effect of multiple veto points where such decisions must be unanimous or they fall apart.

17 Veto Points

Please consider A Small Country — Finland — Casts Doubt on Aid for Greece

Finland is just one of 17 euro zone countries whose parliamentary approval is needed for the expanded bailout fund and whose domestic politics could upset the process. The case of Finland points to a bigger governance problem in Europe, said James Savage, a professor at the University of Virginia who has published a book on European monetary union.

Read moreGreece To Default: Interest Rate On 1-Year Greek Government Debt At Whopping 60 Percent!!!

Germany’s Top Court To Rule On Legality Of (Unconstitutional) Euro Bailouts

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– Germany’s top court to rule on euro bailouts Sept 7 (International Business Times, August 23, 2011):

Germany’s top court will give its verdict early next month on whether the government broke the law with last year’s bailouts of debt-stricken euro zone countries — a ruling which could limit Berlin’s room to manage the region’s debt crisis.

The Karlsruhe-based Federal Constitutional Court will announce its verdict on Sept. 7 at 0800 GMT, it said in a statement on Tuesday.

The court is considering three lawsuits brought by six eurosceptic plaintiffs — five academics and a lawmaker from the Bavarian sister party to Chancellor Angela Merkel’s Christian Democrats — against German-backed international bailout schemes for Greece, Ireland and Portugal.

The plaintiffs argue that the bailouts, which total 273 billion euros ($393 billion), violate property rights and other protections in the German and European constitutions, and break the “no-bailout” clause in the European Union’s treaty, which says neither the EU nor member states should take on other governments’ liabilities.

And Now Italian And Portuguese Bonds Are Selling Off, Total Market Insanity As The Latest ECB Intervention Halflife Is Under An Hour

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Before:

– ECB Now Panic Buying Italian And Portuguese Bonds

– And Now Italian And Portuguese Bonds Are Selling Off (ZeroHedge, Aug 4, 2011):

And now…  the sell off. Total market insanity as the latest intervention halflife is under an hour.

Italian:

Portuguese:

ECB Now Panic Buying Italian And Portuguese Bonds

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Update:

– And Now Italian And Portuguese Bonds Are Selling Off, Total Market Insanity As The Latest ECB Intervention Halflife Is Under An Hour

– ECB Buys Italian Bonds, Third Major Central Bank Intervention In Past 24 Hours As Status Quo Panic Explodes (ZeroHedge, Aug 4, 2011):

At exactly 9 am, half an hour into Trichet’s press conference, the world’s most undercapitalized hedge fund: the European Central Bank, demonstratively came in and started buying Italian bonds in hopes the market will forget just how broke the European continent truly is. This is the third major intervention by a central bank in capital markets in the past 24 hours following the SNB and the BOJ. Next up the Fed, and everything going to hell. Because even as Italian bond yields drop below 6%, the selloff in Portugal bonds is accelerating and the 10 Year yield is now 15 bps wider at 11.34%. We have a question: at what point does the ECB have to officially start printing Euros before its capitalization goes negative?

Update: we spoke too soon. ECB now panic buying Portuguese bonds too:

‘Greece Is Effectively In Default’ – ‘We Are Throwing Money At the Banks Through Greece’ – ‘Germany Will Turn Out Light On Euro – System Defective By Design’ – ‘The Fall Of Spain Would Mean The Fall Of The Euro’ (Video)

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‘System Defective By Design’: Exactly what several German economics Prof.’s said in 1996. They predicted, that if there will be a currency union first (which is liken unto putting the cart before the horse), instead of a economy union, then the new currency will fail. They even predicted the failure of the euro at around 2008-2010.


YouTube Added: 25.07.2011

While the EU struggles to keep the euro afloat with bailouts for Portugal and Greece, and Spain looks to be next in line for a rescue package, financial journalist Johan Van Overtveldt believes the limit of what the EU can do for the euro is close. Johan Van Overtveldt believes that the EU will keep throwing cash into the failing economies until the Germany reaches its limits.

Portugal’s PM Pedro Passos Coelho Discovers ‘Colossal’ Budget Hole

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– Portugal’s Prime Minister Pedro Passos Coelho discovers ‘colossal’ budget hole (Telegraph, July 18, 2011):

Yields on two-year Portuguese debt rose to a fresh record of 20.3pc on Monday, reflecting fears by investors that the country would struggle to pull itself out of downward spiral without some form of debt restructuring.

Mr Passos Coelho also appeared to caution the European authorities that his government will not tolerate heavy-handed interference in the country.

Read morePortugal’s PM Pedro Passos Coelho Discovers ‘Colossal’ Budget Hole

Bond Vigilantes Are Here: US Net Notional CDS Outstanding Surpasses Greece For The First Time

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– The Bond Vigilantes Are Here: US Net Notional CDS Outstanding Surpasses Greece For The First Time (ZeroHedge, July 20, 2011):

While the CDS market for various insolvent European names whose credit default swaps are trading 10 or more points upfront has become more or less nothing but noise, and the only true way to hedge risk exposure, courtesy of ISDA’s advance warning that no matter what a CDS will never be triggered, is to sell cash bonds, the market for default risk is quite active for those names which still trade in a reasonable range: such as between 50 bps and 200 bps. And while the Bloomberg chart below demonstrates on an absolute basis the US is due for a two notch downgrade by S&P based on the recently observed spike in US default risk, it is DTCC data that is more troubling.

As the first chart below shows, of the Top 25 CDS outstanding net notional names tracked by DTCC, there is one name that is a big outlier on both a month over month and year over year basis: the United States of America. The first thing to note is that in the past week, US net notional CDS outstanding just hit $4.8 billion, an increase from $4.5 billion in the past month, a 5.4% increase (the biggest over all top 25 names), pushing the net risk on the US above that of Greece for the first time (Greece declined from $5 billion to $4.6 billion). More disturbing is that on a percentage basis, the year over year change in US net CDS outstanding is the biggest of all, more than doubling at 108.6%, followed only by China and Japan, at 96.7% and 80.9% respectively. Yes: the CDS itself has not blown out yet, but the stealthy increase in the net notional in the troika of “most stable countries” means that the smart money is already quietly positioning itself for the biggest and most significant blow out ever. It also means that the spreads of such countries of Greece and Portugal (a major drop in net notional M/M and Y/Y) not to mention Italy, are yesterday’s news. As most revel in the latest nonsensical Group of 6 plan, the bond vigilantes are already quietly setting the trap.

Below is the biggest percentage change in net CDS notional on a monthly and annual basis:

And here is Bloomberg’s take on where the US rating should be based on its CDS spread:

A Bloomberg Brief CDS implied credit rating model, which compares composite credit ratings against the cost of CDS, shows that investors may be expecting a downgrade to as low as ‘AA’ for the U.S. The world’s largest economy has already been placed on credit watch by both Moody’s and S&P. The cost of protecting against a U.S. default rose to 54.4 basis points yesterday from less than 40 in April.

The composite credit rating — on the y-axis — is calculated by quantifying the three primary ratings agencies’ (S&P, Moody’s, and Fitch) ratings, where available, and averaging the results. A score of one indicates the highest rating ‘AAA’; a score of 10 or better indicates that a country is investment-grade. The cost of fiveyear CDS — on the x-axis — is the amount traders are willing to pay to protect against a debt default.

The current implied credit rating for the U.S. is 2.7, compared to 2.2 back in March, equivalent to approximate ly ‘AA’ on S&P’s scale. That is two levels below the U.S.’s current rating. March was the last time Bloomberg Brief looked at these implied credit ratings. At that time, the three most likely candidates to be downgraded were Portugal, Belgium and Spain.

Both Portugal and Spain have been downgraded. Spain is also the most likely candidate for a downgrade at present, with a composite rating of 2.7 versus a CDS implied rating of 9.1, equivalent to ‘BBB’ on S&P’s rating scale.

Italy And The Euro On The Edge: By Engulfing Italy, The Euro Crisis Has Entered A Perilous New Phase – With The Single Currency Itself Now At Risk

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– Italy And The Euro On The Edge: By Engulfing Italy, The Euro Crisis Has Entered A Perilous New Phase – With The Single Currency Itself Now At Risk (The Economist, July 14, 2011):

FOR more than a year the euro zone’s debt drama has lurched from one nail-biting scene to another. First Greece took centre stage; then Ireland; then Portugal; then Greece again. Each time European policymakers reacted similarly: with denial and dithering, followed at the eleventh hour with a half-baked rescue plan to buy time.

This week the shortcomings of this muddling-through were laid bare (see article). Financial markets turned on Italy, the euro zone’s third-biggest economy, with alarming speed. Yields on ten-year Italian bonds jumped by almost a percentage point in two trading days: on July 12th they breached 6%, their highest since the euro was created. The Milan stockmarket slumped to its lowest in two years. Though bond yields subsequently fell back, the debt crisis has clearly entered a new phase. No longer confined to the small peripheral economies of Greece, Ireland and Portugal, it has hurdled over Spain, supposedly next in line, and reached one of the euro zone’s giants. All its members, but especially Germany, face a stark choice.

Consider the stakes. Italy has the biggest sovereign-debt market in Europe and the third-biggest in the world. It has €1.9 trillion ($2.6 trillion) of sovereign debt outstanding, 120% of its GDP, three times as much as Greece, Ireland and Portugal combined—and far more than the €250 billion or so left in the European Financial Stability Facility (EFSF), the currency club’s rescue kitty. Default would have calamitous consequences for the euro and the world economy. Even if the more likely immediate prospect is sustained stress in the Italian bond market, that will surely prompt investors to flee European assets, making the continent’s recovery ever harder. Meanwhile in the background there is the absurd pantomime of Barack Obama and congressional Republicans feuding over how to raise the federal government’s debt ceiling to stave off an American “default” (see article). That may have distracted American investors briefly; once they realise how much is at stake in Italy, it will not help.

From Rome to Brussels, Frankfurt and Berlin

Read moreItaly And The Euro On The Edge: By Engulfing Italy, The Euro Crisis Has Entered A Perilous New Phase – With The Single Currency Itself Now At Risk

Emergency Summit: European Leaders Consider Greek Default

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‘BTFD!’ (Buy the f****ing dip!)

I am talking about gold and silver.

Protect yourself.

Without protection:

– Belarus Devalues Its Currency By 56% Overnight, Against Every Currency Out There:

Luckily for those who held their “money” in the form of gold and silver, they just got an instantaneous 56% value preservation and a relative boost in their purchasing power with just one central bank announcement.

Spain is too big to bail out! (Unless they turn on the unconstitutional ECB printing press again.) This would be THE END, which is why the European leaders are panicking.

– Europe considers Greek default, leaders to meet (Reuters, July 12, 2011):

BRUSSELS (Reuters) – European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens’ debts and to stop contagion spreading to Italy and Spain.

“There will be an extra summit this Friday,” a senior euro zone diplomat told Reuters, suggesting policymakers have been seized with a new sense of urgency after markets started targeting Italian assets.

Worsening political tensions between Prime Minister Silvio Berlusconi and his Finance Minister Giulio Tremonti have caused markets to focus on Italy’s shaky banks and chances its budget deal could stumble, and to look afresh at Spain, the euro zone’s fourth largest economy.

Willem Buiter, chief economist at Citi and a former UK central banker, said there now was a clear danger of the debt crisis spreading beyond Greece, Ireland and Portugal, the three nations bailed out so far.

Read moreEmergency Summit: European Leaders Consider Greek Default