Weekending 28 October 2011


It is entirely clear that the ‘deal’ concocted by the 17 eurozone premiers and presidents at the Brussels summit and unveiled at 4am local time on Thursday 27 October is simply fancy and fantasy.

First one needs to sprinkle any analysis with large doses of ‘alleged’ – as in ‘alleged deal’, ‘alleged agreement’ ‘alleged action’, and ‘alleged welcome’ as in ‘We welcome Italy’s plans for growth …’

In the words of Wolfgang Munchau in the FT,

The day may yet come when the eurozone finally agrees a comprehensive package to end the crisis, but this was not the day.

The bounce on stock markets through Thursday was nothing much more than whistling past the graveyard and on the eve of Halloween weekend to boot – entirely appropriate and of course by Friday everything was beginning to feel eerie with markets beginning to go off and the alleged Italian plan looking more like The Italian Job.

Second the spectacularly disastrous condition of Greece – and what has caused this collapse – needs to be gleaned from the  communiqué. Third, the banks recap is smoke and mirrors while finally the general scheme of it all, EFSF2½, is imaginative fantasy in the tradition of that children’s tale, The Magic Pudding.

But first to return to the condition of Greece. Read the rest of this entry »


Weekending 25 September 2011

Thy hand, great Anarch! lets the curtain fall;

And universal Darkness buries All.

Alexander Pope

The Dunciad

No posting last weekend – internet problems and also simply the chaos, even through the weekend itself as everyone hosed the Greeks and eurozone finance ministers, led by the Austrian minister, got uppity with US Treasury Secretary Tim Geithner for suggesting they better get their act together. Briefly to recap though: the working week was bookended by the UK’s Independent Commission on Banking (ICB) or Vickers commission recommending separation of utility and investment banking in Britain and ended with a stunning example of the point of the Vickers proposals. As ICB member (and FT economics editor) Martin Wolf wrote in the FT Friday, 16 September, ‘Thank you UBS’.

As a member of the UK’s Independent Commission on Banking under Sir John Vickers I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.

British bankers and their lobbyists had spent months following the publication of the Vickers group’s interim report – which presented the ring-fencing proposal in draft – pushing that hoary line that it would signal the death of the City, the end of all life inside the Square Mile – and prime minister Cameron and chancellor George Osborne seemed to be buying the argument. And then! Step forward Kweku Adoboli – and ring up $2bn plus on the UBS till.

But before that unveiling Thursday (15th) by UBS management of their little loss (clients’ funds were not affected) JPM’s Jamie Dimon stuck in his five cents-worth Monday (in  an FT interview) on the evils of bank regulation: Basel III was ‘anti-American’?!  And he was ‘almost’ inclined to the view that the US should fold up the tent and …

“I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”

Actually it is all getting very (worryingly) xenophobic – including again this week. Everyone has their own version of the ‘Polish’ joke. The English have their ‘Paddy’ stories, the Irish have their ‘Kerry man’ tales. Kiwis and Wallabies sledge each other on and off the cricket (and rugby) field of play and so on and on. All very fine and in the nature of things but … It can get out of hand. Yes, the Greeks have problems and have brought things on their own heads but the idea that they are all beach bums, slackers and layabouts is sailing pretty close to outright racism, and no small touch of sectarianism as well, when mouthed by northern European politicians who themselves can have questions to answer. Don’t mention the Anschluss! Read the rest of this entry »

Weekending 10 September 2011

What a week – and what an end to it: the end of Jurgen Stark, at elast at the ECB, as chief economist and executive board member, with three years still to run in his term. Earlier in the week Deutsche’s Josef Ackermann summed it up on the state of European financial markets, “The ‘new normal’ is characterized by volatility and uncertainty — not only in respect to market developments, but also in consideration of the future of the financial branch”, indeed we live in new normal times – as if we needed any more proof actually.

Friday afternoon ZH reported the market chatter was of Greek default over the weekend. Things do look desperate for the Hellenes: from DJ Greek service, [A]fter the interruption of negotiations with the Troika last week, the postponement of disbursement of next €8 billion tranche is possible. Government officials note that available funds are sufficient to meet basic needs until the end of the month.

However weekending events – actual and prospective –should not be allowed to swamp our attentions from earlier developments – whether Ackerman’s from the hip or Trichet’s top-blower, not forgetting Obama’s plan and lots more. Read the rest of this entry »

Week ending 2 September 2011

Negotiations between troika officials and the Greek department of finance broke down and the troika team left Athens (2 Sept). They are not scheduled to return before mid-September at the earliest. According to a troika statement “the mission has made good progress, but has temporarily left Athens to allow the authorities to complete technical work, among other things, related to the 2012 budget and growth-enhancing structural reforms.” For which read there is a flaming row with the troika essentially deciding that Greece is again off the rails from the point of view of meeting particularly budget deficit targets set in the bail-out agreement.

As a result of the breakdown shares on the Athens exchange understandably fell sharply Friday.

In addition to the (now departed) troika there is a second team currently in Athens: the US consultants BlackRock are going through the banks’ accounts, conducting a stress test (this is the team brought into Ireland to do a similar evaluation of the Irish banks, leading to the big recap of banks there last March). Read the rest of this entry »