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 »


While Athens burns …

… Brussels fiddles on Road to Ruin 

From the outside looking in on the latest phase of the GFC (no it never ended) unfold the brain oscillates between utter disbelief and (when that is successfully suspended) mad hilarity – and then one realises it is actually all for real. One such transitional moment was the announcement by Tesco last week that it had decided to throw stg£5oom at (staple) grocery price cuts. Clearly Britain’s biggest bruiser in the grocery business had decided that its home market is in deep recession and home-makers’ budgets are seriously squeezed. It has said as much: reported consumerist web site bitterwallet,

Tesco top knob Richard Brasher said: “Across the country families are telling us the same thing: their budgets are under real pressure. They want more help today to afford everyday essentials. We have listened carefully and, for families facing hard times, the Big Price Drop will cut prices on the products they need to buy the most.

Another obviously, more recently, was the Rastani Moment (or RM as I’ve taken to call it). This truly was transformational – all the way from disbelief to hilarity and awakening reality. Watch it here (or if you’ve already seen it just pull the duvet over your head). Read the rest of this entry »

Links for Greek debt crisis (updated)

The following links may be useful in keeping track of developments and understanding issues arising.

  1. An essential resource is the financial information portal, capital.gr, a daily online newswire service available in both Greek and English.
  2. Also well worth following is the Greek and English language blog created by Aristides Hatzis of Athens University, Greekcrisis.net.
  3. The FT’s Alphaville blog is also a vital source of information.
  4. For anyone exploring legal aspects of the crisis and the issue of sovereign default the writings of American lawyer Lee Buchheit of New York law firm Cleary Gottleib on aspects of the issue in general and also specifically the Greek case are absolute must-reads. These include

Drafting a Model Collective Action Clause for Eurozone Sovereign Bonds (with G Mitu Gulati);

Greek Debt – The Endgame Scenarios (with G Mitu Gulati);

How to restructure Greek Debt (with G Mitu Gulati);

Sovereign Bonds and the Collective Will (with G Mitu Gulati);

The Pari Pasu Covenant in Sovereign Debt Instruments (with Jeremiah Pam); and

The Dilema of Odious Debt ( with G Mitu Gulati and Robert B Thompson).

The July 21 second bailout agreed by eurozone leaders worth €109 billion ($155 billion) included the use of voluntary private-sector involvement (PSI) in a debt swap that would extend maturities on existing debt. Banks and other private investors are expected to contribute €135 billion to the bailout. The Greek government gave bondholders until September 9 to say whether they intended to take up its debt exchange offer which foresees an average 21 percent haircut on portfolios. It also indicated on 26 August that it might not proceed with the swap if it did not get at least a 90 percent uptake: a development revealed by Reuters in a good old-fashioned scoop. The 9th of September has of course come and long gone with no news on uptake – but plenty of reporting of slowness of joining in the scheme.

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 »

Shelter from the storm?

I was burned out from exhaustion, buried in the hail

Poisoned in the bushes an blown out on the trail

Hunted like a crocodile, ravaged in the corn

“Come in” she said, “I’ll give you shelter from the storm”

Bob Dylan

It is now clear what the Schlieffen Merkel game-plan is – and that she has Sarkozy under her thumb in pursuing it. It is to support Greece to the hilt in the present shambles. The Greeks will get their €8bn – and soon. There will be no more quibbles or threats from the troika or any of its components and nor will there be, to the best of her ability, any more rude noises from her ministers. The next tranche will be handed over despite the fact that Greece is not currently meeting – and will not and cannot meet – the targets laid down in the memorandum of understanding and work-out plan agreed with the troika.  If there is any doubting that the French have been brought to heel by Merkel, then simply look at the utterances of French government spokeswoman and budget minister Valerie Pecresse Sunday 11 September, that France would stop lending to Greece if it did not deliver on its part of the bailout program. 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 »