DPC “Broad Street and curb market, New York” 1906
” In the old days, this would have been a one-week trade. In the new world, and in the less liquid market we live in today, it takes one day for the repricing.”
• US, EU Bond Markets Lose $270 Billion In One Day (BBG)
December has been a bruising month for bond traders and we’re only four days in. The value of the U.S. fixed-income market slid by $162.5 billion on Thursday while the euro area’s shrank by the equivalent of $107.5 billion as a smaller-than-expected stimulus boost by the European Central Bank and hawkish comments from Janet Yellen pushed up yields around the world. A global index of bonds compiled by Bank of America Merrill Lynch slumped the most since June 2013. The ECB led by President Mario Draghi increased its bond-buying program by at least €360 billion and cut the deposit rate by 10 basis points at a policy meeting Thursday but the package fell short of the amount many economists had predicted.
Fed Chair Yellen told Congress U.S. household spending had been “particularly solid in 2015,” and car sales were strong, backing the case for the central bank to raise interest rates this month for the first time in almost a decade.”A lot of people lost money,” said Charles Comiskey at Bank of Nova Scotia, one of the 22 primary dealers obligated to bid at U.S. debt sales. “People were caught in those trades. In the old days, this would have been a one-week trade. In the new world, and in the less liquid market we live in today, it takes one day for the repricing.” The bond rout on Thursday added weight to warnings from Franklin Templeton’s Michael Hasenstab that there is a “a lot of pain” to come as rising U.S. interest rates disrupts complacency in the debt market.
“A lot of investors have gotten very complacent and comfortable with the idea that there’s global deflation and you can go long rates forever,” Hasenstab, whose Templeton Global Bond Fund sits atop Morningstar Inc.’s 10-year performance ranking, said this week. “When that reverses, there will be a lot of pain in many of the bond markets.”
“The credit cycle is long in the tooth..”
• US Corporate Debt Downgrades Reach $1 Trillion (FT)
More than $1tn in US corporate debt has been downgraded this year as defaults climb to post-crisis highs, underlining investor fears that the credit cycle has entered its final innings. The figures, which will be lifted by downgrades on Wednesday evening that stripped four of the largest US banks of coveted A level ratings, have unnerved credit investors already skittish from a pop in volatility and sharp swings in bond prices. Analysts with Standard & Poor’s, Moody’s and Fitch expect default rates to increase over the next 12 months, an inopportune time for Federal Reserve policymakers, who are expected to begin to tighten monetary policy in the coming weeks. S&P has cut its ratings on US bonds worth $1.04tn in the first 11 months of the year, a 72% jump from the entirety of 2014.
In contrast, upgrades have fallen to less than half a billion dollars, more than a third below last year’s total. The rating agency has more than 300 US companies on review for downgrade, twice the number of groups its analysts have identified for potential upgrade. “The credit cycle is long in the tooth by any standardised measure,” Bonnie Baha at DoubleLine Capital said. “The Fed’s quantitative easing programme helped to defer a default cycle and with the Fed poised to increase rates, that may be about to change.” Much of the decline in fundamentals has been linked to the significant slide in commodity prices, with failures in the energy and metals and mining industries making up a material part of the defaults recorded thus far, Diane Vazza, an analyst with S&P, said. “Those companies have been hit hard and will continue to be hit hard,” Ms Vazza noted. “Oil and gas is a third of distressed credits, that’s going to continue to be weak.”
Some 102 companies have defaulted since the year’s start, including 63 in the US. Only three companies in the country have retained a coveted triple A rating: ExxonMobil, Johnson & Johnson and Microsoft, with the oil major on review for possible downgrade. Portfolio managers and credit desks have already begun to push back at offerings seen as too risky as they continue a flight to quality. Bankers have had to offer steep discounts on several junk bond deals to fill order books, and some were caught off guard when Vodafone, the investment grade UK telecoms group, had to pull a debt sale after investors demanded greater protections. Bond prices, in turn, have slid. The yield on the Merrill Lynch high-yield US bond index, which moves inversely to its price, has shifted back up above 8%. For the lowest rung triple-C and lower rated groups, yields have hit their highest levels in six years.
Draghi apparently doesn’t think very highly of the euro: “Eurozone countries won’t want to give a competitive advantage to those outside and will use it as an excuse. That is what worries him.”
• UK Call For ‘Multicurrency’ EU Triggers ECB Alarm (FT)
David Cameron’s push to rebrand the EU as a “multicurrency union” has triggered high-level concerns at the European Central Bank, which fears it could give countries such as Poland an excuse to stay out of the euro. The UK prime minister wants to rewrite the EU treaty to clarify that some countries will never join the single currency, in an attempt to ensure they do not face discrimination by countries inside the eurozone. Mario Draghi, president of the ECB, is worried the move could weaken the commitment of some countries to join the euro. Beata Szydlo, the new Polish premier, has previously described the euro as a “bad idea” that would make Poland “a second Greece”.
Mr Draghi shares concerns in Brussels that the EU single market could be permanently divided across two regulatory spheres, with eurozone countries facing unfair competition if there were a lighter-touch regime on the outside. The idea of rebranding the EU as a “multicurrency union” was raised during a recent meeting in London between George Osborne, the UK chancellor, and Mr Draghi. Mr Osborne said last month that Britain wanted the treaty to recognise “that the EU has more than one currency”. Under the existing treaty, the euro is the official currency of the EU and every member state is obliged to join — apart from Britain and Denmark, which have opt-outs. The common currency is used by 19 out of 28 member states.
Sluggish growth and a debt crisis have made the euro a less-attractive proposition in recent years, and Mr Draghi’s concern is that a formal recognition that the EU is a “multicurrency union” could make matters worse. “He’s worried that people would resist harmonisation by arguing that the UK and others were gaining an unfair advantage,” said a British official. The ECB said the bank had no formal position on the issue. British ministers are confident that the ECB’s concerns can be addressed, possibly with a treaty clause making clear that every EU member apart from Britain and Denmark is still expected to join the euro.
One official involved in the British EU renegotiations said that any safeguards for Britain must not “permanently divide the ins and outs” or force countries to pick camps. “Whatever we do cannot impair the euro in any way. The single currency must be able to function,” the official said. Since the launch of the single currency in 1999, the ECB has consistently argued that a single market and currency must have common governance and institutions. One European adviser familiar with Mr Draghi’s views said: “Eurozone countries won’t want to give a competitive advantage to those outside and will use it as an excuse. That is what worries him.”
“The Troika will shake every Greek upside down until they rob every personal asset they have.”
• Why the Euro Is A Dead Currency (Martin Armstrong)
I have been warning that government can do whatever it likes and declare anything to be be a criminal act. In the USA, not paying taxes is NOT a crime, failing to file your income tax is the crime. The EU has imposed the first outright total asset reporting requirement for cash, jewelry, and anything else you have of value stored away. As of January 1st, 2016, ALL GREEKS must report their personal cash holdings, whatever jewelry they possess, and the contents of their storage facilities under penalty of criminal prosecution. The dictatorship of the Troika has demanded that Greeks will be the first to have to report all personal assets.
Why the Greek government has NOT exited the Eurozone is just insanity. The Greek government has betrayed its own people to Brussels. The Troika will shake every Greek upside down until they rob every personal asset they have. Greeks are just the first test case. All Greeks must declare cash over € 15,000, jewelry worth more than 30,000 euros and the contents of their storage lockers/facilities. This is a decree of the Department of Justice and the Ministry of Finance meaning if you do not comply, it will become criminal. The Troika is out of its mind. They are destroying Europe and this is the very type of action by governments that has resulted in revolutions.
The Greek government has betrayed its own people and they are placing at risk the viability of Europe to even survive as a economic union. The Troika is UNELECTED and does NOT have to answer to the people. It has converted a democratic Europe into the Soviet Union of Europe. The Greek people are being stripped of their assets for the corruption of politicians. This is the test run. Everyone else will be treated the same. Just how much longer can the EU remain together?
Thus putting QE on par with stupidity. Sounds about right.
• ‘There Cannot Be A Limit’ To Stimulus, Says ECB president Mario Draghi (AFP)
Mario Draghi has said the European Central Bank would intensify efforts to support the eurozone economy and boost inflation toward its 2pc goal if necessary. Speaking a day after the ECB’s moves to expand stimulus fell short of market expectations, the central bank president said that he was confident of returning to that level of inflation “without undue delay”. “But there is no doubt that if we had to intensify the use of our instruments to ensure that we achieve our price stability mandate, we would,” he said in a speech to the Economic Club of New York. “There cannot be any limit to how far we are willing to deploy our instruments, within our mandate, and to achieve our mandate,” he said.
On Thursday the ECB sent equity markets tumbling, and reversed the euro’s downward course, after it announced an interest rate cut that was less than investors had expected and held back from expanding the size of its bond-buying stimulus. The bank cut its key deposit rate by a modest 0.10 percentage points to -0.3pc, and only extended the length of its bond purchase program by six months to March 2017. Critics said that was not strong enough action to counter deflationary pressures on the euro area economy. Some analysts believed a desire for stronger moves, like an expansion of bond purchases, was stymied by powerful, more conservative members of the ECB governing council, including Bundesbank chief Jens Weidmann.
But Mr Draghi insisted that there was “very broad agreement” within the council for the extent of the bank’s actions. And, he added, it would do more if necessary: “There is no particular limit to how we can deploy any of our tools.” He acknowledged some market doubts that central banks are proving unable to reverse the downward trend in inflation, saying that, even if there is a lag to the impact of policies in place, they are working. “I would dispute entirely the notion that we are powerless to reach our objective,” he said. “The evidence at our disposal shows, on the contrary, that the instruments we are currently deploying are having the effect intended.” Without them, he added, “inflation would likely have been negative this year”.
Derivatives will continue to be advertized as ‘insurance’, but what they really do is keep the casino going by keeping losses -and risks- off the books.
• SEC to Crack Down on Derivatives (WSJ)
U.S. securities regulators, under pressure to demonstrate they have a handle on potential risks in the asset-management industry, are about to crack down on the use of derivatives in certain funds sold to the public, worried that some products are too precarious for retail investors. The restrictions, which the Securities and Exchange Commission is set to propose next Friday, are expected to have an outsize effect on a small but growing sector that uses the complex instruments to try to deliver double or even triple returns of the indexes they track. Some regulators say these products—known as “leveraged exchange-traded funds”—can be highly volatile, and expose investors to sudden, outsize losses.
The proposed restrictions could adversely affect in particular firms like ProShare Advisors, a midsize fund company that has carved out a niche role as a leading leveraged-ETF provider. The Bethesda, Md., firm is mounting a behind-the-scenes campaign to persuade the SEC to scale back the proposal, arguing that regulators’ concerns are overblown, according to people familiar with the firms’ thinking. Exchange-traded funds hold a basket of assets like mutual funds and trade on an exchange like a stock. At issue is the growing use by some ETFs of derivatives, contracts that permit investors to speculate on underlying assets—such as commodity prices—and to amplify the potential gains through leverage, or borrowed money. But those derivatives also raise the riskiness of those investments, and can also magnify the losses.
SEC officials have said the increasing use of derivatives by mutual funds to boost leverage warrants heightened scrutiny, saying that the agency’s existing investor protection rules haven’t kept pace with industry practices. Some of the existing guidance goes back more than 30 years, long before the advent of modern derivatives.
CDS have developed into de facto instruments to hide one’s losses behind. It’s the only way the world of finance can keep churning along in the face of deflation.
• Banks Said to Face SEC Probe Into Possible Credit Swap Collusion (BBG)
U.S. regulators are examining whether banks colluded in setting prices in the derivatives market where investors speculate on credit risk, according to a person with knowledge of the matter. The U.S. Securities and Exchange Commission is probing whether firms acted in unison to distort prices in the $6 trillion market for credit-default swaps indexes, said the person, who asked not to be identified because the investigation is private. The regulator is trying to determine if dealers have misrepresented index prices, the person said. The credit-default swaps benchmarks allow investors to make bets on the likelihood of default by companies, countries or securities backed by mortgages. The probe comes after successful cases brought against Wall Street’s illegal practices tied to interest rates and foreign currencies.
Those cases showed traders misrepresented prices and coordinated their positions to push valuations in their favor, often through chat rooms – practices that violate antitrust laws. The government has used those prosecutions as a road map to pursue similar conduct in different markets. Credit-default swaps, which gained notoriety during the financial crisis for amplifying losses and spreading risks from the U.S. housing bust across the globe, have since come under more scrutiny by regulators. Trading in swaps index contracts has increased in recent years as investors look for easy ways to speculate on, say, the health of U.S. companies, or the risk that defaults will increase as seven years of easy-money policies come to an end.
Toward the end of each trading day, benchmark prices for indexes are tabulated by third-party providers based on dealer quotes, creating a level at which traders can mark their positions. This process is similar to how other markets that don’t trade on exchanges set benchmark prices. That includes the London interbank offered rate, an interest-rate benchmark. In the Libor scandal, regulators accused banks of making submissions on borrowing rates that benefited their trading positions. A group of Wall Street’s biggest banks have traditionally dominated trading in the credit swaps, acting as market makers to hedge funds, insurance companies and other institutional investors. Those dealers send quotes to clients over e-mails or on electronic screens showing at which price they will buy or sell default insurance. Those values rise and fall as the perception of credit risk changes.
A very interesting theme. “It was like the holocaust seven times over.”
• Enough Of Aid – Let’s Talk Reparations (Hickel)
Colonialism is one of those things you’re not supposed to discuss in polite company – at least not north of the Mediterranean. Most people feel uncomfortable about it, and would rather pretend it didn’t happen. In fact, that appears to be the official position. In the mainstream narrative of international development peddled by institutions from the World Bank to the UK’s Department of International Development, the history of colonialism is routinely erased. According to the official story, developing countries are poor because of their own internal problems, while western countries are rich because they worked hard, and upheld the right values and policies. And because the west happens to be further ahead, its countries generously reach out across the chasm to give “aid” to the rest – just a little something to help them along.
If colonialism is ever acknowledged, it’s to say that it was not a crime, but rather a benefit to the colonised – a leg up the development ladder. But the historical record tells a very different story, and that opens up difficult questions about another topic that Europeans prefer to avoid: reparations. No matter how much they try, however, this topic resurfaces over and over again. Recently, after a debate at the Oxford Union, Indian MP Shashi Tharoor’s powerful case for reparations went viral, attracting more than 3 million views on YouTube. Clearly the issue is hitting a nerve. The reparations debate is threatening because it completely upends the usual narrative of development. It suggests that poverty in the global south is not a natural phenomenon, but has been actively created. And it casts western countries in the role not of benefactors, but of plunderers.
When it comes to the colonial legacy, some of the facts are almost too shocking to comprehend. When Europeans arrived in what is now Latin America in 1492, the region may have been inhabited by between 50 million and 100 million indigenous people. By the mid 1600s, their population was slashed to about 3.5 million. The vast majority succumbed to foreign disease and many were slaughtered, died of slavery or starved to death after being kicked off their land. It was like the holocaust seven times over. What were the Europeans after? Silver was a big part of it. Between 1503 and 1660, 16m kilograms of silver were shipped to Europe, amounting to three times the total European reserves of the metal. By the early 1800s, a total of 100m kg of silver had been drained from the veins of Latin America and pumped into the European economy, providing much of the capital for the industrial revolution.
To get a sense for the scale of this wealth, consider this thought experiment: if 100m kg of silver was invested in 1800 at 5% interest – the historical average – it would amount to £110trn ($165trn) today. An unimaginable sum. Europeans slaked their need for labour in the colonies – in the mines and on the plantations – not only by enslaving indigenous Americans but also by shipping slaves across the Atlantic from Africa. Up to 15 million of them. In the North American colonies alone, Europeans extracted an estimated 222,505,049 hours of forced labour from African slaves between 1619 and 1865. Valued at the US minimum wage, with a modest rate of interest, that’s worth $97trn – more than the entire global GDP.
Any economy that has such traits must fail, by definition. And it will.
• 20 Billionaires Now Have More Wealth Than Half US Population (Collins)
When should we be alarmed about so much wealth in so few hands? The Great Recession and its anemic recovery only deepened the economic inequality that’s drawn so much attention in its wake. Nearly all wealth and income gains since then have flowed to the top one-tenth of America’s richest 1%. The very wealthiest 400 Americans command dizzying fortunes. Their combined net worth, as catalogued in the 2015 Forbes 400 list, is $2.34 trillion. You can’t make this list unless you’re worth a cool $1.7 billion. These 400 rich people – including Bill Gates, Donald Trump, Oprah Winfrey, and heirs to the Wal-Mart fortune – have roughly as much wealth as the bottom 61% of the population, or over 190 million people added together, according to a new report I co-authored.
That equals the wealth of the nation’s entire African-American population, plus a third of the Latino population combined. A few of those 400 individuals are generous philanthropists. But extreme inequality of this sort undermines social mobility, democracy, and economic stability. Even if you celebrate successful entrepreneurship, isn’t there a point things go too far? To me, 400 people having more money than 190 million of their compatriots is just that point. Concentrating wealth to this extent gives rich donors far too much political power, including the wherewithal to shape the rules that govern our economy. Half of all political contributions in the 2016 presidential campaign have come from just 158 families, according to research by The New York Times.
The wealth concentration doesn’t stop there. The richest 20 individuals alone own more wealth than the entire bottom half of the U.S. population. This group – which includes Gates, Warren Buffet, the Koch brothers, Mark Zuckerberg, and Google co-founders Larry Page and Sergey Brin, among others – is small enough to fit on a private jet. But together they’ve hoarded as much wealth as 152 million of their fellow Americans.
Debt deflation is real. And it’s felt first in the world’s prime commodity. “The world is already producing up to 2 million bpd more than it consumes.”
• OPEC Fails To Agree Production Ceiling As Iran Pledges Output Boost (Reuters)
OPEC members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions. Friday’s developments set up the fractious cartel for more price wars in an already heavily oversupplied market. Oil prices have more than halved over the past 18 months to a fraction of what most OPEC members need to balance their budgets. Brent oil futures fell by 1 percent on Friday to trade around $43, only a few dollars off a six year low. Banks such as Goldman Sachs predict they could fall further to as low as $20 per barrel as the world produces more oil than it consumes and runs out of capacity to store the excess.
A final OPEC statement was issued with no mention of a new production ceiling. The last time OPEC failed to reach a deal was in 2011 when Saudi Arabia was pushing the group to increase output to avoid a price spike amid a Libyan uprising. “We have no decision, no number,” Iranian oil minister Bijan Zangeneh told reporters after the meeting. OPEC’s secretary general Abdullah al-Badri said OPEC could not agree on any figures because it could not predict how much oil Iran would add to the market next year, as sanctions are withdrawn under a deal reached six months ago with world powers over its nuclear program. Most ministers left the meeting without making comments. Badri tried to lessen the embarrassment by saying OPEC was as strong as ever, only to hear an outburst of laughter from reporters and analysts in the conference room.
[..] Iran has made its position clear ahead of the meeting with Zangeneh saying Tehran would raise supply by at least 1 million barrels per day – or one percent of global supply – after sanctions are lifted. The world is already producing up to 2 million bpd more than it consumes.
They will soon be forced to change their stand on Saud. Information on support for terrorist groups will become available.
• Germany Rebukes Own Intelligence Agency for Criticizing Saudi Policy (NY Times)
The German government issued an unusual public rebuke to its own foreign intelligence service on Thursday over a blunt memo saying that Saudi Arabia was playing an increasingly destabilizing role in the Middle East. The intelligence agency’s memo risked playing havoc with Berlin’s efforts to show solidarity with France in its military campaign against the Islamic State and to push forward the tentative talks on how to end the Syrian civil war. The Bundestag, the lower house of the German Parliament, is due to vote on Friday on whether to send reconnaissance planes, midair fueling capacity and a frigate to the Middle East to support the French. The memo was sent to selected German journalists on Wednesday.
In it, the foreign intelligence agency, known as the BND, offered an unusually frank assessment of recent Saudi policy. “The cautious diplomatic stance of the older leading members of the royal family is being replaced by an impulsive policy of intervention,” said the memo, which was titled “Saudi Arabia — Sunni regional power torn between foreign policy paradigm change and domestic policy consolidation” and was one and a half pages long. The memo said that King Salman and his son Prince Mohammed bin Salman were trying to build reputations as leaders of the Arab world. Since taking the throne early this year, King Salman has invested great power in Prince Mohammed, making him defense minister and deputy crown prince and giving him oversight of oil and economic policy.
The sudden prominence of such a young and untested prince –he is believed to be about 30, and had little public profile before his father became king — has worried some Saudis and foreign diplomats. Prince Mohammed is seen as a driving force behind the Saudi military campaign against the Iranian-backed Houthi rebels in Yemen, which human rights groups say has caused thousands of civilian deaths. The intelligence agency’s memo was flatly repudiated by the German Foreign Ministry in Berlin, which said the German Embassy in Riyadh, Saudi Arabia, had issued a statement making clear that “the BND statement reported by media is not the position of the federal government.”
This is too crazy.
• Germany Sees EU Border Guards Stepping In For Crises (Reuters)
Germany’s interior minister expects the EU executive to propose new rules for protecting the bloc’s frontiers that would mean European border guards stepping in when a national government failed to defend them. Thomas de Maiziere spoke as he arrived on Friday for an EU meeting in Brussels where ministers will discuss how to safeguard their Schengen system of open borders inside the EU and Greece’s difficulties in controlling unprecedented flows of people arriving via Turkey and streaming north into Europe. Calling for the reinforcement of the EU’s Frontex border agency, whose help Greece called for on Thursday after coming under intense pressure from other EU states, de Maiziere said he expected an enhanced role for Frontex in proposals the European Commission is due to make on borders on Dec. 15.
“The Commission should put forward a proposal … which has the goal of when a national state is not effectively fulfilling its duty of defending the external border, then that can be taken over by Frontex,” he told reporters. EU states’ sovereign responsibility for their section of the external border of the Schengen zone is protected in the Union’s treaties. But the failure of Greece’s overburdened authorities to control migrant flows that have then triggered other states to reimpose controls on internal Schengen frontiers has driven calls for a more collective approach on the external frontier. Following diplomatic threats that it risked being shunned from the Schengen zone if it failed to accept EU help in registering and controlling migrants, Greece finally activated EU support mechanisms late on Thursday.
De Maiziere noted a Franco-German push for Frontex, whose role is largely to coordinate national border agencies, to be complemented by a more ambitious European border and coast guard system. He did not say whether new proposals would strengthen the EU’s ability to intervene with a reluctant member state. A Commission spokeswoman said the EU executive would make its proposal on Dec. 15 for a European Border and Coast Guard. German officials noted that the existing Schengen Borders Code provides for recommendations to member states that they request help from the EU “in the case of serious deficiencies relating to external border control.” Other ministers and the Commission welcomed Greece’s decision to accept more help from Frontex.
Austrian Interior Minister Johanna Mikl-Leitner said: “Greece is finally taking responsibility for guarding the external European border. I have for months been demanding that Greece must recognise this responsibility and be ready to accept European help. This is an important step in the right direction.”
1984.
• EU Considers Measures To Intervene If States’ Borders Are Not Guarded (I.ie)
The European Union is considering a measure that would give a new EU border force powers to intervene and guard a member state’s external frontier to protect the Schengen open-borders zone, EU officials and diplomats said yesterday in Brussels. Such a move would be controversial. It might be blocked by states wary of surrendering sovereign control of their territory. But the discussion reflects fears that Greece’s failure to manage a flood of migrants from Turkey has brought Schengen’s open borders to the brink of collapse. Germany’s Thomas de Maiziere, in Brussels for a meeting of EU interior ministers, said he expected proposal from the EU executive due on December 15 to include giving responsibility for controlling a frontier with a non-Schengen country to Frontex, the EU’s border agency, if a member state failed to do so.
“The Commission should put forward a proposal … which has the goal of, when a national state is not effectively fulfilling its duty of defending the external border, then that can be taken over by Frontex,” de Maiziere told reporters. He noted a Franco-German push for Frontex, whose role is largely to coordinate national border agencies, to be complemented by a permanent European Border and Coast Guard – a measure the European Commission has confirmed it will propose. Greece has come under heavy pressure from states concerned about Schengen this week to accept EU offers of help on its borders. Diplomats have warned that Athens might find itself effectively excluded from the Schengen zone if it failed to work with other Europeans to control migration.
Earlier this week, Greece finally agreed to accept help from Frontex, averting a showdown at the ministerial meeting in Brussels. EU diplomats said the proposals to bolster defence of the external Schengen frontiers would look at whether the EU must rely on an invitation from the state concerned. “One option could be not to seek the member state’s approval for deploying Frontex but activating it by a majority vote among all 28 members,” an EU official said. Under the Schengen Borders Code, the Commission can now recommend a state accept help from other EU members to control its frontiers. But it cannot force it to accept help – something that may, in any case, not be practicable. The code also gives states the right to impose controls on internal Schengen borders if external borders are neglected.
As Greece has no land border with the rest of the Schengen zone, that could mean obliging ferries and flights coming from Greece to undergo passport checks. Asked whether an EU force should require an invitation or could be imposed by the bloc, Swedish Interior Minister Anders Ygeman said: “Border control is the competence for the member states, and it’s hard to say that there is a need to impose that on member states forcefully.”On the other hand,” he said, referring to this week’s pressure on Greece, “we must safeguard the borders of Schengen, and what we have seen is that if a country is not able to protect its own border, it can leave Schengen or accept Frontex. It’s not mandatory, but in practice it’s quite mandatory.”
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