DPC Station at foot of incline, American Falls, Niagara Falls 1890
“..relative to where economists thought we would be, the U.S. is missing by a large margin..”
• The US Economy Just Keeps Disappointing (Bloomberg)
Last week, we reported on how the U.S. economy was the most disappointing major economy in the world based on the Bloomberg Economic Surprise Index, which measures incoming economic data against economist expectations. These measures tend to move in cycles, as they reflect both the absolute economic data as well as the optimism or pessimism of the forecasters, which is in itself cyclical. For the U.S. we keep driving lower, hitting depths not seen since the economic crisis. Again, this doesn’t mean that the economy is anywhere near as bad as it was then. But whether it’s a slowdown caused by the harsh winter or something else, relative to where economists thought we would be, the U.S. is missing by a large margin.
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“On the other hand, if Janet is patient and says so, we’re all going to make an absurd amount of money.”
• ‘Hell Will Break Loose’ If Fed Loses Patience (MarketWatch)
Daytraders tend to relish when the market bounces around like a leprechaun on a hot griddle. But for everybody else, it’s tense times in the trading pits these days. While a calm often settles over markets in the days leading into a hyped-up Fed statement, recent action says to gird for more rockiness. Dips are being bought and profits are being scalped. Yet for all the sparks flying on the S&P, its up only 1% so far this year. That’s better than down, of course, unless you’re betting the “don’t pass” line. But compare that with the 24% explosion to the upside on Germany’s main index, and you’d be pardoned for suffering Teutonic envy. Shanghai, while no Germany, is also doing better than U.S. stocks, and a tandem of brokers are feeling the bull run in China has a long way to run (see call of the day).
Nevertheless, the U.S. is still firmly entrenched in its own bull party, despite recent queasiness. In fact, we’re just about 2,200 days into it. Another two months, and this bull market will overtake the one from 1974-1980 as the third-longest since 1929, according to Bloomberg. Getting there just might hinge on the Fed’s next move. It could go either way, according to the Fly from the iBankCoin blog, who spoke of extremes. “If we find out this Wednesday that [Janet Yellen] is not, in fact, patient, hell will break loose and 66 seals of hell will be broken — paving way for actual centaurs to roam, wall-kicking people in the faces with their hooves,” he wrote. “On the other hand, if Janet is patient and says so, we’re all going to make an absurd amount of money.”
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“..an epic decoupling of put prices and S&P P/E ratios”
• Options Market Signals 2007-Like Crash Risk, Goldman Warns (Zero Hedge)
Although US equity prices have demonstrated a remarkable propensity to completely disregard apparently unimportant things like macro fundamentals, forward earnings estimates, and top-line growth projections, we’ve long argued that eventually, reality will come calling and the farther stretched valuations become in the meantime, the more painful the correction will be. As we noted on Sunday, the cracks are starting to form as DB became the first sell-side firm to predict that EPS will in fact not grow in 2015, prompting us to remark that “EPS growth in 2015 [is] now a wash (if not negative), which implies the only upside for the S&P 500 will once again come from substantial multiple expansion.” Against this backdrop of declining revenues, declining earnings, and pitiable economic projections (thanks a lot Atlanta Fed Nowcast), we bring you yet another sign that a “correction” may indeed be in the cards: an epic decoupling of put prices and S&P P/E ratios. Here’s Goldman:
Long-dated crash put protection costs on the SPX have more than doubled over the past 9 months. We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as US equities trade near all-time highs. Based on our conversations with investors over the past few months, it appears the increase in long-dated put prices has largely gone unnoticed among equity and credit investors. In fact, Investment Grade credit spreads have actually tightened slightly over the same period. The rise in long-dated equity put prices may signal an increasing fear that a substantial market correction is on the horizon, despite low short-term put prices which suggest low probably of a near-term drawdown vs history.
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“It was just the weather, basically..”: “Starts of single-family properties dropped 14.9%..” “New construction slumped a record 56.5% in the Northeast..”
• US Housing Starts Plunge Most in Four Years (Bloomberg)
Housing starts slumped in February by the most in four years as bad winter weather in parts of the U.S. prevented builders from initiating new projects. Work began on 897,000 houses at an annualized rate, down 17% from January and the fewest in a year, the Commerce Department reported Tuesday in Washington. The median estimate of 80 economists surveyed by Bloomberg called for 1.04 million. “It was just the weather, basically,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. Still, “my view of the recovery in single-family housing is that it’s coming more gradually than others think.” An increase in building permits was driven by applications for multifamily units, indicating single-family construction, the biggest part of the market, will keep struggling.
While stronger hiring and low borrowing costs have helped the industry advance, sales remain challenged by limited supply of cheaper homes and sluggish wage growth. The median estimate of 81 economists in the Bloomberg survey called for 1.04 million starts. Estimates ranged from annualized rates of 975,000 to 1.08 million after a previously reported January pace of 1.07 million. Building permits climbed 3% to a 1.09 million annualized pace, the fastest since October, after a 1.06 million rate a month earlier. They were projected at 1.07 million, according to the Bloomberg survey median. Permits for single-family dwellings were the lowest since May.
Stock-index futures held losses after the figures. The contract on the Standard & Poor’s 500 Index maturing in June dropped 0.3% to 2,063.3. Starts of single-family properties dropped 14.9% to a 593,000 rate in February. Construction of multifamily projects such as condominiums and apartment buildings decreased 20.8% to an annual rate of 304,000. New construction slumped a record 56.5% in the Northeast and fell 37%, the most since January 2014, in the Midwest. Starts also dropped in the South and West, indicating weather was only partly to blame.
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• New BoE Regulator Warns Of Risks From US Rate Hikes, Dollar Strength (Reuters)
The start of U.S. interest rate rises could inject volatility into global financial markets and create risks for Britain’s financial stability, a new member of the Bank of England’s top panel of financial regulators said on Tuesday. Alex Brazier, who took a seat on the BoE’s Financial Policy Committee on Monday, cited the normalisation of U.S. borrowing costs as one of the main global risks for markets. The FPC was set up in 2013 after the failure of Britain’s financial regulation to protect the country against the 2007-08 financial crisis. Last year it imposed curbs on large mortgages and required banks to hold more reserves against potential losses. Brazier – in remarks which share concerns expressed by other BoE officials – said rate hikes by the U.S. Federal Reserve or a change in perceptions of their timing and scale would reflect good news about the U.S. economic recovery.
“However, it would probably reduce the extent of the search for yield and prompt a reduction in global risk appetite,” Brazier said in answer to questions from members of parliament who are reviewing his appointment. Brazier joined the BoE in 2001 after university, and most recently served as principal private secretary to Governor Mark Carney and his predecessor, Mervyn King. “Both of them pushed me to the edges of my limits,” Brazier said, noting that his hair had turned prematurely grey. Brazier is now the BoE’s executive director for financial stability, strategy and risk. This is a new role created last year by Carney as part of a shake-up of the bank. BoE chief economist Spencer Dale briefly held the job before he quit to become chief economist for oil company BP.
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“.. the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”
• Europeans Defy US To Join China-Led Development Bank (FT)
France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution. The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank. Australia, a key US ally in the Asia-Pacific region which had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position.
The European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside and pushed for higher lending standards. The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades. When Britain announced its decision to join the AIIB last week, the Obama administration told the Financial Times that it was part of a broader trend of “constant accommodation” by London of China.
British officials were relatively restrained in their criticism of China over its handling of pro-democracy protests in Hong Kong last year. Britain tried to gain “first mover advantage” last week by signing up to the fledgling Chinese-led bank before other G7 members. The UK government claimed it had to move quickly because of the impending May 7 general election. The move by George Osborne, the UK chancellor of the exchequer, won plaudits in Beijing. Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant. One suggested that the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”
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A potential bombshell.
• Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (Bloomberg)
Austria’s decision to burn bondholders of a failed state bank may mean almost €1.3 trillion of European debt once deemed risk-free now comes with a hazard warning. Austria is the first country to wind down a bank, Heta, under the EU’s new Bank Recovery and Resolution Directive after changing laws last year to allow it to write down subordinated debt of its failed predecessor, Hypo Alpe-Adria-Bank. The government is also refusing to stand behind guarantees by the province of Carinthia on Heta’s senior debt. The moves are putting bondholders at risk of losses. As age-old banking mores clash with modern banking rules, investors are being forced to take a second look at how governments have used explicit or implicit promises in the past to issue debt that doesn’t show up in official ledgers.
“People had too much trust in public authorities,” said Otto Dichtl, a credit analyst for financial companies at Stifel Nicolaus. “Austria dropping Carinthia like this is an extraordinary step. We have to see just how this is carried out. From a legal perspective, this is uncharted territory.” Based on current bond prices, Heta’s senior creditors, who bought securities covered by a guarantee from Carinthia province, face losses of more than 40% on their €10.2 billion of debt. Carinthia, a southern Austrian region of 556,000 people with annual revenue of less than €2.4 billion, may face insolvency if the guarantees are triggered. Until this year, figures for debt guarantees weren’t disclosed in most European countries, a fact that helped Greece conceal its true debt levels to gain entry to the euro in 2001.
Greece undertook the biggest debt restructuring on record in 2012. New rules by the European Council, known as the “six pack” directive, led to data as of 2013 being published for the first time last month, revealing €1.28 trillion of government guarantees. The EU introduced the six laws in 2011. As the EU’s biggest user of guarantees, Austria has contingent liabilities corresponding to 35% of national output, or €113 billion, the data show. It isn’t just Austria that has liberally applied state guarantees. Ireland has contingent liabilities equivalent to 32% of its economy, reflecting the collapse of its banking system, while Germany’s tally stands at more than 18% of output. German guarantees, encompassing €512 billion, are the biggest in absolute terms, followed by Spain with €193 billion and France with €117 billion.
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Merkel gets closer.
• Greek PM Tsipras To Meet Merkel, Draghi In Brussels On Friday (Kathimerini)
With Greece rapidly running out of funds, Prime Minister Alexis Tsipras has proposed an urgent meeting on the sidelines of the European Union summit that begins on Thursday in a bid to reach an agreement that would allow Athens to get more funds. Greece urgently needs between €3 and €5 billion. Tsipras on Tuesday telephoned European Council President Donald Tusk and asked him to convene a meeting with Chancellor Angela Merkel, President Francois Hollande, ECB President Mario Draghi and EC President Jean-Claude Juncker. The meeting will be held on Friday morning, despite the fact that European officials questioned its use.
Sources in Brussels said the proposal was a mistake, as it focused on meeting with the leaders of two countries, and the heads of the ECB and the Commission, rather than pursuing a collective agreement in the EU, and it was not clear what Tsipras wanted to achieve. If the aim was to achieve more funding, this would have to be the subject of technical discussions between experts and could not be dealt with at the political level. However, with teams of experts still unable to reach a conclusion as to Greece’s financing needs and its compliance with the bailout agreement, agreement at the political level is precisely what Tsipras is after.
He wants an agreement on a framework that will set out what Greece must do in order to get the ECB to allow his country to borrow more, a source in Tsipras’s office told Kathimerini. Tsipras is prepared to accept reforms that will be proposed by Greece’s partners, including privatization, the same source said. They stressed that Athens would draw the line at adopting further austerity measures. “We accept everything else, on the basis of the commitments made in [Finance Minister] Yanis Varoufakis’s letter to the Eurogroup,” the source added. The Greek prime minister is to meet the German chancellor in Berlin on March 23, following an invitation from Merkel on Monday.
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That’s what I said: “Germany can’t simply sweep the demands from Greece off the table.”
• Greece WWII Reparations Cause Split Among German MPs (RT)
Several senior Social Democrats (SPD) and Greens have for the first time acknowledged that Greece has a case for WWII reparations. This contradicts the stance of German Chancellor Angela Merkel’s government which had ruled it out. “We should make a financial approach to victims and their families,” said Gesine Schwan, chairwoman of the Social Democratic Party (SPD) values committee told Der Spiegel Online on Tuesday. “It would be good for us Germans to sweep up after ourselves in terms of our history,” she said. “Victims and descendants have longer memories than perpetrators and descendants,” said Schwan, who was nominated as a candidate for President twice in 2004 and 2009. SPD deputy leader Ralf Stegner agreed that the issue should be resolved, however independently from the current debate over the Euro crisis and Greek sovereign debt.
“But independently, we must have a discussion about reparations,” Ralf Stegner told Spiegel. “After decades, there are still international legal questions to be resolved.” SPD is the second major party in Germany that shares power with Merkel’s conservative Christian Democratic Union and the Christian Social Union (CDU/CSU). The SPD were joined by the Green party, with leader Anton Hofreiter saying that “Germany can’t simply sweep the demands from Greece off the table.” “This chapter isn’t closed either morally or legally.” Demands for reparations from Germany dating back to the Nazi occupation during World War II have been voiced by Greek politicians over the past 60 years, but have gained renewed energy amid the recent financial crisis and tough austerity measures in exchange for largely German-backed loans.
In April 2013 Greece officially declared that it would pursue the reparations scheme. Greece’s Prime Minister Alexis Tsipras leader of the anti-austerity Syriza party relaunched the heated debate in February by saying that Athens has a “historical obligation” to claim from Germany billions of euros in reparations for the physical and financial destruction committed during Nazi occupation. However, Germany’s government has said that this issue has already been legally resolved, arguing that Greece is trying to detract attention from the serious financial problems the country is facing.
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“We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with.”
• Athens Furious At Eurogroup Suggestion Of Capital Controls (Kathimerini)
The chairman of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, on Tuesday became the first European Union official to suggest the possibility of capital controls to prevent Greece leaving the euro, drawing a furious reaction from Athens, which accused him of “blackmail.” “It’s been explored what should happen if a country gets into deep trouble – that doesn’t immediately have to be an exit scenario,” Bloomberg quoted the head of the eurozone’s finance ministers telling his country’s BNR Nieuwsradio. On Cyprus, he said, “we had to take radical measures, banks were closed for a while and capital flows within and out of the country were tied to all kinds of conditions, but you can think of all kinds of scenarios.”
Greece is scrambling to pay its obligations as revenues drop and it needs the European Central Bank to allow it to borrow more funds. Its eurozone partners are awaiting the result of an inspection into Greece’s finances and its compliance with the bailout program. In Athens, the government issued an angry reply. “It would be useful for everyone and for Mr. Dijsselbloem to respect his institutional role in the eurozone,” Gavriil Sakellaridis said. “We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with. Everything else is a fantasy scenario. We find it superfluous to remind him that Greece will not be blackmailed.”
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Schaeuble keeps at it: “Greek leaders are “lying to the population..”
• Greece Grabs Cash as More Than $2 Billion in Payouts Loom (Bloomberg)
Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than €2 billion in debt payments Friday. Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs, said a person familiar with the matter who asked not to be identified publicly discussing the derivative. Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors – euro area member states, the ECB and the IMF – to release more money from its €240 billion bailout program.
European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform. “As days go by, room for maneuver becomes ever smaller,” said Theodore Pelagidis at the Brookings Institution. “The impression given is that there’s no plan A or plan B. There’s nothing.” The government’s revenue-boosting plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers €556 million from the country’s bank recapitalization fund to the state.
A vote on the measures is scheduled for Wednesday. Greek stocks rebounded Tuesday, ending four days of declines, with the benchmark Athens Stock Exchange gaining 2.6%. Yields on 3-year bonds rose 8 basis points to 20.25%. The government said March 14 it has a plan to “enhance its liquidity” and won’t have problems meeting payments for civil servants and retirees due just one week after the March 20th debt payments. Tsipras has pledged to meet the country’s obligations while at the same time ending austerity measures. “None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Wolfgang Schaeuble said in Berlin Monday. Greek leaders are “lying to the population,” he said.
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“Put them in front of their contradictions. Make them face the contradictions of the eurozone themselves.”
• Greece’s Euro Exit Seems Inevitable (Bloomberg)
Greece’s money troubles resemble a game of pass the parcel, where each successive participant rips another sheet of wrapping paper off the box — which turns out to be empty when the final recipient reaches the core. With time and money running out, a successful endgame seems even less likely than it did a week or a month ago. It’s increasingly obvious that the government’s election promises are incompatible with the economic demands of its euro partners. Something’s got to give. The current money-go-round is unsustainable. Euro-region taxpayers fund their governments, which in turn bankroll the ECB. Cash from the ECB’s Emergency Liquidity Scheme flows to the Greek banks; they buy treasury bills from their government, which uses the proceeds to …repay its IMF debts! No wonder a recent poll by German broadcaster ZDF shows 52% of Germans say they want Greece out of the euro, up from 41% last month.
There’s blame on both sides for the current impasse. Euro-area leaders should be giving Greece breathing space to get its economic act together. But the Greek leadership has been cavalier in its treatment of its creditors. It’s been amateurish in expecting that a vague promise to collect more taxes would win over Germany and its allies. And it’s been unrealistic in expecting the ECB to plug a funding gap in the absence of a political agreement for getting back to solvency. There’s a YouTube video making the rounds on Twitter this week of a lecture Yanis Varoufakis gave in Croatia in May 2013. The most arresting section comes after about two minutes, when the current Greek finance minister literally flips the bird at Germany [..] And if what Varoufakis went on to say is instructive of the game-theory professor’s mind-set, the lack of progress in negotiations with lenders isn’t so surprising:
The most effective radical policy would be for a Greek government to rise up or a Greek prime minister or minister of finance, to rise up in EcoFin in the euro group, wherever, and say “folks, we’re defaulting. We shall not be repaying next May the 6 billion that supposedly we owe the ECB. My God you know, to have a destroyed economy that is borrowing from the ESM to pay to the ECB is not just idiotic, but it’s the epitome of misanthropy.
Say no to that. Put them in front of their contradictions. Make them face the contradictions of the eurozone themselves. Because the moment that the Greek prime minister declares default within the euro zone, all hell will break loose and either they will have to introduce shock absorbers, or the euro will die anyway, and then we can go to the drachma.
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A sovereign nation?
• EU Warns Against Bills On Debt Settlement, Humanitarian Crisis (Kathimerini)
The European Commission’s chief representative on the technical team monitoring Greece, Declan Costello, has described draft laws aimed at tackling the humanitarian crisis and launching a 100-installment payment scheme for taxpayers to settle their debts to the state as unilateral actions taken in a fragmentary fashion, according to a text he has reportedly sent to the Greek side. Costello effectively vetoes the bills in his letter, arguing that they are not compatible with the Eurogroup’s February 20 agreement with Athens, as Paul Mason – a journalist who claims to have seen the correspondence between Costello and the Greek authorities – revealed on Tuesday.
There was no reaction to the news from the Finance Ministry up until late last night, with officials pointing to the list of seven actions that Finance Minister Yanis Varoufakis submitted to the latest Eurogroup meeting which, according to the ministry, included the above bills. Nevertheless other government officials confirmed the existence of the text sent by Costello and noted that certain points related to the draft laws – especially those concerning the settlement of debts to tax authorities – must be clarified.
According to the text that Mason published as a Costello letter, the Commission representative says that those bills will have to be included in the general context of reform promotion. “We would strongly urge having the proper policy consultations first, including consistency with reform efforts. There are several issues to be discussed and we need to do them as a coherent and comprehensive package,” Costello reportedly told the government: “Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with the commitments made, including to the Eurogroup as stated in the February 20 communique.” The debt settlement bill was tabled in Parliament on Tuesday night.
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“A plunge in export volumes offset another decline in the cost of oil imports. Net exports should therefore become a drag on [GDP] growth soon..”
• Japan Exports Slow Sharply In February But Beat Expectations (CNBC)
Japan’s exports rose at a faster-than-expected pace in February but slowed sharply from the previous month as exports to China waned amid the Lunar New Year holidays. Exports rose 2.4% on year, Ministry of Finance data showed on Wednesday, above expectations for a 0.3% increase in a Reuters poll, but down from a 17% on-year rise in January. Despite the above-view reading, exports were sharply lower compared to January’s reading largely due to 17.3% on-year drop in exports to China, which celebrated the Lunar New Year holiday during February. “A plunge in export volumes offset another decline in the cost of oil imports. Net exports should therefore become a drag on [GDP] growth soon,” Marcel Thieliant, Japan economist at Capital Economics, said in a note.
But Mizuho Bank analysts were more optimistic. “We think this supports the [Bank of Japan’s] view of an ongoing, gradual recovery, underpinning its decision to withhold from adding further stimulus even as [central bank governor] Kuroda expresses his view that inflation might turn negative due to oil prices,” it say in a note. Meanwhile, imports fell 3.6% on year in February, sharply below expectations for a 3.1% increase in a Reuters poll. “[The] drop in import values was largely caused by another decline in petroleum import values, which reached the lowest since late 2010,” Thieliant said. “Judging by the Bank of Japan’s import price index, the plunge in the price of crude oil since last summer has now mostly been reflected in the cost of oil imports. However, import prices of natural gas, which tend to follow the price of crude oil with a lag of about six months, have just started to fall. The trade shortfall may therefore still narrow a touch further in the near-term.”
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“New home prices fell 5.7% on year in February..”
• China New Home Prices Post Sixth Consecutive Monthly Decline (CNBC)
China new home prices registered their sixth straight month of annual decline in February, as tepid demand continued to weigh on sentiment despite the government’s efforts to spur buying. New home prices fell 5.7% on year in February, according to Reuters calculations based on fresh data from the National Bureau of Statistics on Wednesday. The reading was worse than January’s 5.1% decline and marks the largest drop since the current data series began in 2011. Meanwhile, both Beijing and Shanghai clocked home price declines. In Beijing, prices fell 3.6% on year following a 3.2% drop in January, while prices in Shanghai fell 4.7%, following January’s 4.2% drop.
However, in a statement after the data was released the Chinese statistics bureau said that home sales are expected to show a significant rebound in March, according to Reuters. “The news isn’t great, and it hasn’t been great for some time. The credit crunch in China is very real and prices do have to adjust after a very long time,” John Saunder, head of APAC at Blackrock told CNBC. “I think the China government is trying to make moves to stabilize things. They’ve undergone a lot of policies and obviously the [central bank] is now reducing the policy rates, so that will all help. but you can’t turn it around instantly,” he said.
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• BoE’s Brazier Says Greek Shock Could Trigger Market Correction (Bloomberg)
A failure to find a political solution to Greece’s sovereign debt problem could trigger a market correction, Bank of England official Alex Brazier said. “A bad outcome in these negotiations could trigger a broader reassessment of risk in financial markets,” Brazier, executive director for financial stability at the BOE, told U.K. lawmakers in London on Tuesday. “We start from a position where market pricing looks potentially subject to correction,” he said. “I don’t view Greece as a big direct risk but it could potentially be a trigger for a market reappraisal” Greek Prime Minister Alexis Tsipras’s government is negotiating with euro-area member states, the ECB and the IMF to release more money from its bailout program.
European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform. “I don’t presume to know how likely it is for Greece to leave the euro,” Brazier said. “Although the economic issue is in some ways very simple – there’s a debt overhang that needs to be dealt with – the way that is dealt with is a political issue and I don’t presume to be able to forecast in any way” how the talks will progress, he said. Brazier said U.K. banks’ direct exposure to Greece was small, “amounting to about £2 billion ($3 billion), which is about 1% of their common equity.”
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Given the propaganda underlying the sanctions, inevitable.
• EU Support for Russia Sanctions Is Waning (Bloomberg)
For evidence of the European Union’s diminishing appetite for sanctions against Russia, look no further than Vladimir Putin’s Kremlin guestbook. Cyprus President Nicos Anastasiades visited the Russian leader in February, granting the Russian navy access to Cypriot ports; March brought Italian Prime Minister Matteo Renzi, labeled a “privileged partner” by Putin; Greek Prime Minister Alexis Tsipras is due next in Moscow, in April. Along with Hungary, Slovakia, Austria and Spain, the three countries were reluctant backers of economic curbs to protest Russia’s interference with Ukraine. As a wobbly truce takes hold in eastern Ukraine, the anti-sanctions bloc will lay down a marker at an EU summit starting Thursday in Brussels.
“The likeliest outcome is that they will not agree to roll over the sanctions now and they will put off a decision until the last possible moment before the sanctions expire,” Ian Bond, a former British diplomat now with the Centre for European Reform in London, said by phone. EU governments halted trade and visa talks with Russia and started blacklisting Russian politicians and military officers last March, after the annexation of Crimea. Those asset freezes and travel bans were extended by six months in January 2015. It took the shooting down of a Malaysian passenger jet over eastern Ukraine in July to prompt wider-ranging curbs including bans on financing of major Russian banks and the sale of energy-exploration gear to Russia’s resource-dependent economy. Those “stage three” measures are set to expire in July.
Proponents of extending them are led by Poland, the Baltic states and the U.K., and count as one of their own the EU president and summit chairman: former Polish Prime Minister Donald Tusk. The hawks have already backed down by seeking a five-month prolongation until the end of 2015, instead of the usual 12 months. “At some time there should be a decision in our view about the extension of the sanctions until the end of the year,” Lithuanian Foreign Minister Linas Linkevicius said in an interview in Brussels at a meeting of EU diplomats on Monday. Even that is a stretch, at least at this week’s summit. Sanctions require all 28 EU countries to agree, enabling skeptics to play for time, shape policies to their liking and, in the extreme, cast a veto. Greece’s new government, for example, voiced discomfort about renewing the blacklists in January before finally going along.
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As it should be. How can you spend $1.4 billion in tax money, where a few million would have done, when people have no health care, unless you’re a full-blown megalomaniac?!
• ECB Celebration of Its New $1.4 Billion Tower Spoiled by Protests (Bloomberg)
As the ECB prepares to inaugurate its new headquarters four months after moving in, more than 10,000 protesters are seeking to spoil the party. Frankfurt, the euro area’s financial capital and home of the common currency, is bracing for demonstrations and sit-ins on Wednesday at locations throughout the city by anti-austerity groups and organizations sympathizing with the plight of Greece. At the ECB’s €1.3 billion premises in the east end, police have erected barbed wire and barricades to keep the protesters at least 10 meters (33 feet) away. “We want a march open to anyone, peaceful and not harming anyone,” Ulrich Wilken, a lawmaker for the Left Party in the Hesse state parliament, said on Tuesday after meeting with police to outline the marchers’ objectives.
“We want an atmosphere of peaceful protest, not the kind of situation the police prepares for with its tanks.” Nine days after the ECB started buying sovereign debt in a €1.1 trillion plan to revive inflation and rescue the economy, protesters are laying the blame for recession and unemployment in the 19-nation euro area at the doors of ECB President Mario Draghi and German Chancellor Angela Merkel. A new government in Greece, led by the leftist Syriza party, is preparing emergency measures to boost liquidity as the cash-starved country braces for more than €2 billion in debt payments on Friday. The country is unable to access bailout funding as it haggles with euro-area governments over the terms of its aid program. Its lenders have been cut off from regular ECB finance lines and pushed onto emergency credit from the Greek central bank.
“In the past, we protested against things like the rescue of the banks in Europe,” said Werner Renz, a representative of protest group Attac. “The focus of our protests this year is on Greece. We need more of Athens in Europe and less of Berlin. There is no way Greece can repay all its debt. The situation can’t be solved by austerity alone.” Draghi is scheduled to host an inauguration ceremony at 11 a.m. with guests including Frankfurt Mayor Peter Feldmann and Hesse’s Economy Minister Tarek Al-Wazir.
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“..indigenous language education, gender parity in government, historical memory, indigenous forms of justice, anti-racism initiatives, and indigenous autonomy.”
• Bolivia: A Country That Dared to Exist (Benjamin Dangl)
This movement toward decolonization in the Andes is as old as colonialism itself, but the process has taken a novel turn with the administration of Morales, Bolivia’s first indigenous president. Morales, a former coca farmer, union organizer, and leftist congressman, was elected president in 2005, representing a major break from the country’s neoliberal past. Last October, Morales was re-elected to a third term in office with more than 60% of the vote. His popularity is largely due to his Movement Toward Socialism (MAS) party’s success in reducing poverty, empowering marginalized sectors of society, and using funds from state-run industries for hospitals, schools and much-needed public works projects across Bolivia.
Aside from socialist and anti-imperialist policies, the MAS’s time in power has been marked by a notable discourse of decolonization. Five hundred years after the European colonization of Latin America, activists and politicians linked to the MAS and representing Bolivia’s indigenous majority have deepened a process of reconstitution of indigenous culture, identity and rights from the halls of government power. Part of this work has been carried forward by the Vice Ministry of Decolonization, which was created in 2009. This Vice Ministry operates under the umbrella of the Ministry of Culture, and coordinates with many other sectors of government to promote, for example, indigenous language education, gender parity in government, historical memory, indigenous forms of justice, anti-racism initiatives, and indigenous autonomy.
Before becoming the Vice Minister of Decolonization when the office opened, Félix Cárdenas had worked for decades as an Aymara indigenous leader, union and campesino organizer, leftist politician and activist fighting against dictatorships and neoliberal governments. As a result of this work, he was jailed and tortured on numerous occasions. Cárdenas participated the Constituent Assembly to re-write Bolivia’s constitution, a progressive document which was passed under President Morales’ leadership in 2009. This trajectory has contributed to Cárdenas’ radical political analysis and dedication to what’s called the Proceso de Cambio, or Process of Change, under the Morales government.
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