Release of Greek loan tranche will be cliff-hanger

• The eurogroup will delay the next Greek loan tranche further amid continued differences with the IMF;
• the Greek parliament last night voted in favour of the 2013 budget;
• but the country is now left on the verge of bankruptcy after the ECB refused to change its stance on the ELA;
• Greece needs to repay a €5bn bond this week, but a T-bill auction can only raise €3.5bn – as the country is now struggling to fill the gap;
• Wolfgang Schauble said he will not accept any pressure, as the Greeks themselves have been delaying the process;
• also said troika was unlikely to deliver its report today;
• Antonis Samaras and other Greek politicians say they have fulfilled their obligations, it is now up to the EU to act;
• Jorg Asmussen says Greece is likely to miss the 2020 debt target by a wide margin;
• Large parts of the eurozone will be subject to a general strike this Wednesday;
• the European Trade Union Confederation is planning an EU-wide strike day in protest against austerity;
• the IMF sees political limits to austerity;
• the German parliament sets new lower borrowing limits as the country is headed for more budgetary consolidation;
• the Italian industry and service sectors are expected to shed 120,000 jobs in Q4;
• state auditors say Italian government has insufficient funds to cope with older unemployed;
• Eugenio Scalfari argues that Monti’s efforts are beginning to produce results;
• Beppe Grillo attacks the new electoral law as discriminating against his party;
• a new pro-euro political movement has established itself in Italy;
• alarm over eviction suicides prompts Spanish government to speed up foreclosure reform;
• the Spanish police says it won’t sanction policemen who refuse to carry out eviction orders;
• Wolfgang Munchau says structural reforms are mostly misunderstood, and won’t solve eurozone crisis;
• Amazon.de’s recommended “technical” books on the euro, meanwhile, is a rag-bag list of anti-euro horrors.

The eurogroup meets today but there will be no deal to release the aid tranche to Greece. The Greek parliament passed the 2013 budget Sunday night to meet conditions for the next tranche of  €31.5bn loan. But the ministers are not in a position to make a final decision yet because of differences with the IMF over how Greece can reduce its debt to a sustainable level by 2020. Germany also wants to wait for the full troika report.

Greece’s struggle as €5bn debt repayment looms this week

Greece needs to raise additional funds to avoid defaulting on a €5bn debt repayment this week as troika lenders remained deadlocked over the question on how to reduce Greece’s debt levels, delaying the loan disbursement. The FT reports that Greece’s debt management office has announced plans to cover the €5bn debt through a treasury bill auction on Tuesday, but Greek banks expected to buy the issue can only raise about €3.5bn of collateral acceptable to the ECB, according to two senior Athens bankers. If the banks are unable to find €1.5bn in other forms of collateral, Greece may seek to use funds from a €3bn reserve for bank recapitalisation held by the Hellenic Financial Stability Fund, backed by international lenders.

Schäuble: we will not let ourselves be put under pressure

Wolfgang Schäuble said the troika of international lenders to Athens was unlikely to deliver a full report in time for Monday’s euro zone finance ministers meeting and that talks over Greek budget controls continued. “At the moment it does not look as if we will have a finished, complete troika report on Monday, especially given that the Greek parliament is only agreeing the budget on Sunday,” he said in the interview published in the Welt am Sonntag. Schäuble said the lenders will not be put under pressure to decide on the loan disbursement.  “We are not responsible for the time pressure, all parties involved have been aware of this deadline for a long time,” said Schäuble. “No one in the euro zone has a problem with agreeing to the payment of the next tranche, but only when the conditions have been fulfilled … and that is up to the government in Athens.”

Samaras: We have fulfilled our obligations

Late Sunday night the Greek parliament approved the 2013 budget with a comfortable majority, Kathimerini reports. Lawmakers backed the austerity measures that by 167 votes in favour, 128 against and four abstentions.  The 2013 budget forecasts a 4.5% contraction of the economy on the back of about €9.5bn in spending cuts and tax hikes next year. During the two days debate SYRIZA leader Alexis Tsirpas accused  Greece’s creditors of “playing games.”  Antonis Samaras told parliament “It’s time for the lenders to do what they should . . . and we believe they will since we have fulfilled our obligations.” PASOK leader Evangelis Venizelos also called on Greece’s lenders to stop holding back the country’s loan tranches and to agree on a comprehensive solution to its debt sustainability problem.

Asmussen: Greece forecast to miss 2020 debt target widely

Greece will fail to reduce its debt burden to a manageable level by 2020 with current policies, Joerg Asmussen told Belgian daily De Tijd (hat tip Reuters), forecasting the target set by creditors will be widely missed. “Under unchanged policies, the debt in 2020 will still be somewhat higher than 140%  of GDP according to ECB estimates,” said Asmussen “My impression is that the appetite for a second restructuring is extremely low among member states,” Asmussen

Simultaneous protests to take place in most European countries

Large parts of the eurozone will be subject to a general strike in protest against austerity on Wednesday. In the past weeks we reported that general strikes had been called in Greece, Italy, Spain and Portugal. The site EuropeanStrike.org lists additional ‘events’ in Belgium, Germany and France, and the European Trade Union Confederation which made a Europe-wide strike call, has a map listing ‘actions’ in 23 European countries, mostly EU member states plus Switzerland (EEA) and Croatia (EU accession country).

IMF sees political limits to austerity

Ekathimerini reports on a briefing by the IMF to G20 leaders on November 4-5, according to which growing resistance to the conditionality imposed on Greece and Portugal points to political limits to austerity programs. The IMF briefing said, on the one hand, that renewed financial market stress would put pressure on governments to expand austerity ‘resulting in larger GDP losses and spillovers on other economies’; while on the other hand the IMF said ‘reforms would take years to complete’ with the risk that ‘austerity may become politically and socially untenable’

German imposes austerity on itself

The German parliament dashed any remaining hopes that Germany may act as a counterweight to the synchronised austerity in Europe, by setting a lower borrowing limit for the federal government than previously envisaged. Reuters reports that the borrowing limit has been cut from €18.8bn to €17.1bn. The total budget gap is some €40bn, with the remainder being financed through privatisations and dividends, Reuters reports. The goal is to achieve a structurally balanced budget by 2014 – which will require a further modest consolidation next year.

Italian industry and service sectors to shed 120,000 jobs in Q4

The Italian services and industry sectors will slash a net 120,000 full-time jobs during the Q4 2012, Il Sole 24 Ore reports citing an analysis from Unioncamere, the Italian Union of Chambers of Commerce, Industry and Crafts. According to the study, the services sector will drop 13.8% year on year, while industry is expected to shrink 15.2%. Growth is expected only in 2014, the Unioncamere report argues.

State auditors says Italian government has insufficient funds to cope with older unemployed

State Auditors have reported that the funds reserved by the Italian budget to the older unemployed are insufficient. As La Stampa reports, actually no proposals have been made yet to solve the problem of the so-called esodati – people who lose their job at a later age and live without an income. State Auditors believe that there may be too many retirees included in the provision and have requested the amendment be redrafted on the basis of more selective criteria. According to the Labour Minister Elsa Fornero the people left without a job or pension as a result of recent changes to retirement rules are a critical issue and Italian government should solve it until the end of the year. Over 390,000 are considered as esodati.

Scalfari argues that Monti’s efforts are beginning to produce results

Eugenio Scalfari argues in his Sunday editorial in Repubblica that there are some optimistic points in 2013 forecasts for Italy. One of these is a less deep recession compared with 2012 –a GDP drop of 0.5% in 2013 against 2.5% of 2012 according to the iMF. After Mario Monti committed several political mistakes, the results of his reforms are now coming through.

Beppe Grillo attacks the new electoral law

Beppe Grillo, head of the anti-euro Movimento 5 Stelle, has attacked the new electoral law for discriminating against his party, Il Messaggero reports. He said the law would pave the way for a second term for Monti. He also criticises the EU for failing to intervene. The new electoral law is designed to artificially achieve a clear majority, with a boost for the leading party that reaches at least 42.5%. According to the last IPSOS poll, the Partito Democratico is at 28.03%, the M5S at 19.8%, Popolo della Libertà at 15.35% and the Northern League at 6.08%.

A new pro-euro political movement in Italy

After the establishment of several anti-euro political movement, one there is one in favour. As Il Corriere della Sera reports, the histrionic journalist Oscar Giannino has founded  “Stop the Decline,” movement of prominent academics including NYU Stern professor Alberto Bisin.

Alarm over eviction suicides prompts Spanish government to speed up foreclosure reform

A second eviction-related suicide leads the ruling PP to propose speeding up legal reforms of mortgage foreclosure, repossession and eviction. According to El Pais (English edition), the government will present a proposal to the PSOE, the Socialist opposition party, on Monday. El Pais says the PSOE will ask for a moratorium on on-going foreclosures, and to consider the possibility that the new legislation will retroactively alleviate the results of the over 350,000 evictions in the past 4 years. The city of Santa Cruz de Tenerife, meanwhile, forced Bankia to stop all evictions in the municipality by withdrawing €1.5m.

The judiciary and the police pressure the Spanish government 

El Pais reports that the Police union SUP announced it will support the conscientious objection of any police officers refusing to take part in evictions. For their part the 46 dean judges of Spain, gathered in Barcelona for a week-log conference, demanded that mortgage law be made more ‘humane’ and that judges be given legal leeway to ‘soften’ foreclosures, El Mundo reports. \

Wolfgang Munchau on competitiveness

In his FT column Wolfgang Munchau argues that the lack of structural economic reforms is not what caused the eurozone crisis, and reforms will not get us out of it. The pro-reform consensus is based on the observation that Germany reformed ten years ago, and has since grown, and that other should emulate Germany. He lists three fallacies: First, the pickup in German growth was due to wage moderation, which itself was caused by outsourcing; Second, France and Spain have specific problems in their labour markets that need to be fixed, but this is not going to happen through Hartz IV type broad brush welfare reform; and finally, competitiveness is not the best target in any case: Germany improve its real exchange rate when everyone else was doing the opposite. You cannot logically advocate such a policy to everybody.

What the Germans are reading: a list of horrors

Germany’s  amazon.de is sending the following “technical” books as recommended readings for the eurozone crisis. We note that Hans Werner Sinn’s book on Target 2 has not made this particular list, but are confident to predict that it is only a matter of time:

• Europa braucht den Euro nicht: Wie uns politisches Wunschdenken in die Krise geführt hat, Thilo Sarrazin
• Die Schuldenlawine: Eine Gefahr für unsere Demokratie, unseren Wohlstand und Ihr Vermögen, Bert Flossbach, Philipp Vorndran
• Der private Rettungsschirm: Weil Ihnen Staat und Banken im Krisenfall nicht helfen werden, Simone Boehringer, Peter Boehringer, Philipp Vorndran, Gerhard Spannbauer, Christine Illing
• Wirtschaftliche Selbstverteidigung: Schützen Sie sich und Ihre Familie vor Eurokrise, Inflation und Staatsverarmung, Roland Klaus
• Freiheit statt Kapitalismus: Über vergessene Ideale, die Eurokrise und unsere Zukunft, Sahra Wagenknecht
• Gebt uns unsere D-Mark zurück: Fünf Experten beantworten die wichtigsten Fragen zum kommenden Staatsbankrott, Bruno Bandulet, Wilhelm Hankel, Bernd-Thomas Ramb, Karl Albrecht Schachtschneider, Udo Ulfkotte
• Die Tragödie des Euro: Ein System zerstört sich selbst, Philipp Bagus

10-Y Spreads, Forex, ZC Swaps and Euribor-Ois

Spain’s spreads keep on rising, and euro continues to weaken

10-year spreads
	Previous day	Yesterday	This Morning
France	0.800	0.789	0.788
Italy	3.647	3.675	3.678
Spain	4.496	4.504	4.567
Portugal	7.303	7.502	7.737
Greece	16.809	16.775	-1.34
Ireland	3.446	3.456	3.627
Belgium	0.973	0.966	0.978
Bund Yield	1.373	1.346	1.343
Euro Bilateral Exchange Rate
	Previous	This morning
Dollar	1.270	1.2729
Yen	100.530	101.15
Pound	0.798	0.7998
Swiss Franc	1.206	1.2058
ZC Inflation Swaps
	previous	last close
1 yr	1.58	1.68
2 yr	1.71	1.69
5 yr	1.71	1.82
10 yr	1.95	2.06
Euribor-OIS Spread
	previous	last close
1 Week	0.000	-7.029
1 Month	-5.500	-3.6
3 Months	2.857	4.757
1 Year	44.743	44.643
Source: Reuters