EUROINTELLIGENCE DAILY BRIEFING, 11 de Dezembro de 2012. Enviado por Domenico Mario Nuti. joaompmachado11 de Dezembro de 201211 de Dezembro de 2012Economia Navegação de artigos PreviousNext Monti’s political options The Financial Times reports that Mario Monti is in discussions to head a centrist alliance, with the support of the chairman of Ferrari; Monti is to decide within a week; the markets reacted fiercely to the political upheavals in Italy, with bonds and shares down; Monti’s announcement that he would step down caused shockwaves all over Europe, where politicians reacted with horror at the prospect of a return of Silvio Berlusconi; Italy’s political and business establishments signs a petition in support for Monti; Pier Luigi Bersani said Monti should not run in an election, but he wants him include as part of a coalition under his leadership; Berlusconi says there is a conspiracy by international finance and media to drive down Italian share prices to make foreign takeovers of Italian companies easier; Matteo Renzi says No to Berlusconi’s offer to join him; the Italian Senate effectively rejected an important structural reform proposal by the Monti administration – the reorganisation of the provinces; the latest data show that almost 30% of Italians risk poverty and social exclusion; Reuters reports that the Ecofin/European Council may this week only reach a political agreement on banking union, with the details to be worked out later; Germany worries about the rotation principle on the ECB’s governing council, which will be triggered with further eurozone enlargement; the Frob has filed a criminal complaint against the head of a former Caja; Catalan’s left separatists signal acceptance of an austerity budget; Luis de Guindos says that Spain may still apply for a rescue package, but the timing was important; continued falls in house prices are weighing on the Spanish bad bank; Hugo Dixon says the banking union currently under discussion does not go far enough, and addresses only half of the vicious circle; the Greek debt exchange offer saw €26.5bn tendered at an average price of 33.4% of face value; the UMP did surprisingly well in a series of by-elections over the weekend; Patrick Honohan says he is confident about a deal on Ireland’s promissory notes; the Belgian central bank says austerity programme is not enough to reach the 2013 fiscal targets; Gerard Depardieu has chosen the country of Manneken Pis for his tax exile; Nicolas Berggruen and Nathan Gardels argue that the German middle classes have an existential interest in saving the euro; a sequel, meanwhile, has appeared to a hilarious video about a Greek-German couple. The market reaction did not come overnight, but it came yesterday morning Italian spreads shot up to 355bp – which means that in the last couple of days – about a quarter of the total Monti market effect has now been reversed. Italy equity prices fell sharply. Yesterday’s news was dominated by various people expressing their sympathy for Mario Monti, and the sheer horror at the prospect of a return of Silvio Berlusconi. That horror is particularly felt from Berlin. There could be more bad news this week, if the European Council may only reach a so-called “political agreement” on the banking union, as one news report suggests. Yesterday’s discussions, were, however, dominated by events in Italy. The Financial Times reports this morning that Monti is considering a run in Italian general election as the candidate of a centrist party formed by Luca Cordero di Montezemolo, Ferrari’s chairman, and Pierferdinando Casini, leader of Unione di Centro catholic party. We have reported on Montezelmolo’s preparations for a pro-Monti movement previously. Montezemolo and Casini regard Monti as natural candidate of a centrist movement, in clear opposition to the new, more aggressive, and more right-wing Silvio Berlusconi. According to polls, the new centrist party could reach over 20% with Monti as a frontrunner. Monti will make up his mind within a week, the article says. Ambassadors, lawyers and bankers ask for a Monti’ return Over 200 people, from ambassadors to top managers, lawyers and bankers, have signed an appeal on Linkiesta to Mario Monti to stay on in politics and fight the next elections. The signatories say that Italy now needed certainty, and that it was crucial for the country to complete the reform process Monti has started. Bersani says Monti should not run in general election Pier Luigi Bersani said that Mario Monti should not run in the upcoming general election. As La Stampa reports, Bersani said Monti must be useful for the country, and for this reason it would be better if he remained out of the contest. The Partito Democratico leader said his party had loyally supported Monti, adding that there will be the possibility to involve him in a future government. But not during the elections, Bersani said. He then added that it was not his intention to constrain Monti’s choices. (Yeah right. Bersani clearly sees an opening now, and we should be under no illusion that he wants to be PM. The polls suggest that the most likely outcome might be PD/centrist coalition, with Bersani as PM, and Monti in a role yet to be defined, either in government or as president.) Berlusconi attacks international speculators over Italy Rarely one to miss out on a conspiracy theory, Silvio Berlusconi called the foreign commentary on his decision to return to frontline politics a speculative attack to drive down Italian share prices, which in turn facilitates foreign takeovers on Italian firms. As Il Messaggero reports, the 76-year-old tycoon blames the international banks and media comments for the sharp fall in Italian bond and stock prices. He said he was a convinced supporter of Europe and EMU. In addition, he said comments by some EU politicians about his candidacy are inappropriate and offensive to Italians. This was a reference to Martin Schulz, the president of the European Parliament, with whom Berlusconi has been sparring for a while. Renzi rules out every possibility to join Berlusconi party after the proposal Matteo Renzi, the Mayor of Florence who lost the Partito Democratico primary vote, rejected the proposal by Silvio Berlusconi to join him in the Popolo della Libertà party. As Il Corriere della Sera reports, Berlusconi said he would leave the ”door open” for the up-and-coming PD politician should he be interested in making common cause with the centre-right, a clear ploy to destabilize the PD. Renzi responded that things can be bought, but not people. Italian Senate rejects the reorganisation of the provinces This was one of the most important structural reforms initiated by the Monti administration, and it has now failed. The Italian Senate rejected the reorganization of Provinces, La Stampa reports. Due an abnormally number of amendments linked to legislative proposal, the Constitutional Affairs Committee of the Senate said that it was impossible to convert the current decree in law. Public administration minister Filippo Patroni Griffi said the situation was now difficult, and he cannot make a forecast, when and whether the planned reorganisation can go ahead. Almost 30% of Italians risk poverty and social exclusion More than a quarter of Italians risk poverty and social exclusion. In 2011, 28.4% of the population were classified as poor or social excluded, up 2.6% from 2010. According to La Repubblica, citing the latest ISTAT poverty data, 11.1% of Italians were classified as poor, against 6.9% in 2010. Due to the economic crisis, ISTAT said, the forecasts see a significant increase in 2012 for people at risk of poverty, maybe to reach 30%. European Council only to reach a political decision on banking union, Reuters reports When the European Council cannot agree on something, they usually pretend that they have reached a “political agreement” with detailed to be worked out later. Reuters reports from Oslo that the Ecofin/European Council may not after all agree the technical details on the banking union, but only settle for a political agreement, with details to be worked out later. If true that would be a bit of a shock. But we are not exactly sure what the story meant by as it referred to delays due to parliamentary ratification. The article quotes Herman van Rompuy as saying that he was still hopeful of an agreement on the legal basis of a banking union (which would mean an actual agreement because the legal basis is what the discussions are about.) We suppose, but are not quite sure, that the story says that there may not even be a legal agreement, in which case Ecofin/ European Council would have to return to the subject in 2013. But in this case, the delay would not be due to parliamentary procedure, but simply to a failure to agree in time. Germany worried about Bundesbank being further sidelined If two more countries were to join the eurozone – a new procedure will kick in under which national central bank representatives will temporarily lose their right to vote in the governing council of the ECB. This is not new in itself, though it is probably new to a lot of people. Suddeutsche writes this morning that the Germany is concerned about a total loss of influence during such periods, when the Bundesbank has to take a back seat in the GC for three months during a year. The article quotes a CSU politician as saying that this was unacceptable to Germany, given Germany’s role as a guarantor. Germany may, as a result, be seeking a change to the agreed procedure. (We, too, see the political problem. The discussion has some similarities with the discussions about the size of the European Commission in the last decade. In the case of the ECB, efficiency won over representation, which is politically problematic. Imagine a situation where the ECB voted to buy bonds, and a non-voting Bundesbank president accused the ECB of conducting an illegal debt monetisation. This could get very messy.) Alleged control fraud in failed Spanish Caja El Pais reports that Spain’s FROB bank restructuring fund has filed a criminal complaint against Roberto López Abad, the former CEO of Caja de Ahorros del Mediterraneo, which was absorbed by Banco Sabadell a year ago in what was then the ‘largest bank rescue in Spain’s history’. The FROB accuses López Abad and another Caja executive of directing funds to tax havens through an opaque firm, Valfensal, which invested in ruinous tourism projects. The Caja executives were able to grant loans to Valfensal bypassing the Caja’s internal controls. López Abad bailed himself out of the CAM in 2010 as part of a subsidized staff layoff scheme, shortly before the Caja was intervened by the Bank of Spain. Former Bank of Spain Governor Miguel Ángel Fernández Ordóñez called the situation in the CAM ‘a veritable scandal’ after it was taken over. Catalan left separatists accept austerity budget in exchange for referendum The left separatist party ERC, which is negotiating an agreement with the incumbent party CiU to provide outside support to a second term for Artur Mas as Catalan Regional President, signalled acceptance of an austerity budget for 2013, writes El Pais. ERC congratulates itself on having convinced CiU to accept certain tax raises which ‘could not be spoken of before the election’, most likely a restoration of the inheritance tax. ERC calls this ‘the budget for transition to independence’. The presumable tradeoff is that CiU would accept holding an independence referendum by the end of 2014. Guindos admits a rescue application is possible In an appearance on Spain’s national radio RNE, economy minister Luis de Guindos admitted that the Spanish government “is looking at” a rescue application. De Guindos insisted that ‘timing is important’, and said that the European Summit at the end of this week will be key to ‘dispel doubts on the future of the Euro and lay down the basis for a banking union’. He also said that Spain will be negatively affected by the political uncertainty in Italy. Spanish housing market weighs down on bad bank Bloomberg quotes a Spanish professor that the prospect of declining property prices for the next two years undermine the profit projections for the SAREB bad bank, which the Spanish Government hopes will entice private investors to provide a majority of the capital in the bad bank. The head of the FROB bank rescue fund, calls a 15% return on investment “a conservative estimate”. As a result of low investor demand, in order to ensure that a majority of the equity ends up in private hands the Sareb is expected to have at most 8% equity, with the rest being state-guaranteed debt. The Sareb will buy foreclosed property at discounts ranging form 80% for foreclosed land to 63% for unfinished developments, to 32% for residential loans. Bloomberg quotes a real-estate consultant to the effect that up to 40% of the assets to be bought are ‘unsellable land’. Hugo Dixon on how not to do banking union Hugo Dixon of Reuters BreakingViews writes that a full-blown banking union (centralized supervision, resolution and deposit insurance) would address one half of the vicious circle between bank and state solvency: states would not be required to recapitalise their banks. However, he worries that the other part of the vicious circle (where banks load up on government debt) would be left intact. Also, he argues that the versions of Banking union currently being considered don’t go far enough in the direction of joint bank recapitalization. Dixon advocates retaining national supervision and recapitalization but requiring banks to be better capitalized and to diversify their holdings of government debt across the entire Eurozone. He also says the ECB should be more willing to refuse to provide liquidity to undercapitalized banks. Greece extended its offer to buy back debt until Tuesday A total of €26.5bn was tendered at an average price of 33.4% of face value when the offer expired on Friday, a senior euro zone official told Reuters. Greece still has €1.15bn left from the €10bn it was allotted to spend on bond buyback. Assuming the same average price, it could buy an extra €3.5bn worth of bonds. A senior Greek banker said “This will be easily covered by Greek banks, if foreign bondholders do not offer more.” Greece’s debt agency extended the offer to 7 a.m. EDT on Tuesday following Friday’s deadline. UMP candidates did well in French by-elections In the first electoral test under Francois Hollande’s presidency, the UMP surprisingly turned out to be the big winner in all three of the first-round by-elections held on Sunday, mobilising voters despite the UMP’s unpopular leadership contest. Le Monde writes even if by-elections do not necessarily reflect national tendencies it is clear that socialists lost support, UMP candidates did surprisingly well and Front Nationale failed to benefit from the UMP crisis. Honohan puts his weight behind Ireland’s efforts to secure bank debt deal Central Bank Governor Patrick Honohan told the Frankfurter Allgemeine (aka Reuters) that he is confident a deal on Ireland’s legacy bank debt is possible. Ireland is lobbying the ECB to restructure €31bn in promissory notes – a form of high-interest IOU – used to recapitalise the former Anglo Irish Bank. A deal on the promissory notes would help secure successful budget consolidation. The main thing was to negotiate a sustainable plan, which would “lengthen the repayment deadline considerably,” Honohan said, without suggesting a time frame. Honohan is adding his weight for the first time to political efforts to get a breakthrough in negotiations. Belgian central bank says austerity efforts not enough to reach 2013 target Only three weeks after a difficult deal on the budget 2013 has been secured in Belgium, the efforts are considered as insufficient to meet the deficit target according to the Belgian central bank. A lower growth forecast, stagnation rather than 0.7% growth, and insufficient efforts from regions and communes would result in a €2bn higher deficit (0.6% of GDP). The finance ministry is expected to announce freezing of a series of expenditures according to Le Soir, but there is more effort required. Depardieu departs into “tax exile” France’s most famous and best-paid actor, Gerard Depardieu, left France and went into ‘tax-exile’ in Belgium, buying a “not-that-pretty” house in Néchin, barely one kilometre from the French town of Roubaix, with plans to move in immediately, according to the mayor of Néchin. His high-profile departure sparked political responses in France, on the left with budget minister Jérôme Cahuzac wishing him well for the Belgian cinema scene, while the mayor of Paris, Bertrand Delanoë, deplored his lack of generosity. UMP designated leader Jean-François Copé said that this is regrettable for France and its image and that such a trend is at the detriment of the middle class. Les Echos has more. German middle class must save the euro Nicolas Berggruen and Nathan Gardels argue in the Financial Times that Germany’s middle classes would be main victims of a collapse of the euro. “What never seems to be debated in Germany is how the industrial foundation of the country’s prosperity would be threatened if the euro fails. If that happened, Germany would be forced to return to the Deutschmark – which would almost certainly soar in value, causing the competitiveness of manufacturing to plummet. In such circumstances, Germany’s multinational companies would be quick to develop survival strategies. Yes, there would be a short-term hit from the falling income of other Europeans who buy German goods. However, German manufacturers would waste little time shifting production abroad to take advantage of lower labour costs and capacity for quality production elsewhere. Design and research might remain at home, but the production and assembly associated with plentiful high-wage jobs will move away.” They conclude that Angela Merkel may have realised this by now. But this has not yet a political consensus in Germany. A German-Greek Christmas Hat tip to Greg Mankiw. There is now a sequel to the hilarious video about a Greek-German couple. This is one is better. Too hard to summerise. 10-Y Spreads, Forex, ZC Swaps and Euribor-Ois This is all looking more familiar again. 10-year spreads Previous day Yesterday This Morning France 0.663 0.657 0.655 Italy 3.229 3.558 3.553 Spain 4.167 4.260 4.342 Portugal 6.141 6.151 6.508 Greece 13.230 12.787 -1.31 Ireland 3.287 3.368 3.503 Belgium 0.804 0.817 0.836 Bund Yield 1.294 1.303 1.308 Euro Bilateral Exchange Rate Previous This morning Dollar 1.294 1.2945 Yen 106.410 106.54 Pound 0.804 0.805 Swiss Franc 1.207 1.2082 ZC Inflation Swaps previous last close 1 yr 1.44 1.54 2 yr 1.66 1.53 5 yr 1.66 1.64 10 yr 1.92 1.89 Euribor-OIS Spread previous last close 1 Week -6.100 0 1 Month -4.614 -2.514 3 Months 5.071 7.271 1 Year 44.586 42.686 Source: Reuters Share this: Share on Facebook (Opens in new window) Facebook Share on X (Opens in new window) X Share on LinkedIn (Opens in new window) LinkedIn Share on WhatsApp (Opens in new window) WhatsApp Email a link to a friend (Opens in new window) Email More Print (Opens in new window) Print Like this:Like Loading...
