European Central Bank to Gain control of 6,000 banks in Euro zone

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 20, 2012

The European Central Bank will “supervise” 6,000 banks in the euro area, including savings banks and regional German public banks, but the degree of direct supervision may vary depending on the banks and the involvement of other regulators.

The German newspaper Handelsblatt reported in its Friday edition that sources from the European Commission (EC), the European Union’s executive, wants the ECB to gain supervision of euro zone banks and not only those included in the European Stability Mechanism (ESM), the EC confirmed today.

With the proposal, the EC faces the German Government, as Chancellor Angela Merkel said the EU summit in late June that it is only necessary that the ECB monitor the 25 largest banks in the euro area, that is the ones considered to be in the ESM system.

Community spokesman Internal Market and Financial Services, Stefaan De Rynck, said today that the EC is still working on the proposal, which will be presented around September 11, but that a single monitoring system should apply the common rules consistently throughout the Union Bank and all financial actors. This is the bankers attempt to turn a supposed financial rescue into a financial power grab, as it was detailed in the memo of understanding (MoU).

“We have seen in the past that systemic risks can arise from banks that are not mentioned much in the media and suddenly become systemic, so it is difficult to define what is a large bank, which is a systemic bank, so we have to ensure that the union bank supervisory system to be able to cover all the banks,” he said.

However, De Rynck said it remains to be seen how this principle is articulated with respect to the types of banks and all institutions of the euro zone. What is clear is that the European Banking Authority (EBA) will have a key role alongside the ECB to play in safeguarding the unity and coherence of the single market, he added.

A European official said today that evidently supervisors have the necessary human resources to engage in this system and said it also left open the possibility that the mechanism will get to countries that are not part of the euro zone. The new supervisory tasks will have to be approved unanimously by the 27 member countries in the case of the ECB and by qualified majority in the EBA.

The same source pointed out that, obviously, to talk about “all banks” also includes savings banks and regional public banks.

A Request from De Guindos

The economy minister Spain has been one of the most outspoken politicians who is pushing for a complete surrender of sovereignty to the European bankers. He believes that the European Central Bank’s intervention must be strong and without limit in order to bring about relief to the pressure exercised by the sovereign debt that all European nations are faced with. De Guindos thinks that more centralized power could be the solution to this crisis, even though the current banking policies created by central banking institutions are ones responsible for the current crisis.

The Spanish Minister of Economy and Competitiveness Luis de Guindos, said that the intervention of European Central Bank (ECB) to ease market pressure on Spanish debt must be strong and that there should not be a set limit to amounts or durations.

In an interview with Reuters, the minister has indicated that such interventions “can not be put limit or can not be explicitly explained; not in the amounts of money that will be used not in the length of time the intervention will take” to not detract the effectiveness of the aid which aims to dispel doubts about the euro zone. That is exactly what needs to be avoided. Giving the banks a blank check without limitations for action or time frame is all they want and need to carry out their agenda further.

Regarding the way in which the monies received by Spain and how they will be used, De Guindos explained that these decisions will be made by the finance ministers of the euro countries and the EU in a meeting to be held in the second week of September. He said that by then the Governing Council of the ECB will have to explain how it plans to run the program to buy debt in the secondary market.

Countries in trouble with sovereign debt expect that the ECB will act on the secondary market,where investors already exchange issued debt by buying short-term bonds and without exercising its role as a preferred creditor, which would drive away the other investors and raise the risk premium.

The interventions of the ECB “should not make explicit neither the amount nor a time limit and as noted by the ECB itself, it must take into account the problems caused by the preferred creditor status”, said an European source. In his opinion, the attitude of the ECB has opened “a very positive scenario” for the Spanish government, as the entity recognized the pressure on Spanish debt markets largely responding to something that goes “beyond the domestic politics ” and has seen fit to intervene to correct it.

By this statement, most European nations expect the ECB and the EU to intervene in every way possible, whenever it is necessary, instead of them looking for a domestic solution, which is how the debt problem could be solved more easily, by simply rejecting the payment of debt created by the banks on behalf of the Euro zone countries, which is what has turned the debt problem into a ticking bomb. Iceland did it and it is now enjoying a less painful recovery. Greece and Spain did not have the guts to face the bankers and reject their fraud, so they still suffer the consequences of working along the rubber barons of financial fraud.

As the Euro zone Drowns, Countries prepare for Deeper Depression

Even the best banker forecasts warn about an imminent economic Depression

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 15, 2012

The latest outlook issued by the European Central Bank (ECB) and the International Monetary Fund (IMF) provide a clear picture that shows how the euro area will fall into an economic depression. The question then is, how will the countries deal with the Depression and whether the banks will be more powerful or have collapsed too.

The risk of recession in the eurozone, after the economy of the region shrank by two tenths of a percent between April and June, threatens to slow the progression of the only growing component of the Spanish economy, that is the export of goods to the rest of the Euro nations. Today, more than half of Spain’s exports are sold in the Euro zone, but the threat of a deeper depression may affect what those nations buy from Spain in the coming months.

According to recent data published by the European statistical office (Eurostat), both the EU and the eurozone, whose member countries are major importers of goods manufactured by Spain, saw its economy falls 0.2% in the second quarter of the year.

The calculations of the European Central Bank (ECB) and International Monetary Fund (IMF) indicate that the recession will get worse in the euro area, as both agencies forecast a contraction of between 0.1% and 0.3 %, for the rest of 2012.

In the second quarter of 2012, the Spanish economy contracted 0.4%, according to the data advanced by the National Statistics Institute (INE), a fall that was not toned down by the positive contribution of the exports sector.

The latest data from the Spanish trade balance reflects an export growth of 3% until May, mainly by increased sales to emerging countries, although these markets still account for only a small part compared to Spanish business partners in Europe.

In fact, the primary client is still the European Union, which purchases 65% of Spanish exports, although sales to Spanish business partners remained stagnant in the first five months of the year. The euro zone receives more than half of Spanish goods, that is why the slow down of 1.1% in sales to these countries during the first five months of the year following the crisis have raised awareness about the difficult times ahead.

The economic developments in the euro countries has been mixed, with Germany so far resisting the crisis and, according to government numbers, growing by 0.3% in the second quarter, while France has not completely collapsed, but is experiencing a crippled economy. Both countries are major markets for Spain, with France buying some 17.4% of Spanish exports and Germany, the second most important partner getting 10.8%.

The best selling goods to these countries belong to sectors such as industrial technology and mechanical auxiliary industry and construction, chemicals, horticultural and fashion.

However, while the Germany has continued to increase the purchase of Spanish goods (6.5%), France has begun to cut its imports, which has resulted in a fall of 0.4% in sales to the neighboring country.

In the case of Germany it is important to mention the fact that the country is a major commercial creditor of Spain, although in the first five months the trade deficit has been shortened in half with Angela Merkel’s country. This has been the result of Spain not importing as many goods from Germany as it did previous to the crisis, for example.

The balance both the euro area and with the twenty seven EU countries is positive, since in both cases Spain sells more than it buys. However, the Spanish foreign balance with the rest of the world is in deficit, which is due to high energy costs arising from oil imports mainly, but also gas, coal and electricity.

The main creditors of Spain as far as energy is concerned are Russia and Nigeria, while the third is China, a country which buys mainly textiles from the Spanish manufacturing industry.

Meanwhile, Greece is trying to meet its commitments to investors. August 20 represented a key date, as it marked the date when the country had to pay off the  debt of 3,200 million euros in the hands of the European Central Bank. The mathematical impossibility to pay such debt, as it was explained in previous articles, obligated Greece to issue even more debt to finance the money owed to the ECB. With this, this country will continue the well known death cycle which in most cases concludes with the complete collapse of debtor nations.

Greece has now placed 4.063 million euros in treasury bills with maturities of three months at an interest rate of 4.43%, slightly above the 4.28% offered in July, as reported by the Greek Authority Management Public Debt (PDMA). The Greek government attempts to achieve a deferral of repayment of that debt or an advance of a new loan of 31,000 million from the second rescue package, which has been rejected by their European partners.

The disbursement of bailout money will be transferred only once the troika submits its report on the progress of the country and gives the approval for the new cuts for 2013 and 2014. Most buyers of the monthly auctions are Greek state banks themselves, which means that the entire financial system is in a downhill fall of self-financing in which the government issues securities to finance the maturities of bonds held by banks in the country, which, in turn, buy debt from the State to use it as proof of liquidity. Do you see the insanity here?

Spain’s debt will increase by 23,000 billion Euros until the end of 2012

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 6, 2012

You are not going crazy. 23,884 billion euros is approximately what Spain’s debt will be in the short term should the country continue to adopt the European banking policies. The reason for this is that the current and soon to come newest austerity and indebtedness measures will prolong the country’s painful crawl towards bankruptcy while inflating the government’s debt to more than 23,000 billion euros. That’s why the actions taken so far by Mariano Rajoy’s led government beg the question about what will be the realistic impact of a financial bailout of the Spanish government, that right now is estimated to be at 300 billion euro. The answer is that any impact will simply get Spain more in debt that it is today.

As it happened in Greece, the negotiation of debt for both the banking system and the Spanish government are just window dressing moves to extend the losses and accumulate power in the hands of the banking elites, to which we are all slaves to, according to the main stream media. The above mentioned debt is the debt that Spain will have to incur into to finance its government for the remaining of 2012. More debt will be added to this in the long term, if the European Banking System decides to rescue Spain, and will turn the obligation impossible to pay.

The more than 23,000 billion is something like the 27.8% of the total amount scheduled for the year. To that amount must be added several billion more in terms of short-term debt — 3 months to 18 months. If things do not change much, long-term debt will be at the highest rate in recent years, according to a statement issued by the president of the European Central Bank (ECB), Mario Draghi.

Friday, the Treasury debt placed at two, four and 10 years were at interest rates ranging between 4.8% and 6.7%. The Director of Studies of Catalunya Caixa, Ramon Roig, explained that “the rate at which the interest rate has been placed is practically the same as that listed on the secondary market.” So if the Spanish debt in this market rally that began Thursday consolidates (the 10-year bond stood at 7.2%), it will become more expensive for Spain to fund. “It will surely make it more expensive to finance the borrowing, which will complicate our life,” said Miguel Angel Bernal, a professor at IEB.

A total of 1062.1 million of debt was placed Thursday into a two years, 4.8% (the previous was 5.3%), with 1,024.4 million due to four years at 6.1% (in the previous one was at 5,6%) and 1045.8 million to 10 years at 6.7% (previously 6.5%).

According to the Spanish Treasury, last June (latest data available) there were 611,992,000 of outstanding government securities with an average life of 6.2 years. The average cost, according to the same statistics, is 4.1%, one of the lowest in recent years.

The Economy Ministry confirmed that as in previous years, there will be no long-term auction given the holiday period in mid August. So the next test for the State are 21 and 28 of this month, when more debt will be put out. That short-term debt is easier to place with investors, among other reasons, because in a hypothetical situation where the money is taken from creditors, a debt reduction may remain outside, say the analysts. This is what happened, for example, in Greece.

Miguel Angel Bernal warned yesterday that “the key time is October because there are many debt maturities.” According to the Treasury, that month will see the renovation of more than 20,000 million for the long term and some 5,000 million for the short term. In addition to these maturities, the State must finance the deficit generated during the same period. “If you spend more than you take in, as in a family, it becomes a deficit and that deficit needs to be financed, which normally results in more debt,” said Roig.

France Begins Taxing Financial Transactions

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 2, 2012

France has implemented –beginning today — a new financial transactions tax, a levy of 0.2% to be paid by investors whose shares belong to businesses with headquarters in the country.

Transactions in shares of companies whose market value is below EUR 1,000 million (1,230 million) will be exempt.
The application of a tax on financial transactions in Europe has not been possible so far due to the refusal of countries like the United Kingdom. At least nine nations that defend their implementation want to be forerunners in the application of taxes on financial transactions under the “enhanced cooperation” program.

The government of President François Hollande also decided to implement a new tax of 0.01 percent to certain high frequency business transactions, as well as some business with unpaid insurance (CDS) on government borrowings from the European Union (EU).

Unlike what happens in transactions with shares, this tax affects only companies and individuals subject to tax in France. For now, the government will not tax purchases of shares from companies and regular government bonds.

The application of the tax on financial transactions had been adopted under the former conservative government of President Nicolas Sarkozy. His Socialist successor wanted to make it applicable as soon as soon as possible and extend its reach to all financial transactions.

Spain’s Economy Slows Further and Runs out of Options, says Central Bank

REUTERS | JULY 24, 2012

Spain’s economy sank deeper into recession in the second quarter, its central bank said on Monday, as investors spooked by a funding crisis in its regions pushed the country ever closer to a full bailout.

Economic output shrank by 0.4 percent in the three months from April to June having slumped by 0.3 percent in the first quarter, the Bank of Spain said in its monthly report.

Economy Minister Luis de Guindos ruled out a full-scale financial rescue on top of the 100 billion euros already earmarked for the country’s banks, but Spain’s sovereign bond yields stayed mired in the danger zone.

In contrast to de Guindos, who told lawmakers there was little else Spain could do to ease the tensions after launching a 65-billion-euro austerity package last week, the central bank’s deputy governor said more belt-tightening was needed.

“(Current market tensions) reflect problems in Spain as well as the euro zone,” Fernando Restoy said after a conference in Madrid.

“We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union.”

Earlier, media reports suggested half a dozen regional authorities were ready to follow Valencia in seeking financial support from Madrid.

Prohibitively high refinancing costs have virtually shut all of the 17 regional governments out of international debt markets, forcing the worst hit to seek loans from the central government to meet bond redemptions.

Spain’s sovereign debt yields rose above 7.5 percent on 10-year paper on Monday, well above the 7 percent level that triggered the spiral in borrowing costs that led to bailouts for other euro zone states.

GERMANY STIRS

In a sign of a growing awareness among the euro zone’s heavy hitters of the need to protect Spain, Economy Minister De Guindos will travel to Berlin on Tuesday to meet with his German counterpart Wolfgang Schaeuble.

“We believe that the reforms already begun by Spain will help calm the markets,” Schaeuble’s spokeswoman Marianne Kothe said in Berlin, adding that the regions’ funding problems had “nothing to do with” the European rescue deal for the country’s banks.

Germany knew of no plans for a broader Spanish bailout request, she said.

Asked about that option on the sidelines of a parliamentary hearing on the bank aid, De Guindos said: “Absolutely not.”

The mounting unease was reflected in financial markets.

Spanish two-year bond yields were up almost 90 basis points at 6.64 percent and the cost of insuring Spanish debt against default rose to a record high.

With the blue-chip stock market index Ibex hitting its lowest level since 2003, Spain reintroduced a temporary ban on short selling on Monday to discourage speculative trading.

But the ban, matching a restriction imposed on Monday in Italy, stoked fears that Spain’s sovereign debt and banking crisis may be more widespread than expected, sending European shares to new intraday lows. They later recovered in Spain and Madrid stock market fell 1.1 percent on the day.

Spain slipped into recession for the second time since 2009 in the first quarter of this year, its economy crippled by a bank sector weighed down by soured assets from a collapsed property bubble and unemployment rates that have risen close to 25 percent.

The government said on Friday it expected the economy to continue to shrink well into next year, fuelling market and massive protests.

For the 12th day running, government employees demonstrated against the cuts programme in the main cities of the country on Monday, blocking roads and stopping traffic.

TIME FOR THE ECB?

In his comments to parliament, de Guindos hinted the European Central Bank – hitherto unwilling to relaunch stalled stimulus programmes that might offer relief to Spain and other states at the sharp end of the euro zone debt crisis – should now step in.

Asked whether ECB intervention was needed, De Guindos said: “I repeat that in this situation of uncertainty and excessive volatility… the only way to act goes well beyond the capacity of governments.”

There was however little sign that the Frankfurt-based institution would move any time soon and Ireland’s Prime Minister Enda Kenny warned the Spanish situation was getting very serious.

“They’re effectively locked out of the long term markets. Obviously it’s an economy with huge figures and from that point of view it’s one of a number of countries now which face very challenging positions,” Kenny told national broadcaster RTE.

Meanwhile, Spain’s central bank said an accelerated programme of structural reforms could offset the impact of the deep austerity programme, aimed at shrinking one of the highest public deficits in the euro zone.

It called for great sector liberalisation to improve competitiveness, the reduction of administrative red tape and the improvement of transparency in good and services markets.

“This should offset the negative short-term effect of the higher fiscal restrictions and, above all, will determine the economy’s medium- and long-term growth potential and productivity,” the bank said in its monthly bulletin.