Roubini : Situation in Europe A Slow Motion Train Wreck

"Nouriel Roubini called the ongoing political turmoil in Europe a “slow motion train wreck.” Speaking to CNBC in Las Vegas on Tuesday, Roubini said he expects Greece to leave the euro zone by next year..."


at http://nourielroubini.blogspot.com/2012/05/roubini-situation-in-europe-slow-motion.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29

Crisis escalates as insurrection breaks German control of Europe

"The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front..."

at http://ausbullion.blogspot.com/2012/05/crisis-escalates-as-insurrection-breaks.html

Leeb - We Will Now See a Gold Standard Imposed in Europe

"With stocks trading lower, along with gold and silver, today King World News interviewed acclaimed money manager Stephen Leeb, Chairman & Chief Investment Officer of Leeb Capital Management.  Leeb told KWN we will see a gold standard imposed on Europe.  Leeb also said the Chinese will move to back the yuan with gold.  Here is what Leeb had to say about the situation:  “Gold is reacting to what’s going on in Europe.  It’s the last resort of liquidity for a lot of people.  It’s been the best performing major asset over the last 12 years.  You have a lot of chaos in Europe an no one knows what’s happening, so there has been a lot of reflex selling of gold.”

Stephen Leeb continues:

“Gold has been a bit stronger than I thought it would be considering the danger of a euro breakup is accelerating.  I don’t think there’s any chance the euro holds together under its current form.  Unemployment among the young in Greece is about 50%.  That can’t stand, it just can’t.

These politicians can’t do this forever.  People are not going to tolerate starvation.  Sooner or later the politicians are going to have to respond.  This means less austerity and more growth, and the end of German hegemony in Europe.

This looks similar to the end of World War I.  Once the euro goes, it will be very much like the end of the war.... 

“You are going to have a lot of currency devaluation.  You are also going to see massive inflation.  Everybody knows what that means for gold.

So you are in the last hours of turbulence for the gold market (to the downside).  Once this correction ends, you are going to have a barnburner to the upside.  Gold will just vault.  I don’t think investors will even remember these frustrating days.  I had been warning we could see this drop in gold because of the problems in Europe, but investors should take advantage of it.

Look at what China is doing.  China is buying gold hand over fist right now.  They are going to move the yuan forward as the world’s reserve currency and it’s going to be partially backed by gold.  The world can also expect to see a gold standard imposed on Europe in the next 12 to 18 months..."

at   http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/9_Leeb_-_We_Will_Now_See_a_Gold_Standard_Imposed_in_Europe.html

22 Red Flags That Indicate That Very Serious Doom Is Coming For Global Financial Markets

"The following are 22 red flags that indicate that very serious doom is coming for global financial markets....

#1 According to CNN, the level of selling by insiders at corporations listed on the S&P 500 is the highest that it has been in almost a decade.  Do those insiders know something that the rest of us do not?

#2 Home prices in the United States have fallen for six months in a row and are now down 35 percent from the peak of the housing market.  The last time that home prices in the U.S. were this low was back in 2002.

#3 It is now being projected that the Greek economy will shrink by another 5 percent this year.

#4 Despite wave after wave of austerity measures, Greece is still going to have a budget deficit equivalent to about 7 percent of GDP in 2012.

#5 Interest rates on Italian and Spanish sovereign debt are rapidly rising.  The following is from a recent RTE article...."

at http://theeconomiccollapseblog.com/archives/22-red-flags-that-indicate-that-very-serious-doom-is-coming-for-global-financial-markets

Graham Summers: Spain’s Fiscal Problems Will Result in Collapse of European Union! Here’s Why

"On the surface, Spain’s debt woes have many things in common with
 those of Greece – bad age demographics and a toxic bank system - but you’ll note that, as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece..."

 at http://www.munknee.com/2012/04/graham-summers-spains-fiscal-problems-will-result-in-collapse-of-european-union-heres-why/

Campbell Asks: Can Italy Be Far Behind Spain?

"About three months ago, shortly before Greece’s sovereign debt was
restructured, I began to warn about Spain as the next Eurozone country to focus on. That has, indeed, turned out to be ‘all the news’ with reports every day on Spain’s deteriorating financial condition. Given the ongoing world economic uncertainty and volatility, however, I suggest you now begin to pay very careful attention to Italy going forward, but doing so without losing sight of what is transpiring in Spain..."

at http://www.munknee.com/2012/04/campbell-asks-can-italy-be-far-behind-spain/

Europe on brink of another financial crisis, Darling warns

"Europe is in the eye of an economic cyclone, with a fresh storm about to hit vulnerable countries, the former chancellor Alistair Darling has warned.

Mr Darling, who accurately predicted in 2008 that Britain was on the brink of the worst economic downturn for 60 years, said European Union leaders should not be lulled into thinking that the worst of the eurozone crisis is over.
In a lecture to students at Queen Mary, University of London last week, the Labour MP said the situation in Spain, where the centre-right government is imposing severe budget cuts and a general strike wreaked havoc on Thursday, should trigger alarm bells across the EU.
The French President, Nicolas Sarkozy, claimed last month that following agreement on a fresh EU bailout of Greece, the eurozone was out of the woods. And David Cameron and George Osborne have insisted that Britain's strategy to push on with austerity measures has helped stabilise European economies. By contrast, Angela Merkel, the German Chancellor, has warned that Europe remains in a "fragile situation" and that the crisis is far from over.
Mr Darling told the university's New Labour in Government class: "Part of the problem with Europe is that a lot of them took the view that that this crisis is now behind us, therefore this is a time to visit austerity, whereas the countries who are going to be most hit by austerity [like Spain] are not out of the crisis at all."

at http://www.independent.co.uk/news/uk/politics/europe-on-brink-of-another-financial-crisis-darling-warns-7606256.html

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Greece Set To Default On Foreign-Law Bonds On May 15

"Back in January, when we wrote "Subordination 101: A Walk Thru For Sovereign Bond Markets In A Post-Greek Default World", we said that "because while the bulk of the bonds, or what is now becoming obvious is the junior class, can be impaired with impunity (pardon the pun), it is the UK-law, or the non-domestic indenture, bonds, which are the de facto fulcrum security. And since the notional outstanding here is tiny, it is quite easy to build up a blocking stake in the bonds and to obtain full control of the process, especially since the ECB appears to have been building up its own stake in local-law bonds....As anyone who has ever overseen or participated in a bankruptcy process, the biggest trump card one can attain is to build up a blocking stake in a fulcrum security (just ask Carl Icahn) . Because it does not matter who has a majority. What matters is who has 33% + 1 of the vote to block any consensual deal." In other words, from the very beginning the ball game was all about the non-Greek law bonds, whose indentures make it impossible for a non-make whole take out settlement.

Alas, we underestimated the stupidity of the European authorities who in their pursuit of a prompt if messy conclusion to the Greek restructuring, which ended up with a CDS trigger, were left with a tranching of the Greek balance sheet into a ridiculous seven classes, which crammed down the Greek law bonds into yet another separate class, an outcome which will shortly bite the European pre-petition sovereign market (i.e., Portugal, Spain and Italy) in the ass. What we did not however underestimate at all, is the critical value of strong indenture provisions, or, in other words, the willingness of UK-law bondholders to not comply with terms forced down their throat. As reported earlier today by the Greek Ministry of Finance, a whopping 20 of 36 classes of non-Greek law bonds have rejected the nation's attempts to restructure, and now appear set for an epic legal showdown, whose outcome will determine whether or not the UK non-UK law spread will explode, or if the entire European bond market will shoot itself in the foot itself, after all strong indentures appear to be merely a bond prosectus placeholder which will never be honored. Most importantly, we are delighted that UK-law bonds have understood one thing - by being the fulcrum security as we said, they have all the leverage. If Greece thinks it can take them in court and not pay them anything, well that may well be the ballgame for the European bond market..."

at http://www.zerohedge.com/news/greece-set-default-foreign-law-bonds-may-15

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The Flaw In Europe’s Austerity Plan: Elections

"Getting Europe’s mainstream politicians and appointed technocrats to agree to bailouts and austerity was actually the easy part. The real challenge for these guys will be holding onto their jobs — and preserving the deals they’ve cut — in upcoming elections.
Voters, it seems, aren’t convinced that that a depression is the only solution to the euro’s design flaws. Faced with the immediate reality of poverty, they’re listening to formerly fringe voices calling for a better deal, either in the form of more help from Germany (via the European Central Bank) or a quick exit from the euro zone and a return to national monetary sovereignty. Greece, of course, is first in line:

Greece’s Fringe Parties Surge Amid Bailout Ire
ATHENS—Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections, raising the risk that it won’t be able to make the economic sacrifices still needed to keep it in the euro.
The election, not yet scheduled but expected in April or May, is shaping up as a public revolt against Greece’s political establishment, which has backed the austerity policies that are the price of financial life support from Europe and the International Monetary Fund. Mainstream politicians are increasingly painted as leading Greece into a debt trap, then impoverishing it in trying to escape..."

at  http://dollarcollapse.com/euro-2/the-flaw-in-europes-austerity-plan-elections/

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Spiegel Says "Even a 1-Trillion Euro Firewall Wouldn't Be Enough"; Mish Says "The Bigger the Bazooka, the More Money Will be Lost"

"Eurozone bureaucrats keep upping the ante as to how big a "firewall" is needed. And at every critical juncture, German Chancellor Angela Merkel has proven she is nothing but a liar. With every demand for additional firepower, comes an inevitable cave-in from Merkel supporting the move, no matter what she says in advance.

Meanwhile, the entire idea that firewalls can accomplish anything is ludicrous, given the key point that no currency unions in the absence of fiscal unions cannot and will not work.

I suspect Merkel understands this, merely wanting to get Germany so deep into bailouts step by step, that it will be reluctant to leave the Eurozone.

It is high time the German Supreme court step in and stop this nonsense.

However, nothing can stop Greece, Portugal, and Spain from leaving, and eventually they will. In the meantime, rest assured that every increase in firepower will be additional money of German citizens' pockets. The end-game will be a currency or banking crisis at the worst possible time.

For now, please consider 'Even a 1-Trillion Euro Firewall Wouldn't Be Enough'

European finance ministers meeting in Copenhagen on Friday agreed to boost the euro-zone firewall to over 800 billion euros. The move marks another U-turn on the part of the Merkel administration, which recently dropped its opposition to increasing the fund. German commentators warn that even the new firewall may still be too small..."

at  http://globaleconomicanalysis.blogspot.com/2012/03/spiegel-says-even-1-trillion-euro.html

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Greek PM says third bailout may be needed

"The Greek prime minister Lucas Papademos has conceded that the crisis-plagued country could require a third bailout only weeks after it secured a second package of rescue funds following months of hand-wringing in Brussels.
Athens may have received the biggest bailout in history but another lifeline could not be ruled out, the technocratic leader said in an interview. So far, the EU and International Monetary Fund have committed a total €240bn (£200bn) to the near-bankrupt nation.
"Some form of financial assistance might be necessary but we have to work intensely to avoid such an event," Papademos told the Italian business daily Il Sole 24 Ore..."

at http://www.guardian.co.uk/business/2012/mar/30/greek-pm-papademos-third-bailout

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Everyone Is Wondering When Spain Will Become The New Greece

"This post originally appeared at The Automatic Earth.

Another week, another bout of social unrest in a Euro peripheral nation, if the fourth largest economy in the area (Spain) can even be called that. Yesterday's action saw more than a million people take to the streets in protest, while several million actually participated in the 24-hour general strike (about 77% of union workers), resulting in 176 arrests and a 104 injuries. It is estimated that 91% of all large business employees took part in the strike and/or occupied the streets. The Spanish politicians, of course, tried to downplay the rate of participation and claimed victory because the strike wasn't as bad as the last big one in 2010, but those claims merely reveal how their desperation is taking on a ridiculously childish quality at this point.
All of this was in response to newly proposed budget cuts of €27bn that are the harshest in Spain's history (along with a 7% rise in electricity/gas bills), but are STILL estimated to fall well short of what's needed to meet the deficit targets required by the Troika gang. In fact, as TAE readers (and Greeks) should know by now, this severe austerity virtually ensures that deficits and sovereign rates will spiral out of control, necessitating calls for bailouts with capital that simply doesn't exist. With a general unemployment rate of about 23% and youth unemployment at stunning levels of 50%, it is rather surprising that the pain in Spain isn't projecting itself into the streets with even greater force. One thing is for sure - Rajoy and his administration is extremely flustered, and the Eurocrats must be soiling their undergarments right now..."

at http://www.businessinsider.com/everyone-is-wondering-when-spain-will-become-the-new-greece-2012-3

Another Failed Grand Plan In Europe

"European Sovereign Yields have been under pressure for most of the last month...seems the market doesn't buy the firewall idea...



The EFSF has committed €200 billion. Depending on how you viewed EFSF, the maximum was €440 billion of funding at the AAA level (which it still has from Moody’s and Fitch). It could have been as much as €500 billion if it wasn’t focused on that maximum rating.

So how did we get a headline of €800 billion?

€200 billion of EFSF money that has already been committed got counted. They can’t commit it again. Yes this is money Europe has committed (more on how they fund it, later) which helped, but it cannot be committed again.

They also included €49 billion and €53 billion of loans already made to Greece under other EU programs as part of the firewall. Again, that €100 billion has already been spent, so it doesn’t really add anything.

Prior to today, the EU had €300 billion of remaining capacity and had spent or committed €300 billion. Now they have €500 billion of free capacity.

Let’s take a deeper look:

Last fall, Greece, Ireland, and Portugal had just over €600 billion of admitted debt (not the guaranteed hidden kind). So far, they have received €300 of EU commitments. Can we assume that a “bailout” is about 50% of a countries debt? Probably not, but it seems that the first round is less than 50%, but as it goes on, the amount grows beyond 50%, but it is eye opening, that 3 countries, with a total of €600 billion of debt, have needed €300 billion of support already – and look likely to need more. Ireland is getting a new extended payment plan. Portugal seems likely to need more. Greece may need more already to deal with the English law bonds, but in any case will likely draw down more.

So this €500 billion that is remaining, has to not only continue to support the existing countries, but in theory needs to deal with Spain and Italy. With €700 billion and €1.6 trillion, that seems dubious, especially once the mechanics are understood, but before we get to that, let’s look at what the EFSF has already done..."

at http://www.zerohedge.com/news/another-failed-grand-plan-europe

Greyerz - European Leaders Lying, Trillions Need to Be Printed

“Spain now has over 700 billion euros of debt, and of that about 14% has been issued in the last three months. That’s over 100 billion euros of debt issued in the last three months. So Europe is hemorrhaging and Spain will be the next Greece.
The Spanish problem is a lot bigger and will be a lot worse. Spanish banks have never taken the correct provision for their property collapse...."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/28_Greyerz_-_European_Leaders_Lying,_Trillions_Need_to_Be_Printed.html

The Rejection of Austerity Begins

"With national elections in Greece only a few weeks away, the coalition that rules the nation finds itself in trouble. Politicians who supported austerity measures as a means to get a bailout of the country’s finances face challenges from candidates who say the government went too far. The reaction is only natural. Many voters have been stripped of benefits, had salaries cut or have lost some form or another of their social safety nets. The upcoming election could sweep new members into parliament, and these new members may try to repeal or modify austerity agreements.
Greece is not the only nation that faces angry voters. Similar circumstances could affect elections in Portugal, Spain and even Italy. A referendum will be held in Ireland to seek support for the nation’s treaty with the European Union, a treaty that is the basis of Ireland’s bailout.
The rounds of national elections could be a year off or more, but this may make it more difficult for current leaders to keep their positions. Austerity’s bite could be felt the most in a few more quarters as governments cut expenses, which may push some nations into recessions, increase unemployment and cut the social services to the elderly..."

at http://247wallst.com/2012/03/28/the-rejection-of-austerity-begins/#ixzz1qQJlF5hd

Portugal’s Insolvent Town Halls and the Trouble with Greece’s New Bonds

"It appears Portugal's municipalities have a debt problem that is a spitting image of that plaguing Spain's regional governments. As remittances from the central government decline, many have reached the point where they would normally be considered insolvent. Some € 9 billion in municipal debt are apparently threatening to default unless some aid comes forth from the central government. The problem with this is of course that the government needs to hew to its 'troika'-imposed deficit targets and therefore can not help them.

As Bloomberg reports:

“Portugal’s town halls face default amid 9 billion euros ($12 billion) of debt unless the government provides aid soon, said Fernando Ruas, president of the nation’s association of municipalities.

“At a company we call it insolvency,” Ruas said in a telephone interview from Lisbon on March 21. “It could happen that some town halls could have to restructure their debt if the government doesn’t intervene.”

Ruas blamed a decline in money transfers from the government in Lisbon to municipalities for their growing financial woes. Portugal last year became the third euro-area country to request external aid, following Greece and Ireland. Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of the 78 billion-euro rescue.

“A sharp decrease in money transfers has made it harder for many town halls to comply with their ongoing commitments,” said Ruas. His association estimates town halls face about 9 billion euros in liabilities. About 1.5 billion euros of the total is in bills to suppliers overdue by more than 90 days while the remainder is mostly made up of debt banks, he said.”

at  http://www.acting-man.com/?p=15800

Euro crisis set to resume

"Last week the head of the European Central Bank, Mario Draghi told a German newspaper that while there were still risks, the worst of the eurozone crisis was over and the situation had stabilised. This rosy scenario is far from reality as concerns grow that a new round of the crisis may be set off by the worsening situation in Spain and Portugal.

In the short term, financial markets have reason to celebrate. The Greek bailout has meant that most of the debt contracted by the banks and other financial institutions has been transferred to the state, to be paid for by ever-deepening austerity means imposed on the Greek people. In addition, the €1 trillion injected into the European financial system by the European Central Bank (ECB) has averted an immediate financial meltdown by providing banks with a lucrative source of ultra cheap money.

However, no serious observer believes this policy has resolved any of the fundamental problems and may, in fact, be making them worse. Critics maintain that the bailout is leading to the creation of many “zombie” banks, which are completely dependent on the ECB for finance and are reluctant to provide credit either to each other or to businesses.

Portugal has carried out all the austerity demands of the European Union in implementing an austerity program. Yet Portuguese 10-year bonds are still trading at interest rates of more than 12 percent, at least double the level considered sustainable.

Spain presents an even bigger danger. As the Financial Times noted, up until last week it might have been thought that the dangers of a Spanish debt default were receding. “That confidence,” it continued, “is already starting to evaporate. A growing chorus of economists and analysts is warning that the Spanish economy—the eurozone’s biggest after Germany, France and Italy—is in much worse shape that markets might suggest.”

According to Citigroup chief economist Willem Buiter, Spain is “at a greater risk than before” of being forced to accept a debt restructuring. Such a move would pose a far higher threat to the European banks and financial markets than the Greek crisis..."

at  http://www.wsws.org/articles/2012/mar2012/euro-m26.shtml

THREE CATALYSTS FOR THE RETURN OF EUROPE’S CRISIS….

"Europe is partying like the good old days. And why not? It looks like the crisis is in the rear-view mirror. But I don’t think that’s necessarily the case. The reason is simple – the cause of the problem has not been fixed. The fact is, Europe is an unworkable currency system. There are no floating exchange rates between the economies and there is no fiscal entity willing to rebalance the imbalances that result from the trade issue (which is largely the result of the lack of floating exchange rates). So what’s happened is that the periphery nations have borrowed from the core nations in order to finance their spending binges, but because they don’t create their own currency they have a real solvency risk. So now we’re in a position where the governments are forced to cut spending in the midst of a balance sheet recession and the austerity is hurting growth without bringing the debt to sustainable levels.
The only reason we’ve seen a reprieve in the crisis is because the ECB has stepped up and implemented what is essentially a sort of ponzi by allowing the private banks to borrow at cheap rates and purchase government debts thereby reaping a profit. The ECB thinks they’ve resolved the solvency crisis without allowing the periphery countries to print money. But the reality is that the math just doesn’t work for most of these countries and while this sort of lending operation can alleviate pressures it does nothing to actually fix the problem in Europe which is at the highest level of the monetary system’s construction. And when the core government’s realize that perpetual bailouts are the name of the game and the economies remain very weak we are going to see someone come to their senses – it will either be the citizens through revolt or the core governments through disgust. But I have a very hard time seeing how this problem doesn’t continue to pop up time and time again in the coming years if not dealt with at the highest levels.
So how might it play out? An excellent post from a European blog has the potential catalysts for the next leg of the crisis:

“The second Portuguese bail-out, although likely, is not certain. The Greek election is not legally due until 2013, despite the lack of democratic legitimacy of the present technocratic government. May be Hollande and Merkel will put their differences aside. Unfortunately, I doubt it…"

at  http://pragcap.com/three-catalysts-for-the-return-of-europes-crisis

Portugal will be the next Greece, predicts Mohamed El-Erian

"Portugal will follow Greece to be the next eurozone country to falter, according the boss of the world's largest private sector bond fund.
Like Greece, it will need extra cash from Brussels to stop the country going bust, Pimco chief executive Mohamed El-Erian told the German magazine Der Spiegel.
Asked whether he expected Portugal to have become the next Greece by the end of this year, he said: "Yes, unfortunately that will be the case."
Portugal's economy is forecast to contract 3.3% this year as the government implements austerity measures under a €78bn (£65bn) bailout from the European Union and International Monetary Fund.
El-Erian, who is also co-chief investment officer of Pimco, said he expected Portugal's first bailout package to be insufficient, prompting it to ask the EU and IMF for more money.
"Then there will be a big debate about how to split the burden between the EU, creditors, the IMF and the European Central Bank. And then financial markets will become nervous because they are worried about private sector participation," he said..."

at http://www.guardian.co.uk/business/2012/mar/18/portugal-next-greece-mohamed-el-erian

Uncertain Future for the Euro: The Plight of the Netherlands. Staggering Unemployment in Spain and Greece

"A report by the London-based Lombard Street Research, which says the Netherlands is badly handicapped by euro membership, and as a result the Dutch Freedom Party has called for a return to the Guilder. Leader Geert Wilders has become the first political movement in the euro zone with a large popular base to opt for withdrawal from the single currency. The Freedom Party is a conservative populist party. We do not read Dutch, but the very fact that this information was only picked up by a few sources outside of the Netherlands shows you what managed news is all about.

Needless to say, the Hague disagrees with the report, which puts the cost for subsidizing and bailing out of the six nations in trouble at $3.2 trillion. We set the costs months ago at $4 to $6 trillion. Mr. Wilders’ answer is if they disagree with the report, why don’t they have the guts to hold a referendum? Let the Dutch people decide.

The report says as we have said so often, that the euro zone cannot survive in its current form. Dealing this year with Ireland, Portugal and Greece should be relatively easy by letting them slide away. Spain and Italy have partially been shunted aside and by the time they are dealt with they will be even weaker than they are now. The socialist mind set is to push problems into the future, which only worsens the problems. The big question is will Europe strive for world government and allow it to thoroughly destroy the EU financially and economically?..."

at http://www.globalresearch.ca/index.php?context=va&aid=29817