Spanish Banks’ Net ECB Loans Leap to Record 337 Billion Euros

Seems to me if there was going to be a liquidity problem with the banks the ECB would have already let it happen:

Spanish Banks’ Net ECB Loans Leap to Record 337 Billion Euros

By Emma Ross-Thomas

July 13 (Bloomberg) — Spanish lenders’ net borrowings from the European Central Bank jumped to a record 337 billion euros ($411 billion) in June. Net average ECB borrowings climbed from 288 billion euros in May, the Bank of Spain said. Gross borrowing was 365 billion euros, up from 325 billion euros in May, and accounting for 30 percent of gross borrowing in the whole euro region. Spain saw the biggest outflow of foreign investment in April since the start of the euro, Bank of Spain data show. Non- residents cut their holdings of Spanish bonds to 37.5 percent of the total in May, from 51.5 percent at the end of last year. Spanish banks picked up the slack in the first quarter, before starting to reduce their holdings in April, according to Treasury data.

Banks Face $6 Billion of Libor Litigation, Morgan Stanley estimates

The libor scandal is particularly bad, even though not a lot of actual $ gains/losses involved, in that it happened after the financial crisis when there was at least some hope that the surviving major banks had, in general, cleaned up their act. And also at least some hope that the crisis was a wake up call to bank regulators and supervisors.

It’s not that hard to spot. For example, relatively wide libor basis swaps indicate markets are discounting libor settings being away from actual deposit rates by more than typical bid/offered spreads.

Banks Face $6 Billion of Libor Litigation, Morgan Stanley estimates

July 12 (Bloomberg) — Banks being probed for attempting to rig benchmark interest rates could face $6 billion of related litigation costs, analysts at Morgan Stanley estimated. The 16 banks may also lose 4 percent to 13 percent in 2012 earnings per share from regulatory fines on a base case scenario, Morgan Stanley analysts led by Betsy Graseck wrote in a note to investors today. They may also suffer from tighter scrutiny from regulators in response to the Libor investigations, the analysts said.

Housing still modestly improving?

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.1 percent in the week ended July 6. The results were adjusted to account for the July 4 holiday.

The MBA’s seasonally adjusted index of refinancing applications fell 3.4 percent, but the gauge of loan requests for home purchases, a leading indicator of home sales, rose 3.3 percent.

ECB to Ensure That Lenders Have Enough Liquidity, Visco Says

More constructive hints?

ECB to Ensure That Lenders Have Enough Liquidity, Visco Says

(Bloomberg) The European Central Bank will continue to guarantee sufficient liquidity for lenders and keep up the fight against market fragmentation among the 17 countries that share the euro, Bank of Italy Governor Ignazio Visco said. “The ECB can’t but continue to pursue these objectives,” Visco said today in a speech in Rome. The ECB cut rates to a record low on July 5 on concern the euro area is slipping deeper into a recession. The central bank, headed by Mario Draghi, agreed in June to help nations in distress by acting as a buying agent for sovereign bonds purchased by government-run bailout funds. The rate cut, to 0.75 percent, is an indication of the ECB’s intention to guarantee “adequate monetary conditions” in the euro area, Visco said. “It followed other measures adopted last month designed to continue to ensure necessary liquidity for the banking system and fight the effects of the fragmentation of monetary and financial markets,” he said.

German Finance Minister Asks Court Not to Block Euro Assistance

(New York Times) The German finance minister warned on Tuesday that there would be severe consequences for the euro currency union if this country’s highest court blocks Germany’s recent ratification of two measures for fighting Europe’s financial crisis.

Officials Spar Over Who Will Guarantee Bank Losses

(WSJ) German finance minister Wolfgang Schäuble said that even once the euro zone’s bailout fund has been authorized to directly recapitalize struggling banks, the lenders’ host government should retain final liability for any losses. “We expect that the final liability of the state will remain” even once the banking supervisor is up and running, he told journalists. He added that what mattered was that the bank support wouldn’t add to a country’s debt—something that he said would be possible even under a scenario where the government retained liability for potential losses. Other officials insisted that banks’ host states wouldn’t have to guarantee any support from the bailout fund.

A Euro-Zone Strategy Shift

(WSJ) Finance ministers from the euro zone agreed that Spain need only reduce its deficit to 4.5% of gross domestic product next year, and 2.8% in 2014, in order to avoid financial penalties. The deal, Spanish Finance Minister Luis de Guindos told reporters, had been clinched without fresh demands on fiscal policy from euro-zone partners, although Eurogroup Chairman Jean-Claude Juncker had warned that there would be a thorough examination of every bank that asks for aid. “I repeat it again, and these are fundamental points, these are two completely independent agreements, they are not related in any way because there is no macroeconomic conditionality in the agreement on the memorandum [of understanding],” he said.

Noyer Warns Hollande of France’s ‘Serious’ Economic Weakness

(Bloomberg) France’s unit cost of labor of 34.20 euros an hour compares with Germany’s 30.10 euros, Italy’s 26.80 euros and 20.60 euros for Spain. Unit labor costs in France have increased by about 20 percent relative to Germany since 2000 as French companies implemented the nation’s 35-hour work-week law, according to Coe-Rexecode. “Of all advanced countries, France has registered, since 2000, the sharpest decline in its market share in global exports,” Bank of France Governor Christian Noyer said. “The drop in the number of hours worked and rigidities in working time arrangements have probably played a role” and reviving exports means tackling all sorts of restrictions that hamper activity, he said.

French current account deficit narrows in May

(AFP) The French current account deficit narrowed slightly in May, owing to a smaller shortfall in the trade of goods and a bigger surplus in services, official data showed on Monday. The Bank of France said the current account, which measures all current payments in and out of the country, showed an overall deficit of 4.1 billion euros ($5.3 billion), compared with a 4.4 billion euro shortfall in April. A breakdown of data showed that the deficit in exchanges of goods had decreased to 5.6 billion euros in May from 6.0 billion in April, while a surplus in services grew to 1.9 billion euros from 1.7 billion.

This is not good if/when implemented:

Rajoy Announces 65 Billion Euros in Budget Cuts to Fight Crisis

(Bloomberg) Spanish Prime Minister Mariano Rajoy announced tax increases and spending cuts totaling 65 billion euros in the next two-and-a-half years. Rajoy’s fourth austerity package in seven months will raise the sales levy to 21 percent from 18 percent; scrap a tax rebate for home buyers; scale back unemployment benefits; consolidate local governments and eliminate the year-end bonus for some public workers. The budget cuts are about double those previously announced. Spain’s central government budget deficit swelled to 3.41 percent of gross domestic product in the first five months of the year, approaching the full-year goal of 3.5 percent after the government brought forward transfers to regional administrations and the social-security system.

Spain Agrees to Guarantee Bond Issuance of Cash-Strapped Regions

(Bloomberg) Spain will guarantee bonds issued by regional governments to help them regain access to capital markets and ease a funding squeeze. The program will be “voluntary” for regions and will come with additional conditions on budget deficits, Antonio Beteta, deputy minister for public administration, told reporters. The plan will be presented at a meeting of regional budget chiefs on July 12, he said. “The mechanism aims to make issues more liquid and easier to place on the markets as they have a central-government guarantee,” Beteta said. Regions face redemptions of about 15 billion euros in the second half of the year, according to data on the Budget Ministry’s website.

Spain Says European Rescue for Banks Opens Door to ECB Funding

(Bloomberg) Spain’s FROB rescue fund will distribute bonds issued by the EFSF to the banks, which “can use them at the ECB if they need the liquidity,” Spanish Economy Minister Luis de Guindos told reporters. As part of the agreement for Spain’s 100 billion-euro bank bailout, one or several vehicles will be created to buy assets from lenders at a “reasonable” price, de Guindos said. Those vehicles will issue bonds that will also be eligible at the ECB. Industrywide conditions for the financial assistance include a 9 percent capital requirement, de Guindos said. A first tranche of 30 billion euros is to be used as soon as the end of the month. Remaining details will be clinched in the memorandum of understanding due to be signed on July 20, he said.

Norway intervenes to avert oil industry closure

This was about to be seriously disruptive:

Norway intervenes to avert oil industry closure

By Mia Shanley and Dmitry Zhdannikov

July 9 (Reuters) — Norway’s government ordered on Monday a last-minute settlement in a dispute between striking oil workers and employers in a move to alleviate market fears over a full closure of its oil industry and a steep cut in Europe’s supplies.

The strike over pensions had kept crude prices on the boil with analysts expecting far quicker action by the government to stop the oil industry from locking out all offshore staff from their workplaces from midnight (2200 GMT) on Monday.

Oil markets breathed a sigh of relief on news of the intervention and crude prices dropped in early Asian trade.

Under Norwegian law, the government can force the striking workers back to duty and has done so in the past to protect the industry on which much of the country’s economy depends.

But it was slow to intervene in the latest dispute, which was in its third week, and did so on Monday only minutes before the start of the lockout, citing potential economic consequences.

“I had to make this decision to protect Norway’s vital interests. It wasn’t an easy choice, but I had to do it,” Labour Minister Hanne Bjurstroem told Reuters after meeting with the trade unions and the Norwegian oil industry association (OLF).

A full closure of output in Norway – the world’s No. 8 oil exporter – would have cut off more than 2 million barrels of oil, natural gas liquids (NGL) and condensate per day.

But the minister said her main concern was the potential cut in gas supplies. Norway is the world’s second-biggest gas exporter by pipeline, with the majority of supplies going to Britain, the Netherlands France and Germany.

“This could have had serious consequences for the trust in Norway as a credible supplier,” she added.

The oil and gas industry makes up about one-fifth of Norway’s $417 billion economy.

Leif Sande, leader of the largest labour union Industri Energi, representing more than half of 7,000 offshore workers, said workers would return to work immediately.

“It’s very sad. The strike is over,” he told journalists.

The dispute has raised eyebrows in Norway, where oil and gas workers are already the world’s best paid, raking in an average $180,000 a year. Offshore workers clock 16 weeks a year but cite tough conditions for their call for early retirement at 62.

The oil industry had refused to budge.

“I am very happy that the minister chose to end a conflict that has cost Norway and the oil companies large sums,” said Gro Braekken, leader of the OLF.

The OLF said the 16-day strike came at a cost of some 3.1 billion Norwegian crowns ($509 million).

The next step is compulsory arbitration to define a new wage agreement.

“With this decision we can see that whenever the oil industry says jump, the government listens,” Hilde Marit Rysst, leader of union SAFE, told Reuters. “We will never leave this issue – it is completely unthinkable to stop fighting for those who are worn out at 62.”

She said unions would push their issues at the next suitable opportunity.

Norway is keen to retain its image as a reliable supplier of energy, but analysts have said the Labour-led coalition government was slow to intervene as it faces general elections in a year, and labour unions are important partners.

On Monday, Labour Minister Bjurstroem said she believed the lockout was not necessary and the oil industry will have to take responsibility.

About 10 percent of the 7,000 offshore workers have been on strike since June 24.

Brent crude dropped more than $1 to below $99 per barrel in early Asian trade on Tuesday on news of the intervention, after surging to above $101 on supply fears in the previous session.

The strike had choked off some 13 percent of Norway’s oil production and 4 percent of its gas output.

State-controlled Statoil, which operates the affected fields, said it would resume production immediately and would be back at full capacity by the end of the week.

The last lockout in the offshore sector occurred in 1986, shutting down production on the Norwegian continental shelf completely, and lasted for three weeks before the government intervened. In 2004, the center-conservative government stepped in to avert a lockout. ($1 = 6.0881 Norwegian crowns)

The certainty of debt and taxes- comments on the Fiscal Cliff

It takes a fiat currency to sustain full employment.

And a fiat currency, like the $US and the euro, includes the certainty of debt and taxes.

Taxation is required to allow the government to spend its otherwise worthless currency.

And ‘debt’- some entity spending more than its income- is required to ‘offset’ an entity’s desire to spend less than its income.

These desires to not spend are known as demand leakages.

That means, at full employment, either a private sector entity or the government will be spending more than its income to offset the demand leakages.

Private sector spending is, operationally, revenue constrained. It is limited by income and credit worthiness.

Public sector spending in a currency it issues is not revenue constrained.

The private sector, the user of the currency, must first obtain funds before it can spend.

The public sector, the issuer of its currency, must, from inception, spend or lend first, before it can ‘collect’ taxes and/or borrow.

The private sector is necessarily pro cyclical. In a down turn, the private sector loses credit worthiness and therefore is limited in its ability to spend more than its income.

That leaves only the public sector to spend more than its income to fill any residual output gap and sustain full employment.

Those claiming ‘the problem is too much debt- private sector and public sector’ are entirely missing the point.

That includes everyone in Congress, President Obama, and Candidate Romney.

Those now pushing for Federal deficit reduction are entirely missing the point.

There is not Federal solvency problem, short term or long term, with any size deficit.

There could be a long term inflation problem.

However, I have seen no credible, professional long term forecasts of substantial inflation. That includes the Fed, the CBO, and the forecasts of the largest financial institutions, as well as the inflation rates implied by the long term inflation indexed US Treasury securities.

Last year the pre debt ceiling war cry from all sides was that immediate deficit reduction was imperative to keep us from becoming the next Greece.

That fell by the wayside after the downgrade, that was supposed to cause interest rates to spike and find the US, Greek like, on its knees before the IMF,
instead cause rates paid by the US Treasury to dramatically fall. The difference is the US govt is the issuer of the $US, while Greece is but a user of the euro.

So seems to me in this economy federal deficit reduction should be off the table, and the burden of proof of a sufficiently high long term inflation risk
be on those who want to put it back on the table. Anything less seems subversive, either by accident or by design.

(feel free to distribute)

more hints euro zone gdp may be stabilizing

A couple of more hints deficits may be high enough for stability and even a bit of positive GDP growth:

German Industrial Production Increased More Than Forecast in May

By Jana Randow

July 6 (Bloomberg) — German industrial output rebounded more than economists forecast in May as construction buttressed Europe’s largest economy against the sovereign debt crisis.

Production rose 1.6 percent from April, when it dropped 2.1 percent, the Economy Ministry in Berlin said today. Economists forecast an increase of 0.2 percent, the median of 36 estimates in a Bloomberg News survey shows. Production was unchanged from a year earlier when adjusted for working days.

The European Central Bank cut interest rates to a record low yesterday as the worsening debt crisis threatens to tip the euro area, Germany’s largest export market, into recession.

While German business and investor confidence have slumped amid signs growth is slowing, record-low unemployment and demand from outside the region have helped insulate the economy. Factory orders unexpectedly rose 0.6 percent in May, the Economy Ministry said yesterday.

“German factories are still doing quite well, but we’ll see some skid marks as a result of the euro region’s debt crisis in the coming months,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In the euro area, everything points toward recession and the global economy has slowed to an extent that it can’t compensate for the weakness in Europe.”

Manufacturing output gained 1.8 percent in May, driven by a 3.8 percent jump in production of consumer goods, today’s report showed. Investment goods production rose 1.7 percent and construction activity was up 3.1 percent.

France’s Trade Deficit Narrowed in May to 5.3 Billion Euros

July 6 (Bloomberg) — France’s trade deficit narrowed 7.7 percent in May as exports rose.

The deficit in May was 5.325 billion euros ($6.6 billion) compared with 5.77 billion euros in April, the country’s customs office said in an e-mailed statement.

Exports rose 1.3 percent from the previous month to 37.44 billion euros while imports rose 0.1 percent to 42.77 billion euros.

For the first five months of the year, the deficit narrowed 10 percent from the same period a year ago to 29.4 billion euros

Airbus exported 22 planes for 1.58 billion euros during May, compared with 28 planes for 2.23 billion euros the previous month.