International Monetary Fund
"China... across the board... is preparing for something big in currency markets... The world has an unease about the dollar system... former President Hu of China said 'the dollar is a product of the past'."
It is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-term solution that allows for stable relations with European creditors, but as we noted on Wednesday, it may be time for Greeks to ask themselves if binding their fate to Europe is in their best interests. Indeed, it's time to take a hard look at the political ramifications of the June 5 IMF deadline and ask if the troika will, in the final analysis, be successful in using financial leverage to undermine the democratic process.
In exactly a month, Ukraine will owe Russia a $75 million debt coupon payment. Finance Minister Anton Siluanov told reporters in Moscow today that "if they miss the payment, we will use our right to go to court." Then it got serious, as Vladimir Putin instructed Russian Prime Minister Dmitry Medvedev to assume control of Ukraine's repayment of its $3-billion debt in Eurobonds that Russia bought in 2013, slamming Ukraine's bill allowing them to impose a moratorium on foreign debt repayments as a de facto announcement of default. As one market participant warned, "I would wait until after June 20 to go forward with" any moratorium, as "if Russia takes Ukraine to court, that might be an incentive for other creditors to go down the same route."
"A senior government official says that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis," Kathimerini reports. Meanwhile, parliamentary speaker Nikos Filis has a message for the IMF.
Do you remember what happened when Cyprus decided to defy the EU? In the end, the entire banking system of the nation collapsed and money was confiscated from private bank accounts. Well, the nation of Greece is now approaching a similar endgame. At this point, the Greek government has not received any money from the EU or the IMF since August 2014. As you can imagine, that means that Greek government accounts are just about bone dry.
US Taxpayer On The Hook As Ukraine Prepares Moratorium On Debt Repayments, Increases Military SpendingSubmitted by Tyler Durden on 05/19/2015 08:26 -0400
It appears, thanks to the generous backing of US taxpayers, Ukraine is about to get its cake and eat it too. On the same day as Ukraine's government unleashes a bill enabling a moratorium on foreign debt repayments - implicitly meaning default "in case of an attack from dishonest lenders" - the defense ministry unveils a plan to increase military spending by 17 billion hryvnia this year statuing that will “make efforts to find possibilities to finance needs” to secure country’s defense. Ukraine bonds are tumbling.
Shape Of Greek Endgame Emerges: IMF Discussed "Cyprus-Like" Plan After Tsipras Warned Of Looming DefaultSubmitted by Tyler Durden on 05/18/2015 09:46 -0400
The IMF discussed a "Cyrpus-like" take it or leave it solution for Greece last week, FT reports. With the countdown to outright insolvency down to two weeks, PM Tsipras will meet EU leaders in Latvia on Thursday to make one last push for a last minute deal. Meanwhile, the fate of the Greek banking sector hangs in the balance as the ECB has come under fire for the monetary financing of the Greek government.
- Tsipras Endgame Nears as Greek Bank Collateral Evaporates (BBG)
- Shi'ite forces ordered to deploy after fall of Iraqi city (Reuters)
- Ratings agency Fitch to downgrade many European banks (Reuters)
- Bubble Blowing to Continue So Long as Yellen Isn’t Raising Rates (BBG)
- Greece's Debt Battle Exposes Deeper Eurozone Flaws (WSJ)
- Obama to set new limits on police use of military equipment (Reuters)
- China April home prices fuel hopes of bottoming out, but long road to recovery (Reuters)
- Hedge Funds Close Doors, Facing Low Returns and Investor Scrutiny (NYT)
- ASIC's Greg Medcraft 'quite worried' about Sydney, Melbourne house prices (Fin Review)
Once again, Greece seems to have slipped the financial noose. This brinkmanship is no accident. Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of default – and thus of a financial crisis that might break up the euro – provides negotiating leverage to offset Greece’s lack of economic and political power. But their calculation is based on a false premise.
Tsipras has got the Eurogroup on speed dial now...
"China is reversing course on a major effort to tackle its hefty local government debt problem, marking a setback for a priority reform aimed at getting its financial house in order," WSJ reports. The abrupt about-face by Beijing, which will now allow local governments to once again tap shadow banking conduits for high interest loans, comes as the PBoC gets set to ramp up an LTRO-like program designed to essentially monetize trillions in local government debt. The interplay between the debt swap program, Chinese-style LTROs, and the decision to drop the ban on LGFV financing could set the stage for a dramatic increase in the country's already massive debt pile.
The costs and consequences of Greece exiting the Eurozone may well dwarf the financial losses triggered by Greece's default.
Germany throws its support behind a Greek referendum on euro membership while Putin invites Athens to join BRICS Bank. Meanwhile, Yanis Varoufakis has a plan for resolving Greece's debt problem — and he imagines the ECB chief is terrified of it.
Greece tapped emergency reserves in its holding account at the IMF in order to make a 750 million euro payment to the Fund on Monday meaning that, as predicted, the IMF is now paying itself. Athens has one month to replenish the account. Meanwhile, the Fund has indicated it wants no part of another Greek bailout. And just to confirm how terminal the situation for Greece is, MarketNews just reported that Greece now has a paltry €90 million in cash reserves left. The end of the world's most drawn out tragicomedy is finally nigh.
Whether it is more posturing ahead of OPEC's June meeting is unclear but the message from 'sources', according to The Wall Street Journal is "OPEC won’t agree to go lower," with regard global market share (which has fallen from more than 50-% to just 32% currently). The cartel's latest strategy report forecasts oil prices won't reach $100 - “$100 is not in any of the scenarios,” in the next decade (and could drop below $40) with its most optimistic scenario $76 in 2025 (which only Qatar and Kuwait can cover expenditures with). “If they want to sustain the organization, they have no choice,” but to reintroduce production quotas, adding any concession by stronger members would be temporary.