Europe Refuses To Be Fixed

Tyler Durden's picture

It seems like it was only 24 hours ago that Europe bailed out Greece for the third time and everything was "fixed", with a resultant desperate attempt to validate this by pushing the EURUSD above 1.3000. Sadly, as always happens, Europe, and especially Greece, refuses to be fixed, because as we will not tire of saying: you can't fix debt with i) more debt, ii) hockeystick projections or iii) soothing words of platitude and an outright bankruptcy, just like that which Argentina is about to undergo, will be needed. If that means the end of the EUR and the delusion that the Eurozone is a viable monument to the egos of a few technocratic career politicians, so be it. As a result, this time around the halflife of the latest bailout was precisely zero, as was that of the latest Japanese QE episode, as the entire world is now habituated to the lies emanating from Europe, and demands details, which in turn are sorely lacking, especially as relates to the question of just where will Greece get the money desperately needed to fund the Greek bond buyback. But at least Kathimerini was kind enough to advise readers that said buyback must take place by December 7 in time for the euroarea finmins to approve the payment of the next Greek loan tranche at the December 13 meeting, something which will likely not happen, especially if Germany's SPD party delays the vote on the Greek bailout until the end of December as was reported yesterday. We can't wait to learn the details of the buyback package, which will come in the "next few days" per ANA, and especially where the buyback money will come from, especially with the FT reporting that various European countries will already lose money next year on the latest Greek bailout.

Aside for the lack of "Greece is fixed-er-est" details, the European Titanic continues to drive on autopilot, blissfully unaware it is headed straight into a unsustainable debt load Titanic, and as such Italy was able to sell EUR7.5 billion in 6 Month Bills at lower yield, pushing the 3 Year to the lowest yield since 2010, even as the next Greece, Spain, just reported a collapse in retail sales, which plunged 8.4% Y/Y. But at least it was "better" than lost month's -12.7%.

An update on European monetary developments showed that M3 soared at a 3 month rate of 3.1%, well above expectations of 2.8%, and the highest since October 2008, which means any possibility of further ECB rate cuts has been effectively taken off the table well into 2013. We do, however, eagerly look forward to the pundits' explanation how it is possible that Europe is getting progressively worse even as a near record amount of liquidity is sloshing around in the Eurosystem. 

But all of this is largely moot, as the reactionary market follows every update out of Washington, in hopes there will be a fiscal cliff resolution. Advance spoiler: there won't be, at least not until we have a replay of the 2008 TARP/2011 Debt Ceiling scenario, and the market plunges to get DC to act. Sorry, the recent brief downtick was certainly not enough to break the record deadlock in Congress, fondest wishes to the contrary notwithstanding.

Finally, the Shanghai Composite again showed what happens when a local central bank refuses to inject any new liquidity, and dropped 1%, breaching the 2009 lows, and closing at a level of 1973.

Expect little in terms of actual market moving macro news today as the fascination with the Fiscal Cliff persists.

More from Jim Reid:

“Reid moves markets”. I’ve always dreamed of reading such a headline and last night I got my wish. Unfortunately it was Senate Majority Leader Harry Reid who grabbed the headlines and took the shine off what was a mildly positive day for markets by suggesting that little progress had been made in fiscal cliff negotiations over the last week or so. He added that ‘we only have a couple weeks to get something done so we have to get away from the happy talk.’ This overshadowed a day of stronger US data with Durable Goods, Home Prices and Consumer confidence all ahead of expectations. The S&P closed 0.52% lower after being 0.2% higher earlier in the session and again close to the highs just before Reid’s comments hit newswires around 90 minutes before the close.

Yesterday marked only four weeks until Xmas so we do need some US political progress soon. It’s possible that Senator Reid was just reminding his colleagues of the relative urgency of the discussions. This is still the biggest story in global markets at the moment and has the capacity to move the S&P significantly into year end in either way.

Asian markets are trading firmly in negative territory following the weak lead from the US. Losses in equities are being paced by the Hang Seng (-0.83%), Nikkei (-1.0%) and the ASX200 (-0.21%). Chinese equities continue to break new post-crisis lows.

After closing below the symbolic 2,000 level yesterday, the Shanghai Composite is down a further 0.87% this morning. Interestingly the Shanghai index is down 2.5% since the country’s new leaders were unveiled in mid-November, during a period when risk assets have generally performed well. Also breaking new lows is the Japanese 10yr government bond yield which has reached its lowest level in at least 9 years (0.718%), helped by calls from the Japanese opposition leader Abe to pursue aggressive easing until inflation targets are met. Ironic really as if such a policy succeeds then JGBs will be a terrible investment in real terms. Elsewhere the AUD and EUR are virtually unchanged overnight against the greenback (1.0445 and 1.292 respectively) while the Australian iTraxx is 2bp wider at 133bp.

More on yesterday’s Greece deal, it was interesting to see the market’s relatively muted response to the Troika’s package – probably reflecting the fact that the package is conditional on a “positive” debt buyback scheduled to take place over the next few weeks and the approval of member state’s parliaments over what seems to be an aggressive timeline target of Dec 13th. As DB’s Mark Wall pointed out, what is meant by a “positive” outcome on the buyback is not officially defined, however in his view it would be a surprise for the Eurogroup to deny support to Greece on the back of low investor participation in a bond tender after having come this far in negotiations. Greek 10yr bond yields closed 26bp lower yesterday at 16.25%, while the Athex Composite (+0.29%) was denied further gains as Greek financials (-7.9%) reacted negatively to the prospect of dilutive bank recaps from the Troika’s package.
On the subject of European politics, DB’s Gilles Moec published a piece on France’s reform path yesterday, pointing out that since coming to power President Hollande’s stance has tilted towards a more reformist stance than expected, highlighted by the recent competitiveness pact and commitment to fiscal discipline.

Returning to the fiscal cliff, the WSJ reported that Morgan Stanley’s CEO James Gorman has called on the bank’s US employees to contact members of Congress in order to urge lawmakers to reach a deal on the fiscal cliff. According to the article, Mr. Gorman’s email doesn’t mention any particular person or parties, but does employ Obama’s rhetoric in calling for a “balanced solution”. The move follows a recent call to action by the CEO of Caterpillar who wrote to employees encouraging them to sign a “Fix the Debt” petition. On that note, Obama is meeting with business leaders and CEOs today as part of his public PR campaign pushing his solution to the fiscal cliff. Amongst those attending today’s White House session are a who’s who of the corporate world including the heads of Home Depot, Goldman Sachs, Deloitte, Merck, Coca-cola, Macy’s, Yahoo, Pfizer, Comcast, State Farm, AT&T, Archer Daniels Midland and Caterpillar (Bloomberg). John Boehner and other Republicans will be meeting with some members of the same group before today’s White House session.

Away from the cliff debate, Bloomberg news said that the Fed may require US units of foreign banks to comply with tougher capital rules by directing non-US firms to house all their businesses within a US holding company.

Given the lack of any major data releases, the likely focus today will be on Obama’s meeting and headlines around the fiscal cliff. Data-wise, Eurozone money supply, German CPI and Spanish retail sales are scheduled today. In the US, we get the new home sales report for October and the Fed’s Beige Book.

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GetZeeGold's picture



No room for medicine......still have lots of candy.


If you see any grownups.....please send them our way.

ClassicCommodity's picture

I wish this would end already.

Winston Churchill's picture

Be careful what you wish for.

I also long for this to be over,but realise that decades of chaos are our fate when

this collapses.The siege of Leningrad would be a good example of whats coming.

You can never be fully prepared,no matter what you may think.l

Zgangsta's picture

Mmmmmm.....decades of chaos.....

JPM Hater001's picture

I can tell you neither when or how it will happen.

And the decades of chaos may happen or not.  Im betting WI leads the way out...

And not because of Paul Ryan.


cossack55's picture

What if you don't live next to a frozen lake?

Gordon Freeman's picture

Of course, the Dec deadline will be met--it always is, isn't it?  You can keep vegetative states alive indefinitely--and they will.

JPM Hater001's picture

I agree-

My dog refused to get fixed so eventually I HAD TO JUST GET THE SHEERS.

Let's hope it doesn't come to that...

Did I say dog?  I meant to say daughters boyfriend.

dwayne elizando's picture

Europe is in desperate need of their own Bernanke!

wisefool's picture

Isn't the Euro S.O.P. to basically harvest the worlds resources to support their lifestyles? They will do it with colonialization. They will do it by convincing the stupid americans to run the petro-dollar. (they get all the benefit and none of the detriment) Along those lines, when the US is protecting oil, and the state department pumping out trillions to suport global stability, they can own the non-evil franchises and corporations around the world.

They will do it with reverse colonialization when there are not enough domestics to do meanial labor. They will use IMF money to bailout nations with universal healthcare, retirement at 60, 38 hour work weeks, 6 week holidays, "flexible" taxation.

The americans who fund the IMF and liquidity swaps get no such perks. Why would they want any of this to change? 5 years of this feint. it is working perfectly.

People around here dont like Barney Frank, but in one of his farewell rants he basically explained all this, in better terms for the masses than even Ron Paul.

GetZeeGold's picture



The americans who fund the IMF and liquidity swaps get no such perks.


We'd like to register a complaint about that....but we're not exactly sure where to do that.

wisefool's picture

I would say call your congress critter, but they are typically trust fund babies who get all weapy doe eyed when they take vacations over there and hangout with people vastly "cooler" than their own constitutants.

As to my junkers, is Barney wrong or right? he did this on the congress floor, on record. Not some newsbabe cable TV segment. If he and I are wrong, why hasn't the problem been fixed in 5 years? How many more "emergency meetings" need to occur with 5 star lodging, Mercedes limosines, haut cusine and hotter pros?

GetZeeGold's picture



I would say call your congress critter


I don't think Nancy Pelosi is the answer to this. They gave her a stick to hold and she still thinks she's got the gavel.


She's doing better than Boehner however. Either that cat is passed out....or he's just dead.

JPM Hater001's picture

In the back room crying...Pelosi used the stick to spank him.

wisefool's picture

Sure but she will also use that stick on the american taxpayer. No amount of global high finance can de-hypothicate the fact that US taxation funds the IMF. US taxation will be used to maintain the FEDs balance sheet, not the funny european money  temporarily in there while they spend the US dollars, tax free, for tangible global assets.

I got nothing against the Euros, except for the fact that seem to spellbound the american elite. Whats the trick? I could enjoy me a 6 week holiday too!

Sandmann's picture

Not true. the IMF has never taken that trip across Washington DC to tell Congress and the Fed that the US needed Corrective Measures 20 years ago

Zgangsta's picture

Europe not fixed = gold in freefall?

youngman's picture

They have to get those options out of the money by Friday...also the USA is selling fiat again this week....can´t have strong gold and silver when that happens...but yes I agree..totally against any logic....

GetZeeGold's picture



gold in freefall?


Yup. Looks like we're doomed.....again.

JPM Hater001's picture

How the hell is a $7 drop freefall?  What do you do, parachute off a stool?

youngman's picture

My bet...Bernanke sends them the money..through an offshore account of course....add this into "other assets".....we are the worlds reserve currency

No Euros please we're British's picture

I guess the Spanish bank bailout is good news for Europe as it's not been mentioned?

Sandmann's picture

Yes, those Bond Holders are going to love their new haircut

JPM Hater001's picture

You know how Popeye has one piece of hair in a curl up front...

I'm not sure they will have that much.

Sandmann's picture

Look at European History over 500-750 years and every time the political system has run out of money for its dreams. Just take Versailles and Louis XIV obsession with grandiosity and funding foreign wars - expropriation of silver from Church and Nobility the only two groups in French Society which paid no taxes; then it was the Peasantry The Third Estate which was landed with all the taxes. If you can't expropriate Jews you take from the Middle Class - the US and UK and Germany have frozen their living standards for decades with User Fees and taxation and debased State Education......they tolerated it it in return for supposedly safe jobs in the Welfare State/Medical/Education Complex.......the rest were subsidised with Welfare or Pork Barrel.

Destroying Middle Class Pensions and Savings whilst locking them into Housing Stock or out of Housing Stock has brought the System to the brink. As it gets uglier the Ruiling Elites will need more Patriot Acts, Civil Contingencies Acts, controls over Internet and Blackberry Messenger to "keep us all safe" from independent thought.....

It is amusing to apply the template of The Reformation protesting about Gold Transfers to Rome from Northern Europe and the Gutenberg Printing Press making Luther's 95 Theses widespread knowledge; and to reflect on the English Civil War beheading Europe's first Monarch and inspiring the French to do the same......time to review how systems get overturned before the current elites turn full-hose Fascism loose to stay in power



shovelhead's picture

Chuck: "...But...but... I'm the KING!"

Oliver: "Yes, you certainly were."


No games.

May become fashionable again, who knows?

three chord sloth's picture

"Sadly, as always happens, Europe, and especially Greece, refuses to be fixed..."

As long as the regular folks of Europe, especially Greece, hold on to the belief that, with the right combination of policies and politicians, they can go back to the "good old days" of the late-90s and early-00s -- when the living was easy on borrowed money, accounts never really needed to be settled, government could sop up excess college-educated workers thru the fake expanded middle class of bloated bureaucracies, and everyone could borrow at German rates -- then nothing will ever be fixed. But sadly, the average European man on the streets still thinks those days were "normal" and today is the aberration... so things still have quite a ways to go before  anyone is willing to begin negotiating with reality.


orangegeek's picture

Nothing is fixed.  Nothing will be fixed.  The culprits to all of this is government, not banks, not wall street, not unions.  Banks, Wall Street and Unions are downstream and reactionary.


Governments act without checks and balances.


So what's left?  The best of a bad bunch is the US Dollar.  And they keep trying to push the US Dollar down further.


In doing so, the Pound, Yen and Euro go up - and the absurd continues.

LawsofPhysics's picture

You dumb fuck, the banks and financial houses own the government.  The "government" is only doing the bidding of it's masters.  Ask yourself why the American taxpayer pays a private bank to coin their money?  Are you completely ignorant of how money comes into being, ignorant of how lobbying works and over 200 years of history?!?!?  What an ignorant fuck.  No wonder America is screwed.

fredquimby's picture

If that means the end of the EUR......


Quelle surprise...... ZH still bleating on about the supposed imminent crumbing of the Euro.




shovelhead's picture


Scrooge brings the Christmas goose and Tiny Tim says "God bless us , everyone."

I think this story may end a bit differently.

Floodmaster's picture

The EURO, CAD CHF, AUD are massively overvalued. Most ‘safe haven’ currencies are everything but safe.

wagthetails's picture

to sum this up, we need a pic of that old gag with a guy holding himself hostage. 

at the very least analyzing europe sure helps us forget our problems...for a while...but the cancer continues to grow.

d edwards's picture

Yeah, this whole bailout business is like the movie Groundhog Day.

Haus-Targaryen's picture

I think once people have realized their leaders have led them into a fiscal Stalingrad you'll have politicans and bankers hanging from piano wire.  

Debugas's picture

why can not they legitimately default ? Is it because this would bankrupt their insurers ?