More fireworks out of Europe, following in the footsteps of the disclosure about Deutsche Bank's dramatic underfunding and need to raise capital, is JC Trichet's stunning announcement that Eurozone members that break the region's rules on public finances should be excluded temporarily from Europe’s political decision-making, according to the FT. Obviously, where there is smoke there is fire, and the ECB president has sufficient reasons to make this demand. It can only mean that major European political turbulence is imminent, precisely as we had been expecting. That it coincides with the end of vacation season is also right in line with our expectations. In essence, JCT's proposal will make a the explusion of member countries symbolic - they won't be fully thrown out, but for all intents and purposes, will be (while still lacking their own monetary independence: the worst of all worlds). That this will not inspire any confidence in Europe is beyond any doubt. Somehow we don't expect a massive surge in the EUR any time soon (and predict a very stressful week for Phillip Hildebrand who will soon be battling with USDCHF parity and a EURCHF in the mid 1.20s).
Let Europe's monetization continue indefinitely! Surely this will do miracles for the EUR once Goldman is done buying all its clients are selling to it today. Other soundbites from his conference earlier below: pick the odd lie(s) out:
- Decision on 3 Month operations was unanimous
- EUR is a very credible currency and has an exception track record [no comment here]
- Q1 growth was "not buoyant, Q2 to be more so"
- Bond programme is designed to ensure effective monetary transmission mechanism
- Says non-standard measures are temporary in nature
- Welcomes recent decision to set up stability facility
- Welcomes steps by governments to do extra fiscal consolidation
Straight from the pages of "How to utilize a good crisis"; a manual written by Rahm Emanuel
Trichet And Dominique To Brief German Parliament On "End Of World" Should They Not Ratify Greek BailoutSubmitted by Tyler Durden on 04/28/2010 10:28 -0400
Guess what happens when banks need something? They promptly brief you how the world will end should one not do their bidding. The IMF and the ECB are apparently no exception to the rule. From prophet Goldman Sachs: "Trichet and Strauss-Kahn in Berlin today to brief parliament. ECB president Trichet and the head of the IMF Strauss-Kahn will be in Berlin today to brief parliamentary leaders about the financial help package for Greece. The idea behind the briefing is to explain to MPs the consequences of a Greek default (i.e what are the second and third round effects) and why it is in the German interest to help."
Sarkozy, Berlusconi And Trichet Deal Suckered Merkel Into Greek Bailout On Terms So Secret Austria Has No Clue What Is Expected Of ItSubmitted by Tyler Durden on 04/13/2010 14:58 -0400
Days into the latest round of European bailouts we finally start to get a glimpse of the scrambling within the EU's top ranks over the past week to avoid the imminent Greek collapse this Monday. According to Handelsblatt, France and Italy had worked out a deal with Trichet first and subsequently advised Merkel that they would go ahead on their own. Merkel who had held out for a 6% interest rate on European subsidy loans was consequently forced to participate in the "syndicate" as Germany has the most to lose from a Greek situation spiralling out of control due to its banking system exposure, yet whose population is the one most vocal against a full blown bailout. The next questions: what are the actual details of the subsidy debt's role in the capital structure, as well as the actual cash disbursement mechanism remain unanswered. Here are some thoughts.
IMF says Italy is right on track. Okay, but which track would that be? More facts thrown at you that probably hurt if you believe the soundbites in the media..
Full Text Of Trichet Speech Following Today's Monthly Monetary Policy Meeting Of ECB's Governing CouncilSubmitted by Tyler Durden on 04/08/2010 09:05 -0400
Regarding our collateral framework, the Governing Council has decided to keep the minimum credit threshold for marketable and non-marketable assets in the Eurosystem collateral framework at investment-grade level (i.e. BBB-/Baa3) beyond the end of 2010, except in the case of asset-backed securities (ABSs). In addition, the Governing Council has decided to apply, as of 1 January 2011, a schedule of graduated valuation haircuts to the assets rated in the BBB+ to BBB- range (or equivalent). This graduated haircut schedule will replace the uniform haircut add-on of 5% that is currently applied to these assets. The detailed haircut schedule will be based on a number of parameters which are specified in the press release to be published after todays press conference.
Dollar surging, euro plunging as Trichet says Greek bailout involving IMF is a very bad idea. Next up: Merkel-Trichet at ten paces. So much for a unified Europe backing Greece. And now with China also a net importer, a surging dollar will do miracles for US manufacturing.
The ECB is finally realizing that Greece will be a major issue for years if not decades to come. Which is why Jean-Claude Trichet finally put the debate of whether his bank will accept BBB- rated collateral beyond 2010 to rest. The answer is yes. This also takes out Moody's ridiculous A2 Greek rating out of the equation: finally Moody's can vote with its conscience. "It is the intention of the ECB's Governing Council to keep the minimum credit threshold in the collateral framework at investment grade level (BBB-) beyond the end of 2010. In parallel, we would introduce, as of January 2011, a graded haircut schedule, which will continue to adequately protect the Eurosystem." Considering how well the Eurosystem has been protected to date, we can't wait to see just how well this experiment will play out.
Jean-Claude Trichet Makes A Moody's Downgrade Of Greece Irrelevant, Says ECB Will Ease Collateral Rules In That CaseSubmitted by Tyler Durden on 03/22/2010 13:26 -0400
Presented is the full text of speech by ECB head Jean-Claude Trichet before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels. While the speech itself has nothing new to say, further entrenching the bubble mentality of the Bernanke Put, some of the comments by JCT in the Q&A are rather relevant, namely that the ECB will once again look at the "collateral issue" of government bonds. Just in case Moody's grows a conscience, here is how the ECB will deal with it: "The European Central Bank does not expect Greek government bonds to be downgraded again, but if they are it might have to reconsider its plan to revert back to pre-crisis collateral rules at the end of this year." This is amusing because earlier today Alphaville posted a research note by UniCredit which shows just how increasingly impaired by "rubbish" the collateral provided by European banks to the ECB has become. This is inline with extended disclosures provided on Zero Hedge about how our own Fed has recently allowed total crap to be lent against in both its discount window and the Primary Dealer Credit Facility. Another amusing soundbite: "High government bond spreads don't justify emergency loans." Oh, so the CDS speculators won't be summarily executed after all, even despite all the disclosure by BaFin and everyone else that CDS speculators had no impact whatsoever on blowing up bond spreads? What an anticlimactic development.
* Bundesbank President Axel "I'm German, That's All You Need Know" Weber
* Portugal's Central Bank Governor Vitor "Policy Wonk" Constancio
* Italy's Mario "What the Hell Are You Laughing at?" Draghi
* Greece's George "But, I've Been in The Lion's Den" Provopoulos
* There's Going to be a Euro Next Year?
Quotes from Germany's Finance Minister:
G-7 To Discuss Greece, Portugal On Sidelines
Crisis Not Yet Fully Over
Market Moves Exaggerated But Must Be Taken Seriously
Euro Is And Will Remain Stable
Will Not Spare Greece From Efforts To Reduce Deficit
Europe Isn't Only Place With Budget Problems
EU Commission Will Enforce Tough Demands On Greece
Just as it appeared that the wheels were about to come off, stocks, euro, gold, and oil were all u-turned late in the day. No doubt, somebody spotted Trichet heading into a massage parlor, providing traders with a heads up that a possible intervention was in order.
Not good for Europe: all the posturing about how Greece will never, ever be bailed out was just destroyed courtesy of a few words out of place by the IMF. IMF Managing Director John Lipsky just noted that the International Monetary Fund is ready to help Greece "in any way necessary." The quote comes from a Bloomberg TV interview conducted earlier.Perhaps that is why Greek CDS just hit another all time wide at 410 (+35). And joining the foot in the mouth crew is ECB president Trichet who said that "Debt on both sides of the Atlantic are unsustainable." So should we now assume that even Central Bankers admit we are headed for a brick wall at 120 mph?
FOCUS: Do you consider this independence to be a great advantage? The Chairman of the Federal Reserve was appointed by the President – and the Senate is currently deciding whether Ben Bernanke can have a second term in office.
Trichet: It is of key importance that the ECB’s independence is guaranteed by an international treaty and not just by national law. National laws can be adopted, but they can also be overturned again.