Sunday, 28 February 2010

EU solution to Greek debt crisis emerges

Economic & political imperatives are starting to surface in the Greek debt crisis. The Euro is a political project but requires economic underpinning to succeed. Politically Greece cannot be allowed to default on its debts and hence leave the Euro. It would be a mortal blow to the great EU project. It cannot be allowed to happen. Economically the only major source of funds is the Germans. The only problem is how to achieve German refinancing of Greek debt without seeming to drive a coach and horses through the EU growth and stability pact and ECB rules. Greece however is running out of time to refinance its debt before default sets in.

The EU answer according to yesterday's FT is to persuade/coerce the German banks to buy up the next offering of Greek debt by offering these banks via the German, state owned investment bank KfW, a government guarantee. The Greeks have delayed this offering until enough banks are signed up or have their arm twisted to ensure the offering is over subscribed and can be hailed as a great success. KfW was set up just after the war to lend in Germany for infrastructure and industrial projects. The German volk wont like it being used to guarantee dodgy Greek debt. There will be nominal involvement from commercial banks from other EU countries so the rescue can be proclaimed an EU success. But will it work?

Currently Greek bonds have a BBB+ credit rating and are virtually untradeable as no one wants to buy them. When locked in holders instead turned to CDS insurance they drove these up to 400+ basis points. I presume the ECB is still taking Greek bonds as collateral in their repo ops despite their published web site criteria of a minimum required single A credit rating equivalent to a 0.001 probability of default in the next year. I cannot see how the EU can influence the ratings agencies but the ECB can take what it likes in its repo ops. Banks forced to buy these Greek bonds will only be able to use them themselves in ECB refinancing operations and will sell off their stock of non - Greek bonds to a level where they hold enough bond stock for their liquidity needs. This will drive up the yields on non-Greek bonds and I can't see many buyers of other PIIGS bonds. I opine these banks will only be able to sell their best credits, i.e. German and French bonds, but they need those for liquidity trading on the inter-bank repo market. The end result of this EU persuasion may well be less day to day bank liquidity - bad news all round. The law of unintended consequences rules OK?

Add in to this the story that Goldmans helped the Greeks hide their true fiscal position, fiddle the books, on Euro entry and it is easy to see how things may rapidly go pear shaped. All the EU directives and all van Rumpoy's Barrosso men won't put Humpty together again! Especially when Greeks are calling the Germans incompetent Nazis and recalling the German occupation of Greece during the war left 300000 Greeks dead.

Europe is in for what AEP in the DT describes as deflation torture followed by huge civil unrest. The politicos, ie Merkel and Sarkozy, may be forced to invoke Article 219 of the Maastricht Treaty and take matters into their own hands to reduce the Euro FX rate. Banking is too important to be left to Bankers and ego driven economists when seats on the gravy train are at stake for the political class.

Friday, 19 February 2010

Greece today, UK tomorrow plus assorted UKIP thoughts

As the snow is good I set off tomorrow to ski at Oberau and stay at the monastery where St Francis, the one who wrote Mrs Thatcher's 1979 victory speech, started life as a monk. So no more blogs for a week unless the monastery has WiFi and I get divine inspiration.

'Our debt set to be higher than that of Greece' is the page one headline in today's DT' The penny is starting to drop! When the news was released that the UK had to borrow from the market in January for the first time since records began A Darling went into Cpl Jones mode and had his Treasury minions phone around the major City institutions saying 'Don't panic, don't panic' Capt Mannering aka Merv King said nothing.

The corollary to this episode escaped the Telegraph hacks.The UK will get the same treatment from the Franco-Prussian EU empire as is now being meted out to the Greeks. The EU will take control of Greek tax and spend policies under article 126.9 of the Lisbon Treaty. An EU proconsul will be appointed to run Greece with a suitably anodyne title and ways will be found to make the Greeks work. Arbeit Makt Frei as the sign said.

Ah say the philes but we are not in the Euro. They should read what the Lisbon Treaty actually says not what they think it says. In or out of the Euro Lisbon made us a vassal province of the EU state!

And what is Farage and his Cabal doing with this God given opportunity? Not appearing on Question Time last night with no reason given. Deferring UKIP NEC elections. Reason, "With many of the likely candidates also involved in running as candidates in the general election it makes sense to postpone our internal poll. That way these people can concentrate their time and energy on achieving success for the party without the added burden of contesting NEC elections" says Zuckerman. To stand for the NEC you have to fill in one form and get 10 signatures. It says it all about UKIP NEC that this simple overwhelms them with work. Canvassing is banned in NEC elections unless approved by Farage.

The real reason for this unconstitutional act is so Farage can get his Pan European party agreed by his current nodding donkeys. I am amazed Zuckerman, a solicitor, can put his name to such an abuse of UKIP rules.

I was approached to stand as an anti EU Alliance candidate in the General Election. I declined for personal reasons but I think this party has much to recommend it. Its candidates will be independent of party control and need only agree on one policy, get us out of the EU. The party system does great harm to our country with the general populace's choice of candidates being restricted and manipulated by party machines. UKIP's MEP selection procedure is a good example. Let us have real Swiss style democracy with binding referendums and no career politicians.

Finally I recommend this week's Private Eye with lots of good Greek jokes along loss of marbles lines.

Monday, 15 February 2010

Greek bond crisis worsens and Farage's UKIP does nothing

I was astounded to read no less than 4 articles in today's DT on the Greek bond crisis plus a major piece by Liam Halligan in the Sunday Telegraph. It is flattering that the major news media are now giving this story the attention it deserves. I have been running it on this blog for a year! I remember when I first joined UKIP over 3 years ago pointing it out to M Wood, SW RO and long time Farage supporter that this was the Euro and therefore the EU's Achille's heel.

LH puts it well in the ST, "The single currency is a triumph of European hubris and political vanity over economic logic". Diane Abbott said on the late night Andrew Neil show last week that when she was on the Treasury select committee in the 90s when the Euro was discussed she quickly realised it had nothing to do with economics and was all about EU political ambition. But after hubris comes nemesis as the classical scholars will remember.

AEP piece in today's DT is headlined, "Greece and its debt have exposed the original sin of monetary union. Edmund Connery's piece is headlined 'German poll anger on Greek bail-out' and Roger Bootle's piece is headlined 'The current Greek crisis is merely act one of a much wider tragedy' BoJo's centre piece spread in the main DT is headlined 'The Greeks must be rueing the day they whacked the drachma'

Its what you call an open goal but what has UKIP and Farage done about it? Nothing but visit pubs in Brussels, Strasbourg and Buckingham. The truth is they don't have an economic spokesman capable of putting the ball in the net. The mediocre Farage sycophants hounded them out of UKIP years ago.

I copy below an email I was sent today from a well placed source who wishes to remain anonymous that clearly details the current waiving of UKIP rules to mislead the membership.

'The NEC elections have been postponed until after the general election. The purpose for their postponement is that Farage wants to foist membership in a Pan-European Party on UKIP. He cannot do so before the general election, as this would cause all sorts of problems with party unity in the runup to the election. The proposal is thought to be so unpopular that Farage feels that he needs to keep certain uber-loyal NEC members (who are up for election) on the NEC until the vote to join a Pan-European Party is passed. Apparently he is concerned that some current NEC members will baulk at it.

UKIP activists are beginning to notice the delay in the NEC elections. The story that will be spread about is that it was a decision taken by the NEC. However, my source has had an opportunity to peruse all of the NEC meeting minutes of the past year and nowhere has this issue been discussed. These events raise certain questions:

1. Their terms on the NEC having expired - are those NEC members who were up for re-election able to attend and vote at NEC meetings until new elections are held? Would their doing so invalidate any decisions taken?

2. If the answer to the first question is No, are decisions taken by the rump NEC without those members present valid?

3. Is it even possible under the UKIP constitution to postpone elections in this manner.'

That says it all. More abuse of the UKIP rules and procedure to serve the Cabal's sordid selfish ends.

Thursday, 11 February 2010

Greek Tragedy. EU waives the rules.

The EU leaders met today and produce what EU leaders do best, a lot of hot air, big on rhetoric and short on facts. The markets were not impressed, can you blame them? The Euro fell on the Forex market against the Dollar,Yen and even Sterling, a triumph for the EU crats and M van Rumpy. The so called plan breaches all the Maastricht Treaty rules setting up the Euro but that's what rules are for in the EU. Nothing is more important than the great EU project. It must be kept rolling at all costs.

As I wrote on Sunday the real trouble will come when the Greeks realise they are now being ruled by Brussels and in particular the Germans on such things as tax, public sector pay and social welfare payments. Their civil servants have already gone on strike, a general strike is planned for 24th Feb but when the weather warms up in late April the rioters will be on the streets of Athens and Salonika. Greek politicians will face real physical violence against themselves and their families. They will have to choose between loyalty to their own people and loyalty to the Franco German EU empire. If they want to stay as as Greek politicians they must reject the EU publicly.

The problem with an EU bailout is it lowers the credit rating of the whole Euro area. Bad, but worse is the moral hazard it creates, with Spain, Portugal and Italy waiting with their begging bowls ready. Politicians in the EU and here in the UK are not telling the truth. They are avoiding the tough decisions they so frequently boast of taking. The so called solution to the credit crunch is built on sand and paper money. It will take real pain, tax rises, wage cuts etc and the courage to face millions of angry voters on these issues at the ballot box. That does not sound like any of our current politicians.

Talking of which I watched Andrew Neil's Daily Politics show at 12:00 today. Who was asked to give the anti EU view on the Greek tragedy from Strasbourg? Daniel Hannaan and he did it very well. He is now clearly regarded by the media as the leading EU critic. He clearly is a class act and makes NF look second division. The pity is so many good, well educated, talented people who could give Hannaan a run for his money have been hounded out of UKIP by the self seeking Cabal.

Sunday, 7 February 2010

Greek Endgame Approaches

The festering Greek sovereign debt crisis has now spread to infect, and affect, the whole Eurozone. Portugal, that put the P into PIGS, last Monday was left with 40%, €200 mn of its latest Euro bond offering unsold. This hit not only Greek and other non-Greek Eurobonds but also the Euro itself which fell heavily against the Dollar and the Yen. The PIGS' CDSs, Credit Default Swaps, the cost of insuring against default, also blew out. Worse, there is a story that the counterparties writing these swaps are mainly Greek banks!. Pig on pork as they used to say in the City.

The FT recently published the table below on the total 302,5 bn US $ debt Greek debt exposure by country:

France 75.5

Switzerland 64

Germany 43.2

Others 120

Exposure in this case is likely to be a mix of sovereign, corporate and bank debt — and it could easily have been reduced using hedges (one reason European CDS liquidity is also increasing):

Size of exposure is not the only issue here, there’s also the issue of concentration. According to BNP, Irish, Austrian and Portuguese exposure is concentrated in just a few banks.

In France, Greek-exposure is concentrated on Credit Agricole, as owner of Emporiki, and Societe Generale, which has stakes in Geniki Bank and Hellas Finance. German exposure by contrast, though ultimately high, is spread thinly between many banks, according to BNP Paribas.

This makes for some interesting politics with a few French banks standing to lose a great deal.

The pressure is on for a bail out by the wealthier members of the Eurozone but that of course would generate demands for similar treatment from the other PIIGS. The other option is to call in the IMF which would be anathema and a big admission of failure to the Eurocrats who hate all things American. It would however leave them able to blame the Anglo Saxons for the inevitable blood bath that would follow implementing the swingeing cuts in public spending the IMF would demand for any loans it makes to Greece. The other usual IMF demand in return for its support is devaluation of the currency something that is outwith the control of the Greek government unless it leaves the Euro. The Germans will not accept propping up the PIGS with their hard earned. Merkel's government would fall if she tried to.

Public spending cuts have to come in all the PIIGS. (and the UK as well but that's another story!) When you have the levels of unemployment of 20% and 40% youth unemployment eating up a huge chunk of the Government budget how can you cut without provoking huge civil unrest, riots and strikes? Governments would be toppled and the political elite lose their lucrative jobs!

The latter is obviously unacceptable to politicians of all colours in all countries but the alternative of Greece leaving the Eurozone followed by the other PIGS would pose a mortal danger to the Eurocrats' great project and even more lucrative lifestyles. This split between the interests of national politicians and the interests of the Eurocrats is the real threat to the EU. It is our best chance and probably only chance of getting out of the EU. UKIP as currently lead will sit in the bars and brothels of Brussels and not even realise what is happening. As Burns wrote in his great battle hymn Scots wha hae, "Now's the time and now's the hour"

It is only the Germans and the French that can topple the EU. UKIP must do all in its power to show the people of these two great powers that it is in their interest to rid themselves of this bureacratic nightmare.