Spain is desperate, pleading and begging for help. Literally Spain said it does not have access to markets to refinance their debt. This is after the G7 decided to do nothing.
Spain said on Tuesday it was losing access to credit markets and Europe should help revive its banks, as finance chiefs of the Group of Seven major economies conferred on the currency bloc's worsening debt crisis but took no joint action.
Treasury Minister Cristobal Montoro sent out a dramatic distress signal about the impact of his country's banking crisis on government borrowing, saying that at current rates, financial markets were effectively off limits to Spain.
"The risk premium says Spain doesn't have the market door open," Montoro said on Onda Cero radio. "The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt."
Now Spain is up against it, testing the market with a bond sale, all in hope of avoiding a bail out, with all of the austerity demands that come with one.
Spain will try to raise between one and two billion euros in bonds on Thursday, a crucial yet cautious test of Madrid's ability to tap investors after a minister said the country was being cut off from the markets.
Euro zone stocks could plummet up to 50 percent if Greece makes a disorderly exit from the euro zone.
Additionally it was proclaimed bank runs have started in Europe.
A bank run is now happening within the eurozone. So far it has been relatively slow and prolonged, but it is a run nonetheless. And last week, it showed signs of accelerating sharply, in a way which demands an urgent response from policy-makers.
Now investors are worried about the contagion effect a Greek exit from the euro zone could have on savers in other countries.
"Preventing bank runs in Italy, Spain and Portugal should be the top priority," said Berenberg Bank economist Holger Schmieding. "Policymakers need to make sure that the potential Greek precedent of a forced conversion of domestic euro deposits into a weak new currency would not spark a run on banks ... elsewhere."
The ECB is pressing the euro zone to set up a fund that would prevent this dangerous ripple effect, a message reinforced by ECB policymaker Joerg Asmussen last week.
Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.
Corporations Park Over 60% of Their Cash Offshore
Large multinationals literally park 60% of their cash offshore. Don't let these facts argue for a corporate tax holiday. Cash would just be distributed to shareholders, not used to hire American workers or invest in America.
Large U.S. companies are holding at least 60% of their cash overseas with some keeping nearly all of their cash balances offshore, according to a study from J.P.Morgan accounting analysts published Wednesday.
In a review of disclosures, the bank’s analysts found that out of the $974 billion in cash on the balance sheets of 602 U.S. multinationals, at least $588 billion, or 60%, is sitting in foreign accounts.
“Foreign subsidiaries are becoming much more important in a lot of businesses, especially with companies that have substantial amounts of intellectual property,” JP Morgan accounting analyst Dane Mott told CFO Journal, noting that many of the companies with significant overseas cash stockpiles were in the technology and pharmaceutical industries.
J.P. Morgan found that Apple had the highest offshore corporate cash balance, with $74 billion held overseas, representing 67% of its total cash holdings. But as a percentage of total cash, J.P. Morgan said the company had a smaller amount sitting offshore than many of its tech rivals, including Microsoft, Cisco, and Hewlett-Packard, which had 89% or more of their cash overseas.
Moody's Investors Service says that it considers Greece (C/no outlook) to have defaulted per Moody's default definitions further to the conclusion of an exchange of EUR177 billion of Greece's debt that is governed by Greek law for bonds issued by the Greek government, GDP-linked securities, European Financial Stability Facility (EFSF) notes. Foreign-law bonds are eligible for the same offer, and Moody's expects a similar debt exchange to proceed with these bondholders, as well as the holders of state-owned enterprise debt that has been guaranteed by the state, in the coming weeks. The respective securities will enter our default statistics at the tender expiration date, which is was Thursday 8 March for the Greek law bonds and is currently expected to be 23 March for foreign law bonds. Greece's government bond rating remains unchanged at C, the lowest rating on Moody's rating scale.
Moody's understands that 85.8% of debtholders holding Greek-law bonds issued by the sovereign have agreed to the exchange, with the vast majority of remaining bondholders likely to be drawn in following the exercise of Collective Action Clauses that will be inserted pursuant to a recent Act by the Greek parliament. The terms of the exchange entail a discount -- a loss to creditors -- of at least 70% on the net present value of existing debt.
Greece is on the edge. Part of their bail out, the voluntary losses Greek bond holders were supposed to accept, is falling short.
Private holders of €206bn in Greek bonds have until Thursday evening to decide whether to take part in a swap where they would trade bonds for a package of bonds and cash that would knock about €100bn off Athens’ debts.
Greece must get 75 per cent of holders to participate to avoid forcing the deal on holdouts through so-called “collective action clauses” which were inserted retroactively into Greek bonds by the government last week. If less than 66 per cent participate, even the CACs would become invalid, scuppering the entire deal.
Greece expects bondholders to accept a one-time offer to write off about 100 billion euros ($140 billion) of Greek debt and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said.
Yet another deal, yet more austerity. The Financial Times has the most detailed terms of the latest Greek bail out. We've dug out some details as well.
Bail out is €130 billion
Greek bondholders hair cut is now voluntary
If Greece sovereign debt holders volunteer to take a hair cut, it's up from 50% to 53.5%
Greece gets to go into more debt with lowered interest rates
Greek is supposed to get their debt to GDP ratio to 120.5% by 2020
The ECB is going to distribute profits on €40 billion of Greek bond holdings
More austerity cuts of 5% GDP by 2014
More privatization of €19 billion by 2015
Here's the money shot. Greece's GDP is expected to shrink by 17% when comparing economic output from 2009 to 2013. That is not a recession. Greece is in a depression.
Gez, why not just invade, rampage and pillage the nation? Must all war be economic these days?
There was a leaked internal document which says Greece will never get out of this debt and shrinking GDP means....more bail outs.
Sorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The FOMC meeting minutes for January 24-25th were released last week and some speculative commodities traders still seem to be in denial land.
The FOMC money quote:
The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.
Traders in New York this morning were greeted with this happy headline from The Wall Street Journal:
US Stock Futures Higher; Buoyed by Greece
Yes indeed, the Dow Jones index is set to open at least 70 points higher because the Greek parliament approved the additional austerity measures demanded by the European Union, the European Central Bank, and the International Monetary Fund. In exchange for €130 million in a second bailout by the “Troika”, as the three lending institutions are called, Greece will have to cut its minimum wage by 22% and the government will have to lay off an additional 150,000 workers. This is in a country that is in its fifth year of recession, with an official unemployment rate of 21%. Business has virtually collapsed, with many private sector companies on the verge of bankruptcy. The health system is so starved for funds that a bacteria resistant to all medicines is raging through hospitals, forcing the chronically ill to decide whether to even risk seeking professional care. Poverty is reaching extreme levels and is well-entrenched among what used to be the middle class. Children are sent to school so hungry that they are fainting in the classrooms. As of last night, the crowds that were storming through Athens and other large cities no longer were content to throw rocks at the police; Molotov cocktails were used to set at least forty buildings in Athens on fire. The police in Athens, facing crowds estimated from 80,000 to 100,000 people, were forced off Syntagma Square, and appeared to have run out of tear gas. Journalists described the business center of Athens as a war zone. The country is slipping into social disorder, if not anarchy. But stock markets in Europe were up today on the happy news that the Greek parliament approved the additional austerity measures.
Here we go again. The Greece parliament has approved more austerity, code speak to cut pensions, wages and dump Greek debt on the backs of the people. Literally Athens is burning.
Spain is desperate, 
Last Friday we saw 
Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.
Moody's has proclaimed 
Greece is on 
Sorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The 
Yes indeed, the Dow Jones index is set to open at least 70 points higher because the Greek parliament approved the additional austerity measures demanded by the European Union, the European Central Bank, and the International Monetary Fund. In exchange for €130 million in a second bailout by the “Troika”, as the three lending institutions are called, Greece will have to cut its minimum wage by 22% and the government will have to lay off an additional 150,000 workers. This is in a country that is in its fifth year of recession, with an official unemployment rate of 21%. Business has virtually collapsed, with many private sector companies on the verge of bankruptcy. The health system is so starved for funds that a bacteria resistant to all medicines is raging through hospitals, forcing the chronically ill to decide whether to even risk seeking professional care. Poverty is reaching extreme levels and is well-entrenched among what used to be the middle class. Children are sent to school so hungry that they are fainting in the classrooms. As of last night, the crowds that were storming through Athens and other large cities no longer were content to throw rocks at the police; Molotov cocktails were used to set at least forty buildings in Athens on fire. The police in Athens, facing crowds estimated from 80,000 to 100,000 people, were forced off Syntagma Square, and appeared to have run out of tear gas. Journalists described the business center of Athens as a war zone. The country is slipping into social disorder, if not anarchy. But stock markets in Europe were up today on the happy news that the Greek parliament approved the additional austerity measures.
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