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| Spot the odd one out. Source: Bespoke |
Sarkozy is trying his best to look electable against that stinky socialist who is leading in the polls. The French little man's plan is to push through a watered-down financial transaction tax (FTT) scheme that would make him look tough on banks. More importantly, this is something his opposition has promised to do as well, so by establishing the tax he is taking away one reason to vote his adversary.
Ridiculous, pathetic, just so French. Read this real-life case from Sweden. Sarkozy probably knows FTT will not work and it would have to be cancelled soon. So basically to sooth some fringe voters he is prepared to spend massive amounts of the French society's scarce resources just to get re-elected. Fuck you, Sarcofagus.
Meanwhile, Merkel has announced his support for Sarkozy's campaign. Of course Merkel needs Sarkozy. Together, they are the Merkozy. Sarkozy helps to transmit the picture that the "European values" are shared by many nations' leaders (deux) and this should make holding the line and feeding the ESM funding obligations to EU countries collectively slightly easier. What would happen without Sarkozy's support? To quote the genius of Peter Tchir from last August:
Any charade that the EFSF isn’t Germany in drag (not a pretty image) would be shattered. The German people would realize that no matter what their politicians are saying,they would be taking on the debt of the PIIGS and be solely responsible for supporting the Euro. I think that will be too much, and the can will not be kicked.
Joke of the Day: Can't get enough of gravitationally-challenged presidents and Gollum wannabes? Then this webcast is for you. Oops, looks like no Sarko, just that D-grade actor Barroso. Oh well - both are completely irrelevant - Zero Hedge covers today's EU summit
News – BTH
Markets – BTH
Recap – GMT
FX option vols – Saxo
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
EURO CRISIS: GENERAL
Why the Eurozone Can’t Just Muddle Through – The Curious Capitalist / TIME
There’s a growing optimism that the common European currency can be saved, but the numbers argue that this is unrealistic.
Greek Bond Math (Assuming the Deal Goes Through) ; Merkel Faces Backlash Over Deal; Political Zugzwang – Mish’s
Greek bond deal does not make anyone better off, Merkel in a position where any move will make her (or euro’s) future darker, nonsense from the political hack Delors.
Merkel and Sarkozy have to appeal to national voters for a short while, and negative and confusing headlines should be expected. Portugal is the next one getting a haircut after Greece, even though EU is trying to pretend that Greece was unique.
What is needed is a grand bargain, with countries that lack policy credibility undertaking structural reforms without delay, in exchange for more room within the EU for growth-generating measures, even at the cost of higher short-term deficits.
EURO CRISIS: GERMANY
Germany will not countenance a debt union for the currency union nor give up any of its own democratic powers over its economy, but all other EU States must comply with Germany's instructions and follow their economic ideology to become good 'EU' Countries. This ludicrous position is only going to end in tears for all.
Clearly risks to German economic expansion are tremendous, particularly if further assistance for periphery nations (via ESM or IMF) or German banks will be required. But if these survey based indicators are reasonable predictors of GDP growth, Germany may indeed achieve at least a partial decoupling.
Merkel to back Sarkozy's re-election bid – euobserver.com
Awwwww…..
EURO CRISIS: TRANSACTION TAX
Why the Tobin Tax is a Bad Idea; Sweden's Experience With the Tax; Details of Sarkozy's Proposed Tax; Sarkozy Wants to "Provoke a Shock" – Mish’s
Let Them Eat Financial Transaction Taxes – TF Market Advisors
If some of the numbers are real and apply to any transactions conducted with French banks or in France – the financial system there would shrink quickly – so if and when anything concrete is proposed it will be watered down significantly.
EURO CRISIS: ECB
Revised ECB liquidity number du jour – alphaville / FT
Credit Suisse thinks market expectations of the size of the 3-year LTRO on 29-Feb is around €0.5-1 bn, and believes that the actual number will be around 0.5 bn.
Credit Suisse thinks market expectations of the size of the 3-year LTRO on 29-Feb is around €0.5-1 bn, and believes that the actual number will be around 0.5 bn.
EURO CRISIS: GREECE
Engineering an Orderly Greek Debt Restructuring – SSRN
29-Jan: In light of Greece’s deep solvency problems and lack of agreement with its creditors so far, the notion of a voluntary debt exchange is increasingly looking like a mirage. In this essay, we examine the alternatives and compare them to an outright default
Bondholders would be better off lobbying the Troika than they are negotiating directly with Greece. After all, the Troika is really calling the shots here. And the Troika wants bondholders treated extremely well — after the restructuring. So if bondholders want things like English-law bonds and constitutional amendments, they should probably be asking the Troika for them, rather than Greece. Greece has no real reason to give them such things. But it can easily be forced to, if that’s what the Troika demands.
“Whoever puts before a people the dilemma of choosing between financial assistance and national dignity disregards basic historical lessons,” said Greece’s finance minister on Sunday.
EURO CRISIS: PORTUGAL
The spread between bond bid- and ask prices is huge, suggesting there aren’t many foreign private investors in the market. 10y trading around 40% nominal, while 2y trading around 80% nominal. Debt restructuring and ECB’s seniority are being priced in?
ECB said to be buying Portuguese bonds. Roll needs 10bn by May 2012, a lump over 10bn in June.
OTHER
The missing GDP – alphaville / FT
Credit Suisse compares the US recovery against earlier ones. Recovery speed is around half of the long-run average, worst-hit sectors are consumer spending on services, residential investment and the state and local governments.
Credit Suisse compares the US recovery against earlier ones. Recovery speed is around half of the long-run average, worst-hit sectors are consumer spending on services, residential investment and the state and local governments.
Baltic Dry Index Signals Renewed Market Collapse – alt-market.com
The stark decline in the BDI today should be taken very seriously. Most similar declines have occurred right before or in tandem with economic instability and stock market upheaval.
Risk on/risk off is changing – alphaville / FT
Standard Chartered: USD used to strengthen on weak macro news (risk-off). Now this has changed. So where has the risk-off trade been heading instead? Seemingly mostly Asia-ex Japan and commodity currencies like the AUD.
Every time I have been there I have had the feeling that Russia was about to finally do something to change its ways, yet I am always unfortunately let down. This time however it feels and looks different.
Davos 2012: The unfinished and the unmentionable – Stephanie Flanders / BBC
Anyone who listened to the main sessions in Davos could tell you the top two items now on the to-do list for European leaders: fixing the eurozone's financial firewall and finally sealing the deal on Greece.
Banking Wasn’t Meant to Be Like This – Credit Writedowns
It is too early to forecast whether banks or governments will emerge victorious from today’s crisis. As economies polarize between debtors and creditors, planning is shifting out of public hands into those of bankers. The easiest way for them to keep this power is to block a true central bank or strong public sector from interfering with their monopoly of credit creation. The counter is for central banks and governments to act as they were intended to, by providing a public option for credit creation.
DIVERSIONBart Simpson’s rules: 1) I didn’t do it 2) Nobody saw me do it 3) They can’t prove anything
New masters of the media universe – The Guardian
Before the global meltdown, financial news was strictly for geeks and struggled to get on the news. Now, financial correspondents have become celebrities
Review of “Models. Behaving. Badly.” by Emanuel Derman – Portfolio Probe
The review style is really post-post-modern in style.