Yet another equities wobble overnight in Europe. The equities main indexes were down approximately 3% with the Italians leading the way with a fall of 4.75%. Over the weekend the new Spanish PM had asked the markets for a bit of reprieve, he didn’t get it:
Reuters reports that people are likely to return to the streets within days to begin protesting austerity yet again.
The ECB announced that it had purchased 8 billion euros in government bonds last week, up from 4 billion the week before. It is likely that most of this was the Italian and Spanish variety, but the ECB still seems to be holding back as the purchases aren’t anywhere near its reported self imposed limit.
The temporary Greek Prime Minister, Lucas Papademos, was in Brussels to meet the Eurpoean Commission president José Barroso in an attempt to negotiate the sixth bailout tranche. Barroso’s welcoming speech is below:
I’m very pleased to welcome Prime Minister Lucas Papademos to the European Commission today. Prime Minister, your visit to Brussels so soon after taking office sends a strong message of your commitment to working closely with the European Commission .
I want to congratulate you very sincerely on your election by the Parliament as Prime Minister of Greece. I know it requires courage to assume this kind of responsibility at this very difficult moment in your country.
The agreement to form a national unity government backed by a broad political consensus is a vital signal of the need for political stability in Greece at this crucial time. The situation is extremely serious, more so perhaps than at any point in the last eighteen months. Political determination and resolve are more important than ever to enable Greece to stay the course towards economic reform and renewal.
There are two essential objectives for the coming months. Firstly, a second programme of financial assistance to Greece for the next three years must be concluded by the end of this year. Secondly, the voluntary bond exchange with private sector investors should take place as planned at the beginning of 2012.
The immediate task is to take the necessary steps for the sixth disbursement to be released as soon as possible. It is also crucial that the new government sends a clear signal that it will not waver from setting its debt on a steady downward path. The statements made by the Prime Minister on this in the last few days have been extremely important. Fiscal consolidation should go hand in hand with the structural reforms needed to transform Greece’s growth potential and generate new jobs.
I have assured the Prime Minister that we are doing everything in our power to help him and to help Greece. We have mobilised resources, though our Task Force for Greece, like never before. The Task Force is working well with the Greek authorities. Horst Reichenbach joined our meeting today and outlined the comprehensive roadmap of technical assistance that is needed in priority areas such as tax administration and administrative reform.
I know these are extremely difficult times for many Greek citizens. I do not underestimate the pain that the necessary cuts in public spending are causing. But sometimes in life we have to take difficult decisions. The alternatives are certainly much worse. I do hope and trust that the Greek people will support this transitional government and understand why these hard choices are needed.
I want to say on my own behalf and on behalf of the European Commission, also on behalf of Vice-President Rehn who was today in our meeting with Prime Minister Papademos, that we will put the best of our resources to support the Greek Government and the Greek efforts, but for that, of course, a condition is necessary – that Greece wants to help itself; that Greece promotes the real broad national consensus. The situation demands this national consensus and I have said it several times before – that in these times, that are so exceptional, some exceptional solutions have to be found and that I fully trust the determination of the Greek people in building that national consensus.
Once again I would like to congratulate you, Prime Minister, on your appointment. I know that Mr Papademos has taken on what might be described as a Herculean task, but I know that with his expertise and credibility he has the ability to make it possible, of course counting on the support of the Greek people.
Given that the Greek people where denied a right to vote on this entire process, congratulating the man who holds the position while demanding the support of the Greek people appears oddly hypocritical to me. However, you don’t need to go as far as the citizenry to find someone who wouldn’t be providing support.
New Democracy head Antonis Samaras refused to give a written guarantee that he would continue to do whatever it took to meet the terms of the bailout no matter who wins an election tentatively set for Feb. 19.
According to LAOS party head George Karatzaferis, who met the troika team on Sunday, the international lenders would not release Athens’ sixth aid installment without the pledge.
“I believe there is no wiggle room at all and we have to find an arrangement so that the money can be released in time to cover the country’s pressing needs,” Karatzaferis told reporters, adding that he would sign the pledge.
Samaras told the troika officials on Sunday that a verbal vow not to oppose existing reforms should suffice.
But in what analysts say is a move to distance himself from painful austerity measures and win votes ahead of the election, he also said last week he wants to win a full majority so he can reverse reforms he disagrees with.
The stand-off continues.
Overnight Mr Barosso once again defended eurobonds as a support mechanism for Europe even though the Germans have repeatedly stated that they are not acceptable.
It wasn’t all periphery last night, however. The rot is beginning to settle on the core with France receiving an ominous warning from Moody’s:
“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Moody’s Vice President and Senior Credit Officer Alexander Kockerbeck said in the rating firm’s Weekly Credit Outlook.
French debt doesn’t seem to have been effected too badly by the news, however French CDS move over 3% higher.
In other news Slovenia’s tight connections to Italy are still causing the country issues, the Luxembourg PM stated that EU treaty changes are not a ‘matter of priority‘, the ECB’s Stark warned that the crisis had spread to the core, Spain nationalised Banco de Valencia, Credit Suisse says Europe needs a ‘Momentous Deal‘ , and finally the 3 Month Euro Basis Swap rate is now the worst since last 2008 and, as the TED spread shows, we are slowing but surely creeping towards a liquidity lockup.