Cyprus is now an evens-money bet to leave the eurozone within the next 12 months.

Ladbrokes slashed its odds after president Anastiades called for its bailout to be revamped. The news that he had been swiftly rebuffed by EU officials this morning (see 9.25am), means Cyprus remains the most likely country to leave the eurozone.

Next country to leave the Euro

• Cyprus: 1/2
• Greece: 2/1
• Slovenia: 7/1
• Italy: 10/1
• Spain: 10/1
• Portugal: 12/1
• Cyprus to leave the Euro within a year: evens

Cyprus’ President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA’s terms are “too onerous.” Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials “puzzled”, according to a letter the FT has uncovered, as “essentially, he is asking for a complete reversal of the program.” The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.

The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume – or just token gestures to recover some populist support as the enemy of my enemy is my friend. >> Read More

 International Monetary Fund managing director Christine Lagarde has defended the European Central Bank’s crisis policies in a newspaper interview published Wednesday in Germany.

Without the commitment of ECB president Mario Draghi to buy up an unlimited amount of government bonds if need be, “there would be today in the whole Eurozone economic stagnation, higher unemployment and even more social tension,” Lagarde told the German daily Sueddeutsche Zeitung (SZ).

The announcement by the ECB of its OMT bond buying programme was “the turning point,” Lagarde told the paper. “Exceptional circumstances call for exceptional measures,” she said. >> Read More

Just six short months ago (before GGBs rallied 119% and the Athens Stock Index 53%), the EU and IMF agreed on Greek Debt/GDP targets, pronounced the nation “fixed”, and went on winter vacation. Well, surprise, the hockey-stick of expected GDP has not come to pass and now, as Der Spiegel reports, the IMF is refusing to participate in further rescue programs for Greece unless financing for the nation is secured for the next 12 months – in other words – a new haircut for Greece will be required to cover the EUR4.6 billion funding shortfall. 

 Christine Lagarde’s ‘fund’ is putting pressure on EUR members, after their mea culpa last week at the biliousness of their previous efforts to save the troubled PIIG nation, to agree to these new haircuts. This will not be a pretty dance – as with Merkel now a few short months away from a general election (and Germany owed EUR15 billion in KfW loans and a further EUR35 billion contributions to ESM/EFSF mechanisms), any agreement on her part would solidify opposition parties’ proof that taxpayer money was lost (and the good money after bad argument).

Perhaps that is why GGB prices have dropped over 10% in the last week?

The IMF admitted that not only is it an idiot (this was public knowledge) but also a liar (curious, as no “serious people” do this in polite company and certainly not publicly).

Subsequently, it released the full 51 page report. Those who are inclined to read the IMF’s admission that all our allegations about the international agency’s credibility, competence and corruption (which, as it implicitly admits, was also using taxpayer funds from around the world to preserve the way of life for a few parasitic and unelected European technocratic dictators). But perhaps the funniest is that the “world’s bailout organization” (at least in the days before the New Normal) is actually charging $18.00 for every hard copy of the report in which it admits it was morally (if not financially, at least not yet) bankrupt.

So wasting hundreds of billions in taxpayer funds to preserve a broken monetary model and the wealth of a few good bankers is acceptable, but when it comes to attaching a stamp to a letter, the IMF is suddenly prudent and responsible?

Just when one thinks the IMF can’t shock any more, they go ahead and fully redeem themselves.

Full report for which we will not charge one Paisa - pdf link. >> Read More

The International Monetary Fund is out with a report reviewing the Greek bailout program that it helped set up in 2010 and maintained through early 2012.

 The report is critical of the program set up by the IMF and the “troika” of creditors (the other two members being the European Union and the European Central Bank) for Greece.

For starters, the IMF admits that the projections for the Greek economy that were supposed to result from the implementation of the program turned out to be too optimistic.

From the report:

• The fiscal multipliers were too low.. The question that arises is whether underestimation of the size of the fiscal multipliers in the SBA-supported program caused the depth of the recession to be underestimated. The program initially assumed a multiplier of only 0.5 despite staff’s recognition that Greece’s relatively closed economy and lack of an exchange rate tool would concentrate the fiscal shock. Recent iterations of the Greek program have assumed a multiplier of twice the size. This reflects research showing that multipliers tend to be higher when households are liquidity constrained and monetary policy cannot provide an offset (see October 2012 WEO), influences that appear not to have been fully appreciated when the SBA-supported program was designed. Aslund (2013) has also argued that there is a habitual tendency of Fund programs to be over-optimistic on growth until the economy reaches a bottom (and thereafter to underestimate the recovery). >> Read More

France and Italy are fighting against ambitious plans by the ECB to basically ‘externally audit’ 140 banks across the EU representing 80% of Europe’s banking assets. The implementation of the project (by the head of financial stability at the central bank) appears to have two main drivers. First, to understand which banks’ balance sheets are inhibiting lending (and why); and second, to ensure there is clarification on taxpayer-funded bailouts versus shareholders and depositors taking losses first. As Zeit reports, it seems the ECB appears to be questioning the reliability of the banks own figures.

Via Zeit (via Google Translate), 

 

The European Central Bank (ECB) is working on a strong kick to overcome the crisis. It goes to the timely information in a rehabilitation center to European banks, whose balance sheet problems inhibit lending.

 

With the implementation of the project was Ignazio Angeloni commissioned, head of financial stability at the central bank. The timing is already set. From the autumn of the monetary authorities will illuminate along with the national supervisory authorities, the balance sheets of major financial institutions in the euro zone. There is a total of around 140 banks, which together cover about 80 percent of the market. >> Read More

Crisis-hit Cyprus could be headed for a much worse recession than initially anticipated when international creditors agreed to prop up its economy, the IMF has announced in a 47-page report released today. Helena Smith writes:

Forecasting that the island’s output will shrink by at least 9% in 2013 (and perhaps even more) the IMF said Cyprus faced “unusually high” macro-economic risks if it did not adhere to the stringent terms of the €13bn bailout it has signed with the EU, ECB and IMF.

“Should these risks materialize, additional financing measures may be needed to preserve debt sustainability,” it said, predicting that the tiny nation’s debt load would hit 126% of gross domestic product in 2015 before falling to 105% of GDP by 2020. 

Despite having already agreed to draconian belt-tightening measures – including highly controversial capital capitals – it was likely that Nicosia would be required to further slash GDP by 4.7% a year (the equivalent of €900m worth of budget cuts) over 2015 to 2018 to secure the island’s long-term primary budget surplus, said the IMF.

With the ink on the loan agreement barely dry, the report has unleashed fury among politicians on the island with the anti-austerity main opposition Akel party not only slamming the bailout deal but questioning if the government had read it before it signed up to the agreement. 

Akel cadres say the IMF assessment will embolden those now openly asking if it would not be better for the beleaguered island to exit the eurozone than apply such tough conditions.

Submitted by Michael Snyder of The Economic Collapse blog,

When is the economic collapse going to happen?  Just open up your eyes and take a look around the globe.  The next wave of the economic collapse may not have reached Wall Street yet, but it is already deeply affecting billions of lives all over the planet.  Much of Europe has already descended into a deep economic depression, very disturbing economic data is coming out of the second and third largest economies on the globe (China and Japan), and in most of the world economic inequality is growing even though 80 percent of the global population already lives on less than $10 a day.  Just because the Dow has been setting brand new all-time records lately does not mean that everything is okay.  Remember, a bubble is always the biggest right before it bursts.  The next major wave of the economic collapse is already sweeping across Europe and Asia and it is going to devastate the United States as well.  I hope that you are ready.

The following are 10 scenes from the economic collapse that is sweeping across the planet…

#1 27 Percent Unemployment/60 Percent Youth Unemployment In Greece

The economic depression in Europe just continues to get worse with each passing month.  According to the Daily Mail, the unemployment rate in Greece has nearly tripled since 2009… >> Read More

The US Dollar is likely to correct lower against the Japanese Yen if a disappointing Retail Sales report dents expectations of an earlier unwinding of Fed stimulus.

 Talking Points

 US Dollar May Fall vs. Yen if Retail Sales Data Disappoints

• Euro to Take Cues from Eurozone Finance Ministers’ Meeting
• Australian Dollar Sinks on Swan Comments, China Data Set

An uneventful economic calendar in European trading hours turns the spotlight on April’s US Retail Sales report. Expectations call for receipts to decline 0.3 percent, marking the second consecutive print in negative territory. Despite a handful of recent upside surprises, US economic news-flow has tended to underperform relative to consensus forecasts since late March. This hints analysts continue to overestimate the health of the world’s largest economy and opens the door for a downside surprise. Such an outcome is likely to weigh against bets on a tapering of Federal Reserve stimulus efforts. This threatens to apply downward pressure to the US Dollar, particularly against the Japanese Yen where the greenback enjoys a yield advantage. >> Read More