If the Troika that handles bailouts of distressed euro zonecountries were a soccer team, it would probably be looking for a new manager after achieving a track record of one win, one loss and one draw.

The uneasy trio of European Commission, International Monetary Fund and European Central Bank was assembled in haste in March 2010 after Greece‘s public debt and deficit exploded and it was about to lose access to market funding.

Last week’s IMF “mea culpa” report about the failures of the Greek programme blew the lid off the fiction that the three institutions saw eye-to-eye on the rescue packages they designed and are enforcing in Greece, Ireland, Portugal and now Cyprus.

Behind closed doors, they clashed over whether Greece should restructure its debt, forcing investors to take losses, and whether Ireland should make bondholders in its shattered banks share the cost of a financial rescue. >> Read More

At an active volcano, long-period seismicity. . . provides

a glimpse of the internal dynamics of the volcanic edifice. When this activity occurs at shallow depths, it . . . can accordingly be a useful indicator of impending eruption.

Long-period volcano seismicity: its source and use in eruption forecasting, Bernard A. Chouet, US Geological Survey, 1996

 These days, if you tell investors that the only opportunities on offer are to pick up pennies around the edge of a volcano, they’re likely to perk up and ask you directions, and whether it’s possible to securitise the cash flows from the pennies. Yes, they know it’ll erupt, but what else are they going to do? Buy more double-B bonds? There’s a management fee at stake here, after all. >> Read More

Former Central Bank of Cyprus chief Anthanasios Orphanides was on Tom Keene’s show on BloombergTV this morning.

 In his interview, he goes off on the EU for its treatment of Cyprus, and says the European project is dying.

You can watch the full video here.

Below is a partial transcript provided to us by Bloomberg TV.

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Orphanides on Cyprus bailout:
“We are witnessing historic times. What we are witnessing is the slow death of the European Project. We are in a situation that some European governments are essentially taking actions that are telling citizens of other member states that they are not equal under the law.”

“What we have seen in the last few days is a very serious blunder by European governments that are essentially blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors in the banking sector in Cyprus. It is not clear how this can affect in a positive matter the European project going forward.” >> Read More

EU finance ministers have given the green light for 11 eurozone members, including France and Germany, to ready a new tax on financial transactions.

The approval under “enhanced co-operation” rules allows the smaller group to pioneer the tax.

Governments previously failed to agree to impose the tax across the entire 27-member EU or 17-member eurozone.

The UK and 15 other EU members will not introduce the tax, which is intended to discourage speculative trading. >> Read More

The euro region’s combined debt burden surged last year to the highest since the start of the single currency as governments struggled to fill budget gaps and contain the fiscal crisis.

The debt of the 17 nations using the euro climbed to 87.3 percent of gross domestic product in 2011 from 85.4 percent the previous year, the European Union’s statistics office in Luxembourg said today. That’s the highest since the euro was introduced in 1999. Greece topped the list with debt at 170.6 percent of GDP, followed by Italy and Portugal at 120.7 percent and 108.1 percent, respectively. The EU’s debt-to-GDP limit is 60 percent.

European governments are seeking ways to plug their deficits and restore investor confidence as the economy shows signs of a deepening economic slump. Greek Prime Minister Antonis Samaras’s government has been negotiating with the euro area and the International Monetary Fund over 13.5 billion euros ($17.6 billion) of austerity measures for 2013 and 2014 needed to qualify for the release of more loan installments. >> Read More

European officials will move to prevent Spain from dragging the single currency into a new round of convulsions this week as a series of high-level meetings aim to ease the three-year-old European debt crisis.

European finance ministers meet in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation, while on Oct. 10, Spanish Prime Minister Mariano Rajoy travels for talks with French President Francois Hollande in Paris. Germany’s Chancellor Angela Merkel tomorrow makes her first visit to Greece since the crisis began in 2009.

“It feels as if we are in for a month or so of Spanish trouble,” Erik Nielsen, London-based chief global economist at UniCredit SpA, wrote in a note yesterday. Nielsen cited the risk that Spain will wait too long to request financial assistance and that a rescue package will be badly designed.

A month after European Central Bank President Mario Draghi unveiled a plan to gain the upper hand through central-bank bond purchases, handing the burden of crisis resolution over to European governments, leaders have yet to agree on a blueprint for rescue conditions and centralized bank supervision. >> Read More

European officials will move to prevent Spain from dragging the single currency into a new round of convulsions this week as a series of high-level meetings aim to ease the three-year-old European debt crisis.

European finance ministers meet in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation, while on Oct. 10, Spanish Prime Minister Mariano Rajoy travels for talks with French President Francois Hollande in Paris. Germany’s Chancellor Angela Merkel tomorrow makes her first visit to Greece since the crisis began in 2009.

“It feels as if we are in for a month or so of Spanish trouble,” Erik Nielsen, London-based chief global economist at UniCredit SpA, wrote in a note yesterday. Nielsen cited the risk that Spain will wait too long to request financial assistance and that a rescue package will be badly designed.

A month after European Central Bank President Mario Draghi unveiled a plan to gain the upper hand through central-bank bond purchases, handing the burden of crisis resolution over to European governments, leaders have yet to agree on a blueprint for rescue conditions and centralized bank supervision. >> Read More

As Mario Draghi watched euro-zone markets disintegrate in late July, he scribbled two sentences into the margin of an otherwise routine speech for London investors, changing the course of the three-year-old euro crisis.

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” the European Central Bank president jotted. “And believe me, it will be enough.”

The ECB had long resisted using its most powerful tool—its printing press—to save struggling European governments from the debt crisis. The Bundesbank, Germany’s influential central bank, warned of dark consequences if the ECB tried that. Now Mr. Draghi, the ECB’s Italian chief, was signaling that it would defy its biggest shareholder.

Investors’ loss of confidence in the very survival of the euro convinced him there was no other option. Lenders were turning away from Spain and Italy, where a government insolvency could destroy the dream of European unity and rock the global economy.

By agreeing to create money to purchase struggling countries’ debt without limit, the ECB has ushered in the decisive phase of Europe’s battle to save the euro. If the ECB’s resort to the printing press fails to stabilize markets and buy time for crisis-hit countries to recover, nothing else will, economists say.

Even if it works, the ECB will emerge a fundamentally different institution, having abandoned major planks of the economic orthodoxy that shaped its charter and first decade. A more activist central bank, while welcomed in most European countries, is already confronting deep skepticism in Germany, where fears are growing that it is sowing the seeds of inflation.

A loss of German support for the euro would call the currency’s viability into question anew. The controversy over the ECB shows how the euro crisis is fueling tension among European nations. While many Germans fear a takeover of the currency union by Mediterranean countries, many southern Europeans feel that German obstinacy is prolonging the crisis. >> Read More

Economic news lately has been dominated by the euro crisis. Europe is in recession. Many see Greece as an economic basket case. Italy and Spain may be facing bankruptcy.

Greece may yet be forced to abandon the Euro Zone, renege on its national debts totaling hundreds of billions of euros, and revert to the old drachma as its currency. This may trigger banks in Greece and elsewhere in Europe to collapse, or at least seek massive bailouts from the European Central Bank and the International Monetary Fund.

And as Europe slips deeper into recession, European governments are at odds as to how best to address these problems. Germany, the richest member of the European Union, has a Conservative government that is adamant that the fiscal problems faced by Greece, Italy and Spain were caused by excessive government spending and borrowing.

To the Germans, supported by the Conservative British government, the solution is austerity. Countries with major debt problems must cut back their spending, reduce the size of their public sectors, and curb social entitlements like public pension plans and health, education and welfare policies.

Such austerity has already been the price of Greece receiving fiscal support amounting to hundreds of billions of euros. But such austerity in Greece has also crippled the economy, placing the country and its people into an economic depression the likes of which have not been seen since the 1930s. The Greek economy has declined by over 10 per cent since 2009.

If austerity is supposed to spur economic market fundamentals so that a country can grow out of its financial troubles, that theory has been failing in Greece.

And this has led leaders such as France’s new Socialist President Francois Hollande to stress that economic growth, not austerity, is the key to economic renewal and that with the private sector unable and unwilling to take the lead in investing in the European economy, such investments must come from governments.

Hence governments in France, Italy and Spain are calling for major programs of public spending, not unlike the Marshall Plan of the late 1940s.

As these debates have been playing out in Europe, there are some in North America who argue that the euro, the common currency in most of Western Europe, is doomed. >> Read More

BRUSSELS – The council of eurozone finance ministers, known as the Eurogroup, may hold an extraordinary meeting on July 20 to discuss the situation in Greece and in Spain, according to reports, despite being set to hold a scheduled meeting on Monday.

As far as Greece is concerned, the first discussions on the ongoing inspection by the mission of the European Commission, the European Central Bank and the International Monetary Fund — known as the troika — will take place at Monday’s scheduled Eurogroup meeting. The Europeans are expected to decide what stance they will take with respect to the inspection and the negotiation for the signing of the updated bailout agreement with the troika.

Diplomatic sources told Kathimerini that European governments are being cautious, and will remain so at least until the end of the bailout program’s evaluation. The evaluation is not seen happening before Monday’s meeting, which will be taken up by the Spanish and Cypriot requests for entry into the European Support Mechanism (ESM) and the implementation of the May 28-29 European Council decisions.

As a result, an extra meeting of the Eurogroup will be necessary on July 20. That is when the troika will receive its political orders regarding its negotiating mandate, signaling what kind of concessions European governments are prepared to make. The new round of talks with the Greek side will begin on July 24. >> Read More