Posted by Andy Borowitz
ST. PETERSBURG (The Borowitz Report)—Hopes for a positive G20 summit crumbled today as President Obama blurted to Russia’s Vladimir Putin at a joint press appearance, “Everyone here thinks you’re a jackass.”
The press corps appeared stunned by the uncharacteristic outburst from Mr. Obama, who then unleashed a ten-minute tirade at the stone-faced Russian President.
“Look, I’m not just talking about Snowden and Syria,” Mr. Obama said. “What about Pussy Riot? What about your anti-gay laws? Total jackass moves, my friend.”
As Mr. Putin narrowed his eyes in frosty silence, Mr. Obama seemed to warm to his topic.
“If you think I’m the only one who feels this way, you’re kidding yourself,” Mr. Obama said, jabbing his finger in the direction of the Russian President’s face. “Ask Angela Merkel. Ask David Cameron. Ask the Turkish guy. Every last one of them thinks you’re a dick.”
Shortly after Mr. Obama’s volcanic performance, Mr. Putin released a terse official statement, reading, “I should be afraid of this skinny man? I wrestle bears.”
After one day of meetings, the G20 nations voted unanimously on a resolution that said maybe everyone should just go home.
The European Union’s cap-and-trade system took a huge hit on Thursday, with carbon prices plummeting a record 40 percent after a panel rejected a plan to delay emission permit sales to alleviate the overabundance of permits already in the system.
“The market is panicking, really,” Daniel Rossetto, managing director of Climate Mundial, told Bloomberg, adding that traders fear that Europe’s carbon emissions market won’t continue past 2020.
An excess of carbon emission permits in the 54 billion euro trading system drove the price down 91 percent from its record high in April 2006. Carbon permit prices sank to a record low of 2.81 euros ($3.75) per metric ton immediately after the panel rejected the EU plan. However, prices slightly rebounded to 4.33 euros per metric ton.
“This should be the final wake-up call,” said EU Climate Commissioner Connie Hedegaard in a statement. “Something has to be done urgently. I can therefore only appeal to the governments and the European Parliament to act responsibly.”
The European Commission wanted to temporarily delay the sale of 900 million permits to alleviate the current overabundance. Analysts say this move would have boosted prices, but not high enough to provide sufficient incentives for utilities to switch to cleaner energy sources, reports the Guardian.
However, the plan was met with resistance from various governments, industries, and lawmakers.
Joachim Pfeiffer, economy spokesperson for German Chancellor Angela Merkel’s party, said the plan was “absurd” and would impose higher costs on German industry.Reuters reports that the bank Societe Generale cut its EU carbon price forecast from 2013 to 2015 by 30 percent, due to prices plunging to record lows.
“Negative news and events relating to the EU [Emissions Trading System] continue to pile up and come from all sides. So it is not at all surprising that EUA prices have fallen and have continued to be quite volatile,” they said. “The EU ETS has become a one-way market, spiraling down.”
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- EU Carbon Permits ‘Worthless’ Without Change of Rules, UBS Says (bloomberg.com)
- Carbon price under EU emissions Trading System hits all-time low (seeker401.wordpress.com)
- EU Carbon Market Is at Risk of Total Collapse, Lawmaker Says (bloomberg.com)
- EU’s carbon market suffers after parliamentary vote (reuters.com)
- EU carbon price crashes to record low (aftermathnews.wordpress.com)
- EU carbon price crashes to record low (junkscience.com)
By Julien Toyer MADRID | Tue Jun 5, 2012 5:44am EDT
(Reuters) – Spain said on Tuesday that credit markets were closing to the euro zone’s fourth biggest economy as finance chiefs of the Group of Seven major economies were to hold emergency talks on the currency bloc’s worsening debt crisis.
Treasury Minister Cristobal Montoro sent out the dramatic distress signal in a radio interview about the impact of his country’s banking crisis on government borrowing, saying that at current rates, financial markets were effectively shut 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.
The country, which enjoyed rapid growth after it joined the euro at its launch in 1999, is beset by bank debts triggered by the bursting of a real estate bubble, aggravated by overspending by its autonomous regions.
The risk premium investors demand to hold Spanish 10-year debt rather than the German equivalent hit a euro era high of 548 basis points on Friday, on concerns that Spain’s fragile banking system and heavily indebted regions will eventually force it to seek a Greek-style bailout.
Montoro said Spanish banks should be recapitalized through European mechanisms, departing from the previous government line that Spain could raise the money on its own and prompting the Madrid stock market to rise.
But his comments on Spain’s borrowing sent the euro down after the 17-nation European currency earlier hit a one-week high against the dollar on expectations that a conference call of G7 finance ministers and central bankers may hasten bold action.
The European Central Bank holds its monthly rate-setting meeting on Wednesday and European Union leaders meet on June 28-29 to discuss their strategy for overcoming the two-year-old crisis which has already seen Greece, Ireland and Portugal forced to accept international bailouts.
Investors have fled peripheral euro zone sovereign debt for the relative safe haven of German Bunds and U.S. and British government bonds amid worries about Spain’s banking crisis and fears that a June 17 Greek election could lead to Athens leaving the euro, setting off a wave of contagion around the euro area.
Spain will test the market on Thursday by issuing between 1 billion euros ($1.24 billion) and 2 billion euros in medium- and long-term bonds at auction.
Emilio Botin, chairman of the nation’s biggest bank, Banco Santander told Reuters Spanish banks needed about 40 billion euros in additional capital, adding that “there is no financial crisis in Spain”. Montoro said the figures were “perfectly accessible”.
But his dramatization of the debt situation set a stark backdrop for the conference call of the United States, Canada, Japan, Germany, France, Italy and Britain, plus European Union officials, which two G7 sources said would start at 1100 GMT.
Montoro’s comments appeared aimed at pressuring the ECB and EU paymaster Germany to find ways of intervening. But the central bank has so far shunned calls to resume purchases of Spanish government bonds, and Berlin has said it is up to Madrid to decided whether to apply for assistance if it needs help.
Spain has been trying to persuade EU partners to allow direct aid from the euro zone’s rescue fund to recapitalize its banks without making it submit to the political humiliation of a full-fledged assistance programme, officials say.
The festering euro zone crisis has sparked mounting concern outside Europe, with the United States fretting that it could further harm its faltering economic recovery, and countries such as Japan and Canada fearing fallout for the global economy.
“We have reached a point where we need to have a common understanding about the problems we are facing,” Japanese Finance Minister Jun Azumi told reporters.
Ottawa and Washington both called for action after a G7 source said fears that capital flight from Spain could escalate into a full-fledged bank run had triggered the emergency talks.
“Markets remain skeptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen,” White House press secretary Jay Carney told reporters.
In a sign of increasing concern about the euro area’s debt crisis, Australia’s central bank cut interest rates by 25 basis points to 3.50 percent, the lowest level in two years. It cited further weakening in Europe and a deterioration in market sentiment.
PRESSURE ON BERLIN
Pressure is building in particular on Germany, the biggest contributor to euro zone rescue funds, to back away from its prescription of fiscal austerity for the region’s weaker economies and to work harder on fostering short-term growth.
Berlin argues that it is already doing its share by encouraging above-inflation domestic wage settlements, accepting the prospect of higher-than-usual German inflation and most recently agreeing that Spain should have more time to achieve its fiscal targets.
Furthermore, Chancellor Angela Merkel opened the door on Monday to the prospect of a euro zone banking union in the medium term, saying she would discuss with EU authorities the idea of putting systemically important cross-border banks under European supervision.
A German government strategy paper seen by Reuters sets out a timetable for closer fiscal union in the euro zone, but Berlin does not expect final decisions on strengthening economic policy coordination until March 2013, with only a roadmap being agreed at this month’s summit.
A G7 source familiar with plans for the call said the group would urge more progress at this month’s EU summit, though this alone would probably disappoint global markets.
Central banking sources said the ECB could contribute by cutting its main interest rate, lowering its deposit rate to try to shake loose some 700 billion euros parked overnight in its vaults by anxious banks, or by providing a third big liquidity injection to banks.
Some analysts believe the bank is more likely to await the outcome of the Greek election and the EU summit before taking decisive action.
A G7 source said there was only a very small chance the G7 would go as far as to pledge coordinated action to curb excessive currency volatility. Japan, for one, fears a strong yen, which has been a safe haven for investors during the euro zone crisis, could help tip its economy into recession.
The G7 could also call for concerted action at the upcoming summit of the wider Group of 20 major economies in Mexico on June 18-19, the source said. The G20, which includes China, played a prominent role during the 2008-2009 financial crisis.
A G20 official in Asia said the grouping, which also includes Brazil and India, could look to put pressure on Germany to switch to stimulus mode, as part of a wider call for strong, developed economies to step up spending.
“Germany and Canada could be seen as those having fiscal capabilities among the advanced economies,” the official said.
- Merkel rejects debt sharing as Obama urges Europe action (ekathimerini.com)
- Spain wants euro zone fiscal authority (news.yahoo.com)
- Spain tries to calm investors amid market pressure (seattlepi.com)
The (ESM) will replace the (EFSF): EU leaders to agree on permanent bailout fund, balanced budget ???
BRUSSELS | Sun Jan 29, 2012 6:40pm EST
(Reuters) – EU leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.
The summit – the 17th in two years as the EU battles to resolve its sovereign debt problems – is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity.
The summit is expected to announce that up to 20 billion euros ($26.4 billion) of unused funds from the EU’s 2007-2013 budget will be redirected toward job creation, especially among the young, and will commit to freeing up bank lending to small- and medium-sized companies.
But discussions over the permanent rescue fund, a new ‘fiscal treaty’ and Greece will dominate the talks.
Negotiations between the Greek government and private bondholders over the restructuring of 200 billion euros of Greek debt made progress over the weekend, but are not expected to conclude before the summit begins at 9:00 a.m. EST.
Until there is a deal between Greece and its private bondholders, EU leaders cannot move forward with a second, 130 billion euro rescue program for Athens, which they originally agreed to at a summit last October.
Instead, they will sign a treaty creating the European Stability Mechanism (ESM), a 500-billion-euro permanent bailout fund that is due to become operational in July, a year earlier than first planned. And they are likely to agree the terms of a ‘fiscal treaty’ tightening budget rules for those that sign up.
PERMANENT RESCUE FUND
Leaders hope the ESM will boost defenses against the debt crisis, but many – including Italian premier Mario Monti, IMF chief Christine Lagarde and U.S. Treasury Secretary Timothy Geithner – say it will only do so if its resources are combined with what remains in the EFSF, creating a super-fund of 750 billion euros ($1 trillion).
The International Monetary Fund says an agreement to increase the size of the euro zone ‘firewall’ will convince others to contribute more resources to the IMF, boosting its crisis-fighting abilities and improving market sentiment.
But Germany is opposed to such a step.
Chancellor Angela Merkel has said she will not discuss the issue of the ESM/EFSF’s ceiling until leaders meet for their next summit in March. In the meantime, financial markets will continue to fret that there may not be sufficient rescue funds available to help the likes of Italy and Spain if they run into renewed debt funding problems.
“There are certainly signals that Germany is willing to consider it and it is rather geared toward March from the German side,” a senior euro zone official said.
The sticking point is German public opinion which is tired of bailing out the euro zone’s financially less prudent. Instead, Merkel wants to see the EU – except Britain, which has rejected any such move – sign up to the fiscal treaty, including a balanced budget rule written into constitutions. Once that is done, the discussion about a bigger rescue fund can take place.
After nearly three years of crisis, some economists believe the combination of tighter budget rules, a bigger bailout fund and a commitment to broader structural reforms to boost EU productivity could help the region weather the storm.
“The fiscal compact and the ESM will shape a better future,” said Carsten Brzeski, a euro zone economist at ING.
“Combined with ongoing austerity measures and structural reforms in peripheral countries, and, of course, with a lot of ECB action, the euro zone could master this stage of the crisis.”
Economists say the pivotal act in recent months was the European Central Bank‘s flooding of the banking sector with cheap three-year money, a measure it will repeat next month.
While EU leaders are managing to put together pieces of legislation and financial barriers that might help them stave off a repeat of the debt crisis, immediate concerns – especially over Greece and potentially Portugal – remain.
By far the most pressing worry is the seven-month-long negotiation over private sector involvement in the second Greek rescue package. A deal in the coming days may help restore investor confidence, although Greece will still struggle to reduce its debts to 120 percent of GDP by 2020 as planned.
“If there is a deal, the heads of state and government can endorse it, welcome it and say that now it is up to Greece to agree to and deliver on reforms to get the second financing package,” the euro zone official said.
Negotiators believe they have until mid-February to strike a deal. Failure to do so by then would likely force Greece to miss a 14.5 billion euro repayment on its debt due in mid-March.
Even if Athens can strike a deal with private bondholders to accept a 50 percent writedown on the nominal value of their bonds, it may still not be enough to close Greece’s funding gap.
The IMF has suggested it may be necessary for public sector holders of Greek bonds – including the ECB and national central banks in the euro zone – to write off some of their holdings in order to close the gap.
Such a move would not necessarily involve the ECB or national central banks incurring losses, they would just be expected to forego any profit on the bonds they have bought.
But German ECB board member Joerg Asmussen told Reuters there was no possibility of the ECB taking part in the private-sector restructuring of Greece’s debt.
(Reporting By Jan Strupczewski, editing by Mike Peacock)
- German Chancellor Angela Merkel Deflects Pressure to Boost Eurozone Bailout Funds (ibtimes.com)
- Eurozone’s score card (bbc.co.uk)
- EU summit on debt crisis faces Brussels disruption as unions strike (guardian.co.uk)
- Germany opposes combining ESM, EFSF: reports (marketwatch.com)
- Germany, France press for rapid Greek debt deal (revolutionizingawareness.com)
- S&P downgrades euro zone bailout fund (jhaines6.wordpress.com)
- EU Leaders Are Considering Doubling The Euro Bailout Fund At The Last Minute (businessinsider.com)
- ESM’s & EFSF’s.. its just shuffling the chairs on the Titanic (seeker401.wordpress.com)
- Presenting Today’s Deux Ex Rumor (zerohedge.com)
- EC President Barroso: ‘EU should put hand in pockets AGAIN to beef up bailout fund’ (dailymail.co.uk)
- S&P Downgrades Eurozone’s Bailout Fund (ibtimes.com)
For the majority of a nerve-wracking summit that dragged on more than 10 hours, from 6 PM CET Wednesday to 4 AM CET Thursday morning, all attempts at progress to stem the crisis appeared to hit a wall.
But EU leaders finally made a breakthrough.
At 3:30 AM CET, we heard that they were closing talks with bank representatives on “voluntary” 50% haircuts on holdings of Greek bonds. Then we started hearing about leverage, and suddenly — at 4 AM CET (10 PM EST) — we finally got word of some agreement.
So here’s the rundown of what leaders decided (EU leaders were still pretty vague about all the numbers, however, citing estimates for most things):
– 50% haircuts on private holdings of Greek bonds through 2020. Evidently this will still be voluntary. It would cut Greece’s debt by €100 billion ($139 billion). German Chancellor Angela Merkel said EU leaders aim to see the credit swap take place in January.
– Leverage will increase the firepower of the European Financial Stability Facility by 4-5 times, to somewhere in the range of €1 trillion ($1.4 trillion).
– China and the IMF could play a huge role in the bailout. Not only has the IMF expressed interest in playing a role, French President Nicolas Sarkozy told reporters that he will call Chinese Premier Hu Jintao around midday tomorrow, presumably to discuss this.
– Greece will receive €130 billion ($180 billion) in fresh aid. We’re thinking this includes the nearly €110 billion ($150 billion) it was promised back in July.
– EU leaders believe Italy’s commitment to debt sustainability and encouraging growth, even though Italian PM Silvio Berlusconi didn’t propose any new measures to accomplish these goals in a letter he wrote to some members of the summit today.
– The European Banking Authority estimates that only €106 billion ($147 billion) in funding will be needed to recapitalize European banks and help them meet capital requirements of 9%. Turns out it didn’t actually conduct new stress tests accounting for adverse scenarios this time around. European Council President Herman van Rompuy told reporters that banks must reach this 9% ratio with only the “highest quality capital.” We’re hoping he means Tier 1 capital and will not allow banks to use riskier convertible bonds to meet this number.
– We aren’t likely to see a final roadmap on EU treaty changes until March 2012.
– A statement from the summit can be found here.
Clearly there’s still a lot more progress to be made towards truly solving the crisis. None of these steps alone — or even altogether — will do that, not to mention that the numbers we’re seeing here have not all been written in stone. Indeed, until we see EU authorities start to execute some of these proposals, it will be difficult to bank on their success.
That said, the fact that EU leaders actually made (at least preliminarily) plans on a lot of the issues they said they would — particularly after all the negative news today and earlier this week — will reassure markets that these leaders are indeed capable of accomplishing something when pressed.
Looking forward, we will be looking to see EU leaders make good on these proposals, without diluting them to ineffectiveness. In particular, treaty changes — probably the most controversial of any measures we’ve heard discussed thus far — will be key to actually mending the broken bones of the euro area.
Oct. 20 (Bloomberg) — Angela Merkel won’t allow the euro region to split because she understands that could cause “a dark age” by wrecking the markets leading energy policy as oil supplies dwindle, said an adviser to the German chancellor.
Europe‘s 500 million residents, the wealthiest market on Earth, have led the development of technologies in clean energy, transport and communications that can drive global growth that doesn’t rely on oil, said Jeremy Rifkin, a Wharton Business School professor who has advised Merkel for six years.
“I hope they pull this off, there’s no one else,” he said yesterday in Madrid of Merkel’s struggle to boost growth as part of Europe’s rescue strategy and preserve the single currency area. “If it splits up, we’re into a dark age.”
Rifkin argues that record oil prices in 2008 pushing up the costs of everything from food to clothing rather than the collapse of Lehman Brothers Holdings Inc. was the main cause of the financial crisis. The global economy won’t return to its pre-crisis growth until it moves away from fossil fuels because rising oil prices will continually hold down expansion, he said.
The global economy sputtered again this year after oil prices surged. The European Central Bank started buying Italian and Spanish government bonds to control the sovereign debt crisis on Aug. 8, three months after oil prices reached their highest since 2008. Stock markets slumped this summer, with the S&P 500 losing 17 percent from July 22 to Aug. 8.
Germany’s deployment of renewable energy, intelligent power grids and electric vehicles leaves it best-placed to lead the world economy beyond its reliance on fossil fuels, Rifkin said. His vision involves creating an “energy Internet.”
The EU has led the global battle to limit the greenhouse gas emissions that scientists say are almost certainly the cause of global warming, establishing the world’s biggest market for carbon-dioxide emission permits in 2005. That infrastructure, as well as the bloc’s targets for transforming its energy networks over the next 30 years, would likely be wrecked if the single currency area split, Rifkin said.
Merkel meets European Union leaders in Brussels on Oct. 23 as they seek a solution to the debt crisis that has brought the euro area to the brink of recession, according to Christian Schulz, an economist at Joh Berenberg Gossler & Co. in London.
“If the euro fails, Europe fails,” Merkel said yesterday. “But we shall not allow this to happen.”
Global crude output likely peaked in 2006, the International Energy Agency said last year. Oil companies will have to spend trillions of dollars drilling in increasingly hostile environments such as the deepwaters of the Gulf of Mexico or the Arctic to meet demand, it said in its 2011 World Energy Outlook.
Merkel, Sarkozy, Zapatero
Rifkin, in the Spanish capital to speak today at a Del Pino Foundation conference, has advised Merkel, French Premier Nicolas Sarkozy and Spain’s Jose Luis Rodriguez Zapatero that the global economy’s fundamental problem stems from the end of a growth model based on fossil fuels.
Sustainable expansion will only return when officials and executives can produce “the third industrial revolution,” the University of Pennsylvania’s Wharton School professor argues in a book of the same title due to be published next month.
The shift will involve harnessing Internet technology to manage a decentralized network of renewable power generators based in homes and offices, he said. Domestic hydrogen batteries and computer software will allow consumers to buy and sell power over a smart network, he said.
“This is the completion of the legacy Steve Jobs started,” he said, referring to the Apple Inc. chief who died on Oct. 5. Energy “collecting technologies are going to get cheaper and cheaper. They are following same cost curves as computers and phones.”
Rifkin has also advised executives at companies including Samsung Electronics Co., Citigroup Inc., McKinsey & Co. and Ford Motor Co. as well as the European Commission and the U.S. Department of Interior.
–Editor: Randall Hackley
- Jeremy Rifkin on NPR: “The Third Industrial Revolution” (pointaview.wordpress.com)
- Oh boy… the Germans and EU are taking advice from Rifkin. They really are screwed (junksciencesidebar.com)
- Sarkozy issues barely veiled threat to Merkel: deal on euro or destroy Europe. (politics.ie)
- Latest Barrage Of Headlines From Europe (zerohedge.com)
- The Third Industrial Revolution? The ‘Democratization Of Energy? (mikyunglim.wordpress.com)
- Keen On… Why The Third Industrial Revolution Will Take Place in Europe Rather Than America (TCTV) (techcrunch.com)