sign up log in
Want to go ad-free? Find out how, here.

90 seconds at 9 am: Pro-bailout coalition wins Greek elections; Euro rallies on markets relief; NZ$ headed for 80 USc; Euro-crisis set to drag on; Spain eyes austerity; Italy plans asset sales

90 seconds at 9 am: Pro-bailout coalition wins Greek elections; Euro rallies on markets relief; NZ$ headed for 80 USc; Euro-crisis set to drag on; Spain eyes austerity; Italy plans asset sales
18th Jun 12, 8:14am by Bernard Hickey

Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news the pro-bailout coalition of New Democracy and Pasok appear set to win Greek elections, exit polls show.

Bloomberg reports the pro-bailout coalition is set to win the bonus 50 seats for being the largest group in the parliament and BBC has reported that anti-bailout leftist leader Alexis Tsipras has conceded defeat.

Investors were relieved that the immediate prospect of a Greek exit from the euro appeared to recede.

Reuters reported the euro rallied to two week highs. The New Zealand dollar, which often rises and falls with appetites for riskier assets, rose to 79 USc in morning trade from 78 USc on Friday.

However, the euro debt crisis is far from over.

Greece is still set to run out of cash within weeks and will have to ask for a third bailout and restructuring of its debts. That would require yet more austerity, which is simply driving its economy deeper into a debt deflation spiral where as the economy contracts due to austerity, the weight of the debt gets heavier.

Spain is also now diving into a similar spiral. The IMF warned over the weekend that Spain was unlikely to meet its budget deficit targets and Spain's leaders have called for another round of reforms and austerity to try to make the economy more competitive within the euro zone.

Italy has also announced plans for asset sales to try to bring its budget back into surplus.

Most believe the euro-zone crisis cannot be solved until Germany stumps up with enough money and guarantees to make a full fiscal union and banking union work.

Currently the 17 euro zone nations have a single monetary policy with a single interest rate, but have 17 different fiscal policies and almost as many different banking systems and banking regulators.

Many in Europe have called for a more complete political union and fiscal union that would see Germany and the stronger Northern European countries guarantee the debt issued by Southern European countres. They also want a banking union where German-backed funds can be used to bail out and restructure Southern European banks.

Currently, Germany's politicians are against full Euro-zone bonds and a European Banking Union. However, Chancellor Angela Merkel has shown signs in recent weeks of edging towards such a solution, but only hesitantly and only at the behest of markets in near meltdown.

Meanwhile, the New Zealand dollar continues to strengthen regardless of the European outcome. Market relief increases appetites for risk, which boosts the New Zealand dollar, while fears about a Euro-zone meltdown increase expectations that central banks will print more money to calm down markets. That weakens currencies such as the US dollar and Euro, strengthening those currencies such as the New Zealand dollar where central banks are not printing money.

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

29 Comments

by  steven  |  18th Jun 12, 9:36am 1339968991

What has actually been fixed?

Nothing....we just have no immediate meltdown as the Greeks exit....nothing has been fixed in Greece or Spain or anywhere else....

regards

Up
0
by  steven  |  18th Jun 12, 9:37am 1339969035

What has actually been fixed?

Nothing....we just have no immediate meltdown as the Greeks exit....nothing has been fixed in Greece or Spain or anywhere else....

regards

Up
0
by  vavau.to  |  18th Jun 12, 10:08am 1339970892

What has shifted is the change in political loyalties in Greece. the 99% are taxed double  that  of the 1% according to krugman. Roubini says bailout the 99% not the banks. Conservative NZ will be mired in gloom until the goverment understands this simple yet crucial shift.

Up
0
by  south paw  |  18th Jun 12, 10:24am 1339971885

A bit of a surprise the Greeks voting for more of a German a@#$ raping. Are the prospects of leaving the Euro and setting out Iceland style that terrifying?

Up
0
by  powerdownkiwi  |  18th Jun 12, 10:33am 1339972428

It doesn't change their problem.

 

Either way ends in default, the closer the Emperor gets to the top of the mountain, the harder it is to stave off hypothermia.

 

Thermodynamics always beats delusion.

 

But they are only a symptom. The basic cancer here is inoperable and terminal.

Up
0
by  scarfie  |  18th Jun 12, 11:45am 1339976722

Merkel is an intelligent, cunning, devious and probably ruthless player, but she is out of her depth on this one. 

Up
0
by  steven  |  18th Jun 12, 12:45pm 1339980354

Actually because she isnt a "cunning, devious and probably ruthless player" its that she's out of her depth....

;]

regards

Up
0
by  scarfie  |  18th Jun 12, 2:01pm 1339984877

Lol true.

 

Although all those qualities could also be accompanied by 'stupid'. I am thinking of the piece I read about the way she came to power, which is frightening in its similarity to Herr Clark. These sorts crave power and the political colour they choose is a matter of conveniece, not their underlying belief system. I suspect you could dump JK in the same category although he is of course the smiling assassin type. It is why I laugh when I see the small minded politcal debate that sometimes graces these pages.

Up
0
by  steven  |  18th Jun 12, 10:57am 1339973833

Yes....suddenly the greeks were threatened with having to work for a living.....instead of more handouts.  Huge difference in attitude of the Icelantic ppl v Greek, huge difference in the the economies as well.

Its going to happen anyway....more fool the ppl still playing the game of musical chairs, I'll stand on the sideline thanks.

regards

 

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 12:10pm 1339978246

Fairfax to slash 1900 jobs over the next 3 years

 

....... they will sell down more of their TradeMe stake

 

Close printing plants at Chullora & Tullamarine

 

..... cut the SMH & other broadsheets into tabloid format

 

Place a paywall around their online news content

 

..... on the ASX , FXJ has jumped up 5 % this morning , on the news [ brought to you by Scoop-Gummster ]

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 12:16pm 1339978603

The 24 page " Fairfax of the Future " is available for free on the ASX ( www.asx.com.au ) , under FXJ code , articles .

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 12:34pm 1339979670

The NZX has placed TradeMe ( NZX : TME ) on a trading halt , whilst Fairfax searches for an investment bank to purchase 15 % of the company's stock ....(  that will dilute FXJ's stake to around 51 % of TradeMe ) ........

 

..... oddly enough , a finance reporter in Australia (ABC TV ) claimed that Fairfax is selling down it's stake in ailing internet company TradeMe ....

 

Gummie's not fooled by that red herring , nothing wrong with our TradeMe ..... it's the parent , FXJ which is ailing ,..  rotten to the core .....

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 1:18pm 1339982337

...... if anyone wonders why a company such as Fairfax , known for it's advertising " rivers of gold " , could sink so low , so quickly  ...... have a peek at the board of directors : Just one person with a media background !

 

Back in the 1990's , when the internet started going gang-busters , and other companies either established sites themselves ( i.e. Seek , in the jobs market ) or bought out other's sites , Fairfax sat on their hands ... happy in the knowledge that the general public loved them , and would never desert their daily newspapers ....

 

..... oooops , missed the bus ! ..... only belatedly did they buy the online garage sale site , TradeMe ..... too little , too late .

Up
0
by  goldenfox  |  18th Jun 12, 4:00pm 1339992010

Its worthy of a deeper investigation for the value hunters out there!

Trade Me is worth $1.2bn FJX owns 70% which is $1.05bn. While FJX itself is worth $1.5bn so therefore the newspapers and domains are worth $495m.

If a raider could flog TME, sell the domains (Domain,Stayz, MyCareer) to Seek or Carsales.com then they could just run the newspapers for there own ends. As a method to control the public, to own polticians, to stop mining taxes, to allow indentured foregin works. Oh wait Gina's beaten me to it

 

Up
0
by  Gareth Vaughan  |  18th Jun 12, 1:52pm 1339984369

Must have a read of that.

Up
0
by  Bernard Hickey  |  18th Jun 12, 1:43pm 1339983818

Luckily for us there is no paywall around Gummy's comments ;)

cheers

Bernard

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 2:15pm 1339985754

Thanks Ed. : -

 

..... Gina Reinhart has increased her stake in Fairfax to 18 % .....

 

Fairfax claim that their restructuring ( booting out a quarter of the workforce ) will save them $A 235 million by 2015 .... overlooking the several $ billion of debt overhanging their balance sheet , off-set by a similar quantity of " goodwill " .... the intangible value of their mast-heads ..

 

[ junior reporter Scoop Gummster ( unpaywalled for your edification & pleasure ) ]

Up
0
by  iconoclast  |  18th Jun 12, 2:09pm 1339985343

at current [exponential] rates of downhill progress there will soon be an opportunity for all the ex-paper-boys and ex-copy-boys (and girls) to step up and make a take-over offer at say $0.01c per share .. wonder how Alan Kohler and Robert Gottliebsen are feeling about the $20 million offer from Fairfax .. and I now temporarily withdraw my earlier rumour that Fairfax has interest.co.nz in its sights ... hey guys .. want yer jobs back?

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 2:16pm 1339985802

... the rate at which Fairfax is losing advertising revenue to the internet shows no sign of abating ......

 

Unless a White-Knight such as Mrs Reinhart decides to takeover the whole firm , shareholders will continue to suffer ..... ... . prior to the GFC the share price was around.  .. $A 5 ...... now 65 cents ( up 5 cents this morning ) ....

 

... as per usual , the company knows only how to cut staff , but not how to gain revenue , or at the very least , how to stop losing it ... 20 % of all production staff to go , 20 % of editorial & journalists , & 60 % of job losses from an unspecified " across the board " .....

 

These guys really couldn't organise a booze up in a pub , could they ............

Up
0
by  iconoclast  |  18th Jun 12, 2:21pm 1339986088

what makes you think they have the management smarts to manage trade-me? 

Up
0
by  Gareth Vaughan  |  18th Jun 12, 3:37pm 1339990672

They've largely been hands off and let Trade Me run itself. And when they had the IPO last year, Sam Morgan was brought on to the Trade Me board.

Up
0
by  steven  |  18th Jun 12, 12:40pm 1339980001
Up
0
by  steven  |  18th Jun 12, 12:44pm 1339980272
Up
0
by  scarfie  |  18th Jun 12, 2:09pm 1339985345

I have being giving thought to this recently and wonder what future generations will think of us burning off all that fossil fuel at an overall rate of perhaps 30% efficiency. Another thought I have pondered is that all the devices used to convert energy to work, ie: steam engines, sterling engines, ICE, electric motor etc, were invented as a response to the energy source available. Now we have a situation where we are trying to invent the energy source.

Up
0
by  steven  |  18th Jun 12, 12:47pm 1339980471

"If what I'm about to say is even halfway true, the economies of countries like Australia and New Zealand, which we visited recently, as well as many others, are in for a brutal shock."

http://theautomaticearth.org/Finance/goodness-gracious-great-walls-on-f…

"I single out Australia and New Zealand because their economic growth, indeed by now their entire economic performance, which has been far better than the US and EU in the past 5 years, would be torn and frayed to shreds if the Chinese economy would hit one or more serious snags. And from what I see I can draw just one single conclusion: it will. The consequences down under will be shattering."

regards

Up
0
by  scarfie  |  18th Jun 12, 2:55pm 1339988143

Thanks, good piece. Stratfor made the comment quite some time ago that China has to maintain 8% growth to pay all the bribes, but that article fills in a bit more detail.

 

My only worry with debt deflation is the interest. Once the obligation of interest is created then the only way to pay it is to expand the money supply. If someone pays down their debt then it leaves a shortfall somewhere else. If lots pay debt down then the shortfall is going to become acute. While they can shuffle the numbers around to hide it, sooner or later is has to come out. The question is where are they hiding it, and when will it be revealed? Default is the outcome of debt deflation, but I see that as politcally undesireable. I think the only other option, printing, as the easier option. Possibly this is a slower method to collaspe? Ugly either way :-)

Up
0
by  Gummy Bear Hero  |  18th Jun 12, 8:23pm 1340007791

Is it true Bernard , that the yield on 10-year Dutch bonds is at a 500 year low ...

 

.... is there something about the Dutchland economy  which we're not privy to ?

Up
0
by  speckles  |  18th Jun 12, 9:17pm 1340011029

 

 

Netherland economy to you mate....Investors are turning to the Netherlands for refuge as one of Europe’s remaining AAA rated nations as market turbulence worsened after as bets the currency area is heading for a breakup. The austerity agreement reached between Rutte and three opposition parties, which includes raising the so-called value added tax to 21 percent from 19 percent, eased concern the country would miss its deficit targets, making its bonds an alternative haven to the record-low yields of Germany.

Up
0
by  Claire Lorraine  |  19th Jun 12, 10:19am 1340057950

He who owns the land and resources owns the economy ! Right?

Note how the austerity game insists on selling land and resources to the banksters.

Time to look at Land Valuation/Natural resorces Taxation.

For starters :

 

1. Max Keiser Interviews Fred Harrison - YouTube

 

http://www.youtube.com/watch?v=irR785WAYd8

 

 

 

2. From: Dave Wetzel, Executive Committee Chair - TheIU <davewetzel.theiu@gmail.com>

 

 

In the UK since the 1970s we have seen massive privatisations of public utilities and other profitable state companies such as BP, British Airways, the National Coal Board, Civil Aviation Authority, British Airports, bus/rail transport companies, public housing, etc.

At no time did voters object although they were losing all future dividends to relieve income taxes, sales taxes etc. (Ironically, much of which was economic rent).

Now people complain of high utility charges, high bus and rail fares etc. - but it's all too late as we have no control and the duty of the privatised companies is to protect the interests of their shareholders - and with virtual monopolies such as local bus network, a single rail route, electricity, gas, water - this means charge consumers as much as they can get away with.

How different would this picture be if every citizen had received a share of the profits of all these companies as a single annual cheque? There would have been howls of outrage as they lost their "windfall" income.

So, in the 1980s, when we were presenting a Private Member's Bill to Parliament to collect land rent, I suggested we split the net income from land rent in 3 equal parts:

1. one third to reduce taxes on production.

2. one third to improve education, health, transport and other public services.

3. one third to be divided equally as an annual cheque for every man, woman and child living in the UK - to be called "The Land Dividend".

Then if a future Government were to suggest giving the land rent back to the Duke of Westminster and his ilk there would be howls of anguish as people opposed the loss of their annual Land Dividend cheque.

 

Would land rent be sufficient?

Harrisburg only collects one-eighth of its income from the split-rate tax on land and yet has seen many improvements such as new business growth, reduced unemployment, reduced crime etc.

In the UK LVT would have several benefits:

1. a fresh income.

2. better use of idle or under-used urban land.

3. improved homes and less government expenditure on housing.

4. reduced costs of urban sprawl.

5. reduction in taxes on production benefitting all businesses and allowing for a lower marginal rate of tax in depressed areas of the UK with lower land values. (nb Same percentage rate applied universally but producing less in areas of low land value).

6. New firms starting and existing small businesses expanding which were previously below the margin of production. 

7. With more jobs, lower Government expenditure on unemployment benefit and alleviating poverty. (Estimated to be half of UK Government expenditure).

8. Fewer Civil Servants needed to collect LVT instead of income tax on low waged. These individuals would be released to work in the "real" economy providing goods and services that people need and maybe creating works of art, writing books, entertaining people etc. which otherwise would be lost while they earned a living pen-pushing.

9. More jobs = less crime. reduced public expenditure on police, courts, prison and probation services.

10. More money spent on education means less crime. (Many of our young criminals are semi-literate.

11. Wealth wasted on land speculation would be re-invested in productive industry, training a skilled work-force, providing resources for inventors and university business initiatives etc. etc.

12. In Denmark in the 1950s a modest LVT even created higher land values - thus increasing LVT receipts on revaluation. But with no Land Dividend the LVT was easily abolished by the subsequent Government.

13. a return of farm landowners' subsidies (Europe's "Common Agricultural Policy") to the taxpayer.

 

Who says that land rent would not be sufficient to pay a Citizens' Land Dividend?

 

- or am I totally wrong and wasting my time present LVT ideas around the world?

 

(Greetings from Hong Kong, where I'm meeting tax officials later today, having just arrived from Guilin, China where I presented LVT at a conference). 

 

 

_______________________________________________

Up
0