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Cracks Are Starting To Appear In Europe: ‘Austerity’ Ignites Masses In Greece, Norway Faces

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Merkel Advisor Feld: “Euro Crisis Will Return Shortly And With A Vengeance”

The Italian economy would not find their way out of the recession, according to the pessimistic assessment by Lars Feld: “The sustainability of Italian public finances is in jeopardy. The euro crisis will therefore return shortly with a vengeance.”

Apparently, the Italians were not ready to move on the path of reform that has been taken by Mr. Mario Monti, Field said.

“You can not expect that Italy’s European partners or the ECB will stabilize the Italian economy, when its people are not ready for reform.”

And making sure Feld is not alone, he was joined by Anton Boerner, head of Germany’s BGA exporters’ association, who in turn said Italy must reform tax, labor, judicial system or risk “irreparable damage” of euro. Finally, Boerner says if Italy not willing to reform, “we have to think about how to deal with a modified eurozone.”

What exactly a “modified” eurozone means we don’t know. We will, however, surely find out soon enough. 

In Greece: As ‘Austerity’ Ignites Masses, Elites Turn To Imperial Stormtroopers

The usually reserved waitress at our favorite Greek-owned Sunday breakfast place approached us in dismay. Her daughter and son-in-law were escaping Greece for the US. Even middle class professionals were finding themselves digging in the garbage for food to eat, she said. You cannot imagine just how bad it is in Greece, she told us, with tears in her usually stoic eyes.

What has happened in Greece is as Ryan McMacken quotes Mark Thornton in a recent LRC blog, about what passes in popular parlance as “austerity”: “The…idea of raising taxes on individuals to pay off international banksters…[which] is bad economics and is not real austerity.” 

Norway Faces Liquidity Shock in Record Redemption: Nordic Credit

Norway’s bond haven is about to become a lot smaller.

The government is preparing to repay a record 66.5 billion kroner ($11.8 billion) in 6.5 percent bonds maturing May 15, which is more than the top-rated nation has left to sell of its planned 70 billion kroner in issuance this year.

The redemption threatens to trigger an outflow of funds as foreign investors balk at the loss of liquidity, driving up existing debt prices and weakening the krone, according to analysts atNordea Bank AB and Danske Bank A/S. Offshore investors own almost 60 percent of the maturing bonds, or about 38 billion kroner, Nordea estimates.

“The amount involved means that this flow could have a substantial market impact,” said Gaute Langeland, chief analyst at Nordea Markets in Oslo.

EU moving towards break-up: Analyst

An analyst says the European Union members will not reach an agreement on the bloc’s next seven-year budget, paving the way for its breakup, Press TV reports.

“…When we’re moving into a triple dip recession all around, when top of the agenda for most of the countries is austerity measures, budget cuts and trying to pay off the national debt, the likely of getting people to agree to a trillion stimulus for the European Union is highly unlikely,” said Simon Dixon, the CEO of Bank to the 

CITI: Cracks Are Starting To Appear In Europe—And One Market Is Particularly Concerning

The big rally in European risk assets like stocks took a breather late last week.

Citi strategist Robert Crossley is watching flows in sovereign bond markets, and he warns that problems are surfacing in Europe.

In a note to clients titled “Cracks starting to appear in Europe,” Crossley looks at demand for European sovereign debt – which just turned negative for the first time in three months.

Although the drop in demand has been led by a retreat from safe-haven investments in “core” sovereign debt – like that of Germany – the issue is where the money has been going.

Certain sovereign debt markets in the euro periphery – Spain, for one – have been the big winners. Demand for the periphery remains positive, notes Crossley, but that could change pretty quickly:

Although demand for peripherals has fallen, like the core, it remains positive. It is this cumulative yield-seeking positioning that concerns us in the current environment where the risk-on mood is turning and investors are reassessing the risk-reward of risk positions with the wash-out of carry trades in short-dated EUR swap forwards, a strengthening FX rate, and risks surrounding comments coming from the forthcoming ECB meeting.

Sure enough, there is one market in particular that has Citi particularly wary: Spanish sovereign debt

The Pain In Spain Falls Mainly… Everywhere

A Taxpayer Revolt Against Bank Bailouts In the Eurozone

Bank bailouts in the Eurozone, like bank bailouts elsewhere, have made owners of otherwise worthless bank debt whole through a circuitous process where, in the end, taxpayers transferred their money to investors. Even in Greece, investors were coddled. Even Proton Bank that had siphoned off $1 billion in a scheme of fraud, embezzlement, and money laundering was bailed out at taxpayer expense [European Bailout Fund For Greek Money Laundering And Fraud].


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