€uro vs. Doller "The world is not enough!!"

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Weidmann skeptisch zu Banken-Beteiligung an Hellas-Hilfe
Sonntag, 12. Juni 2011, 13:29 Uhr

Berlin (Reuters) - Bundesbankpräsident Jens Weidmann hat Zweifel an der Umsetzbarkeit und Wirkung einer Beteiligung privater Gläubiger an den Kosten der Griechenlandkrise geäußert.

An dem Grundgedanken sei nichts falsch, sagte Weidmann der Zeitung "Welt am Sonntag". "Im Gegenteil, es wäre sinnvoll, weil so die Gläubiger mit in die Verantwortung für ihre Anlageentscheidungen genommen werden, und es entlastet die Steuerzahler." Es gehe aber um die Umsetzung. "Eine erzwungene Laufzeitverlängerung birgt in der konkreten Situation mehr Risiken als Chancen." Vor allem störten die Folgen für die Notenbanken. "Ein vermutlich vergleichsweise kleiner Beitrag der Privaten würde mit Ansteckungsgefahren und einer höheren Risikoübernahme der Notenbanken erkauft. Dagegen wehren wir uns", sagte Weidmann.

Wie Finanzminister Wolfgang Schäuble plädierte am Wochenende auch Eurogruppen-Chef Jean-Claude Juncker erneut für eine Beteiligung privater Gläubiger. Im Gespräch ist, dass die Banken freiwillig einer Verlängerung der Laufzeit griechischer Anleihen zustimmen. Das Euro-Land bekäme so einen Zahlungsaufschub und wäre nicht gezwungen, sich an den Finanzmärkten um Geld zu bemühen.

MERKEL: KEINEN UNKONTROLLIERTEN BANKROTT ZULASSEN

Eine rein freiwillige Lösung würde er begrüßen, sagte Weidmann. Die Gläubiger sollten ein Interesse an einer Stabilisierung haben und bereit sein, einen eigenen Beitrag zu leisten. "Allerdings sollten wir die Erwartungen auch deshalb nicht zu hoch setzen, da schon jetzt nicht mehr so viele Papiere von privaten Gläubigern außerhalb Griechenlands gehalten werden." Alles andere als eine rein freiwillige Lösung würde wohl als Kreditereignis gewertet. Dann würden die Anleihen durch die Rating-Agenturen als Ausfall bewertet. Damit könnten aber die Investoren das Vertrauen auch in andere angeschlagene Euro-Länder verlieren, und die Krise würde sich weiter ausbreiten, warnte der frühere Wirtschaftsberater von Bundskanzlerin Angela Merkel.

Bei einem Kreditereignis handelt es sich um eine völlige oder teilweise Zahlungsunfähigkeit des Schuldners, bei der Kreditversicherungen (CDS) fällig werden. Viele Experten befürchten, dass dies eine Finanzkrise wie nach der Pleite der der US-Bank Lehman Brothers auslösen könnte.

Davor warnte auch die Kanzlerin. Weder dürfe Deutschland "einen unkontrollierten Bankrott eines Landes zulassen", noch etwas tun, was den Aufschwung weltweit insgesamt in Gefahr bringe, sagte Merkel in ihrer wöchentlichen Video-Botschaft. Der Bankrott von Lehman habe in Deutschland 2009 zu einem Wirtschaftseinbruch von fast fünf Prozent geführt. "So etwas muss unbedingt verhindert werden."

Bis 2014 muss Griechenland Staatsanleihen im Wert von 80 bis 90 Milliarden Euro an seine Geldgeber zurückzahlen. Rund ein Drittel stehen Banken, Fonds, Versicherungen und anderen privaten Geldgebern zu, der Rest öffentlichen Gläubigern wie der Europäischen Zentralbank (EZB).

WEIDMANN: GRIECHENLAND MUSS LIEFERN

Weidmann sagte, die Zahlungsfähigkeit Griechenlands hänge vor allem von der Haltung der Regierung und der Bevölkerung ab, die immer mehr gegen den verordneten Sparkurs rebelliert. Wenn das Euro-Land die strikte Auflagen, zu denen auch umfangreiche und rasche Privatisierungen gehören, nicht erfülle, entfalle die Basis für weitere Mittel aus dem Hilfsprogramm. "Griechenland hätte dann diese Entscheidung getroffen und müsste die sicherlich dramatischen wirtschaftlichen Konsequenzen eines Zahlungsausfalls tragen." Das sei zwar nicht sinnvoll und würde die Partnerländer in eine schwierige Situation bringen. "Der Euro wird aber auch in diesem Fall stabil bleiben."

“Europe’s policy makers are playing a high stakes game of poker and Trichet is just not willing to blink yet,” said Julian Callow, chief European economist at Barclays Capital in London. “But history has shown us that he will be pragmatic if it is a question of saving the euro. The ECB will step in if there is a vacuum.”
Trichet’s Compromises

The debt crisis has already forced Trichet to tear up the rule book. The ECB is lending unlimited amounts of cash to support banking systems and has relaxed collateral requirements. In May last year, it took the unprecedented decision to start buying the bonds of distressed nations in an effort to calm markets as Greece’s fiscal woes began to infect other euro-area members.

The Frankfurt-based central bank has since bought about 75 billion euros of bonds. Of that, 40 billion euros is Greek debt, according to a Barclays Capital estimate. The ECB stopped buying bonds 10 weeks ago.

While the ECB has said it could accept a plan in which creditors voluntarily agree to buy Greek bonds to replace maturing debt, Trichet said last week the ECB has no intention of rolling over its own Greek holdings.
Chain Reaction

He also warned against Schaeuble’s proposal that maturities on Greek debt be extended for seven years, an outcome that credit-rating companies said would be considered a default. That in turn could cut off ECB lending to Greek banks, setting off a chain reaction.

Politicians are trying to reach agreement on a new aid package by a European Union summit on June 23-24.

European governments and the IMF would lend as much as an extra 45 billion euros to Greece under a new bailout plan that also includes roughly 30 billion euros in asset-sale proceeds and about 30 billion euros in rollovers by creditors, two people with direct knowledge of the talks said last week.

“Participation of private creditors in cases of insolvency is indispensable,” Schaeuble told lawmakers in Berlin June 10. A working group set up last week is charged with indentifying “a good solution for the involvement of the private sector that can and has to be supported by the European Central Bank,” he said.
ECB Encouragement

While the ECB is prohibited by its founding treaty from buying bonds on the primary market, Deutsche Bank economist Gilles Moec said it could encourage debt rollovers by restarting its secondary-market purchases. Some strategists say the ECB doesn’t have much debt to roll over out of Greece’s total of about 330 billion euros.

“My understanding is the ECB hasn’t bought a great deal of those Greek bonds that are going to be the primary targets,” Vincent Chaigneau, head of interest-rate strategy at Societe Generale SA in London, said an interview. “If the ECB doesn’t participate it won’t be that big a problem. I tend to believe the governments can pressure the banks, either with positive or negative incentives.”

Incentives being considered include giving investors preferred status, higher coupon payments or collateral, said people familiar with the matter who declined to be identified because the talks are in progress.

The cost of insuring Greek debt against default has surged to a record, according to traders of credit-default swaps. Moody’s Investors Service puts the chance of a default over the next five years at 50 percent.

The yield difference, or spread, between 10-year German bunds and Greek securities of a similar maturity was at 1,374 basis points last week.

“If it comes to turmoil in the market, the ECB will probably resume their government bond purchases and keep the banks topped up with liquidity,” said Marco Valli, chief euro- area economist at UniCredit Group in Milan. “But that is as far as they will go.”

So where did sellers of Treasuries invest their funds instead? The sectors that reduced purchases of Treasuries noted above shifted funds into agency-backed securities (this includes agency MBS and debt), corporate bonds, money market funds, and mutual funds. Notably, there was little change in either consumer credit assets or mortgage loans, and sectors responsible for the greatest relative outflows from Treasuries during the period as a whole also reduced investment in equities relative to the average flows over the previous year (i.e., Q4 2009 to Q3 2010).

Read more: www.businessinsider.com/where-did-qe2-go-2011-6#ixzz1P9pVQxvV

The initial bout of quantitative easing, worth $1.73 trillion, began in December 2008 and ended in March 2010. It was created to stabilize the housing sector, which was the epicenter of the financial turmoil and has yet to show signs of recovery.

The Treasury bond component of the first round of purchases totaled $300 billion, from March to October 2009.

The Fed's buying assets has been controversial from the start. Critics say it is tantamount to printing money, and it has been credited with fueling a stock market rally but blamed for a surge in oil and food prices.

The end of QE2 has been well-flagged. The Fed said at the outset it would run until the end of June 2011.

Still, investors expect stocks, bonds, gold and the euro to fall after it ends, according to a Reuters poll of 64 analysts and fund managers last month.

HOUSING WOES

Come July, the Fed will rely on cash generated from its $1 trillion holding of mortgage-related securities to anchor Treasury yields and support the economy.

Proceeds from Fed's maturing mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) will fluctuate monthly depending on house sales and mortgage refinancings.

Recent evidence suggested the real estate conditions are deteriorating again with single-home home prices dropping below their 2009 low in March. The double-dip in housing will likely be compounded by an abrupt slowdown in job growth in May.

This grim development portends that a housing recovery is farther than previously thought and would take longer for people to sell their homes and to pay off their mortgages. This means mortgage securities will not be prepaid quickly.

"We are still at least two to three years away from seeing signs of even a baby upturn in home prices," said Anthony Karydakis, senior economist at Commerzbank in New York.

Going back to the 1950s, housing starts have typically returned to their pre-recession levels in 1- to 2 years after they hit bottom. But the current housing market is showing "atypical" behavior since its euphoric highs earlier this decade, Karydakis said.

Housing starts are stagnant after 1- years into the current economic recovery and more than a year since the initial bout of bond purchases. They had enjoyed a brief revival due to a federal first-time homebuyer credit program.

"Housing starts have stabilized at very low levels, but there have been no signs of a recovery," Karydakis said.

In April, housing starts fell 10.6 percent to an annualized rate of 523,000 units.

Eurozone debt reduction or “reprofiling” will help to resolve the issue of excessive debt in some insolvent economies. But it will do nothing to restore economic convergence, which requires the restoration of competitiveness convergence. Without this the periphery will simply stagnate.

Here the options are limited. The euro could fall sharply in value towards – say – parity with the US dollar, to restore competitiveness to the periphery; but a sharp fall of the euro is unlikely given the trade strength of Germany and the hawkish policies of the European Central Bank.

The German route — reforms to increase productivity growth and keep a lid on wage growth — will not work either. In the short run such reforms actually tend to reduce growth and it took more than a decade for Germany to restore its competitiveness, a horizon that is way too long for periphery economies that need growth soon.

Deflation is a third option, but this is also associated with persistent recession. Argentina tried this route, but after three years of an ever deepening slump it gave up, and decided to default and exit its currency board peg. Even if deflation was achieved, the balance sheet effect would  increase the real burden of private and public debts. All the talk by the ECB and the European Union of an internal depreciation is thus faulty, while the necessary fiscal austerity still has – in the short run – a negative effect on growth.

So given these three options are unlikely, there is really only one other way to restore competitiveness and growth on the periphery: leave the euro, go back to national currencies and achieve a massive nominal and real depreciation. After all, in all those emerging market financial crises that restored growth a move to flexible exchange rates was necessary and unavoidable on top of official liquidity, austerity and reform and, in some cases, debt restructuring and reduction.

Of course today the idea of leaving the euro is treated as inconceivable, even in Athens and Lisbon. Exit would impose big trade losses on the rest of the eurozone, via major real depreciation and capital losses on the creditor core, in much the same way as Argentina’s “pesification” of its dollar debt did during its last crisis.

Yet scenarios that are treated as inconceivable today may not be so far-fetched five years from now, especially if some of the periphery economies stagnate. The eurozone was glued together by the convergence of low real interest rates sustaining growth, the hope that reforms could maintain convergence; and the prospect of eventual fiscal and political union. But now convergence is gone, reform is stalled, while fiscal and political union is a distant dream.

Debt restructuring will happen. The question is when (sooner or later) and how (orderly or disorderly). But even debt reduction will not be sufficient to restore competitiveness and growth. Yet if this cannot be achieved, the option of exiting the monetary union will become dominant: the benefits of staying in will be lower than the benefits of exiting, however bumpy or disorderly that exit may end up being.

Nouriel Roubini is chairman of Roubini Global Economics, professor of economics at the Stern School of Business NYU and co-author of ‘Crisis Economics’ that has been recently published in its paperback edition.