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The Never Ending European Implosion Update

eurozoneSpain today was suddenly imploding. We should say suddenly with a bit of sarcasm, after all, we've been watching Europe put their fingers in the never ending European financial dike for years now.

What happened was Germany has demanded Spain be liable for their loans, 100% from last month's Spanish bail out.

The German Bundestag voted Thursday to approve the $122 billion banking bailout, but only if the Spanish government accepted full liability for the loans. “There will be no direct bank financing,” said Volker Kauder, head of the Christian Democratic delegation in the Bundestag.

Truth be told this is just another day in the adventures of Eurozone financial crises. U.S. Treasury bonds are hitting record lows as a mass exodus from Europe seeks safe assets.

U.S. Treasuries yields fell to new record lows on Monday as concern that the euro zone's debt crisis is spiraling out of control led investors to seek out the relative safety of U.S. debt.

Germany and U.K. bonds yields are also hitting record lows as the flight to safe haven continues.

Delightful News Out of Greece This Morning (for bankers)

Traders in New York this morning were greeted with this happy headline from The Wall Street Journal:

US Stock Futures Higher; Buoyed by Greece

greece austerity protestYes indeed, the Dow Jones index is set to open at least 70 points higher because the Greek parliament approved the additional austerity measures demanded by the European Union, the European Central Bank, and the International Monetary Fund. In exchange for €130 million in a second bailout by the “Troika”, as the three lending institutions are called, Greece will have to cut its minimum wage by 22% and the government will have to lay off an additional 150,000 workers. This is in a country that is in its fifth year of recession, with an official unemployment rate of 21%. Business has virtually collapsed, with many private sector companies on the verge of bankruptcy. The health system is so starved for funds that a bacteria resistant to all medicines is raging through hospitals, forcing the chronically ill to decide whether to even risk seeking professional care. Poverty is reaching extreme levels and is well-entrenched among what used to be the middle class. Children are sent to school so hungry that they are fainting in the classrooms. As of last night, the crowds that were storming through Athens and other large cities no longer were content to throw rocks at the police; Molotov cocktails were used to set at least forty buildings in Athens on fire. The police in Athens, facing crowds estimated from 80,000 to 100,000 people, were forced off Syntagma Square, and appeared to have run out of tear gas. Journalists described the business center of Athens as a war zone. The country is slipping into social disorder, if not anarchy. But stock markets in Europe were up today on the happy news that the Greek parliament approved the additional austerity measures.

Latest On The European Fiscal Adventureland Ride

melodramaLike a bad mini-series, the European non-events events just keep rolling on in. Here are the latest ones.

From the Financial Times, leaders failed to create a new treaty.

Leaders of the European Union’s 27 countries failed to agree to change the EU’s treaties in order to implement tighter fiscal rules and instead chose to create a new intergovernmental treaty which will likely have less teeth and be negotiated only among 23 of the bloc’s members.

Despite the division – which will leave Britain and Hungary out of the new pact, with the Czech Republic and Sweden still weighing participation – Mario Draghi, the European Central Bank president, signalled his approval, a key vote of confidence that could allow the ECB to move more aggressively in eurozone bond markets.

The U.K. was a major veto and the reason for the failure. Reuters:

"This is a summit that will go down in history," said Sarkozy. "We would have preferred a reform of the treaties among 27. That wasn't possible given the position of our British friends. And so it will be through an intergovernmental treaty of 17, but open to others."

Europe's Economic Implosion Heats Up

Europe is imploding. Today S&P cut Belgium's credit rating to AA:

S&P projects Belgium will end 2011 with general government debt at around 93% of gross domestic product in net terms, and at around 97% of GDP in gross terms.

italy 2yr bond 11/25/11
Italian bond yields hit 7.8% and that's a 14 year high for borrowing costs and a doubling in a matter of days. Unlike the Fed, Italy cannot print up more Euros either to take care of their problem.

The Italian Treasury paid 6.504 percent to auction 8 billion euros ($10.6 billion) of the debt, almost twice the 3.535 percent a month ago and the highest since August 1997. Italy’s two-year bonds yielded a euro-era record 7.83 percent, almost 50 basis points more than 10-year notes.

Yesterday Moody's cut Hungary to junk status. Junk means not ready for prime time, or investment.

Greece on the Verge of Default

greek dominoesThe rumors are swirling that a Greek Default is imminent:

Despite strong denials that the country is heading for a default, rumours have grown that the end game is approaching. Wolfgang Schäuble, the German finance minister, has insisted that a sixth, €8bn (£6.8bn) instalment of aid will not be released unless Greece enacts corrective measures to kickstart its economy and improve competitiveness. Experts from Washington and Brussels will fly into Athens this week to assess whether Greece is sticking to its programme of drastic spending cuts and tax rises, amid fears that its creditors could be ready to pull the plug.

Literally there are talks about seizing Greek assets, by force.

Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets.

Greece, assuming in response, announced a new property tax, collected through electricity bills:

The tax is €4 per square meter (about $0.50 per sq. feet). The government is projecting this levy will make up for the revenue shortfall due to the sharper than expected contraction in the Greek economy.

Manufacturing Monday: German firm opens up in US, Volt not 100% American, and drug inspections

 

 

Greetings folks, and welcome to another episode of Manufacturing Monday!  Well it seems another European firm has opened up a factory here in the good ol' US of A.  Meanwhile, Chevy's turning to foreign sources for lithium batteries for it's upcoming Volt.  Finally, we take a look at a push to investigate foreign pharmaceutical labs.

 

MAN likes Cleveland!