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Russia Taking Full Advantage Of Greek Crisis
Russia Taking Full Advantage Of Greek Crisis
With Greece’s debt situation spiraling downwards, the European project is showing some cracks. The July 5 referendum could amount to a vote on whether or not Greece stays in the euro.
In the meantime, the turmoil offers an opportunity for Russia to advance its interests. Of course, the EU is an absolutely critical trading partner for Russia, so if the bloc starts to fray at the seams, that presents financial risks to an already struggling Russian economy. Russia’s central bank governor Elvira Nabiulllina warned in June of the brewing threat that a Greek default would have on Russia. “We do consider that scenario as one of possible risks which would increase turbulence in the financial markets in the European market, bearing in mind the fact the European Union is one of major trading partners, and we are definitely worried by it,” she said in an interview with CNBC.
With the economic fallout in mind, Russia does see strategic opportunities in growing discord within Europe. First, Russia is pushing its Turkish Stream Pipeline, a natural gas pipeline that it has proposed that would run from Russia through Turkey and link up in Greece. From there, Russian gas would travel on to the rest of Europe. Russia is vying against a separate pipeline project that would send natural gas from the Caspian Sea through Turkey and on to Europe.
Related: Current Oil Price Slump Far From Over
In mid-June, Alexis Tsipras met with Russian President Vladimir Putin at the St. Petersburg International Economic Forum. Russia and Greece signed amemorandum following the meeting to push the project forward. Russia’s energy minister Alexander Novak emphasized that Gazprom would not own the section of the pipeline on Greek territory, a crucial fact that avoids heavy antitrust scrutiny from EU regulators.
With an eye on the looming default, Russia agreed to finance the project, and Greek officials portrayed the project as economic assistance amidst its ongoing debt crisis.
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Why The Puerto Rico Debt Crisis Is Such A Huge Threat To The U.S. Financial System
Why The Puerto Rico Debt Crisis Is Such A Huge Threat To The U.S. Financial System
The debt crisis in Puerto Rico could potentially cost financial institutions in the United States tens of billions of dollars in losses. This week, Puerto Rico Governor Alejandro Garcia Padilla publicly announced that Puerto Rico’s 73 billion dollar debt is “not payable,” and a special adviser that was recently appointed to help straighten out the island’s finances said that it is “insolvent” and will totally run out of cash very shortly. At this point, Puerto Rico’s debt is approximately 15 times larger than the per capita median debt of the 50 U.S. states. Yes, the Greek debt crisis is larger, as Greece currently owes about $350 billion to the rest of the planet. But only about $14 billion of that total is owed to U.S. financial institutions. But with Puerto Rico, things are very different. Just about the entire 73 billion dollar debt is owed to U.S. financial institutions, and this could potentially cause massive problems for some extremely leveraged Wall Street firms.
There is a reason why Puerto Rico is called “America’s Greece”. In Puerto Rico today, more than 40 percent of the population is living in poverty, the unemployment rate is over 12 percent, and the economy of the small island nation has continually been in recession since 2006.
Steven Rhodes, the retired U.S. bankruptcy judge who oversaw Detroit’s historic bankruptcy and has now been retained by Puerto Rico to help solve its problems, gave a blunt assessment on Monday.
Puerto Rico “urgently needs our help,” Rhodes said. “It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer,” he added.
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Greek debt crisis: ‘Something awful’ this way comes
Greek debt crisis: ‘Something awful’ this way comes
The next “final” twist in the exhausting Greek drama is upon us, and it’s looking like “something awful” is about to befall the country’s banking system, Citigroup analysts said yesterday.
A deal was on the table Friday, but the ECB’s move over the weekend to freeze emergency loans for Greek banks has led to capital controls and, in turn, has increased the odds of a Greek exit from the euro zone. For investors, it means a battered euro, wrecked equities and maybe, just maybe, a more reluctant Fed when it comes to ramping up interest rates.
So far, the U.S. stock market is starting this holiday-shortened week with a sound thrashing. It was even worse in Asia, where the Shanghai CompositeSHCOMP, -3.34% broke lower into bear-market territory despite a surprise interest-rate cut over the weekend. Technology, in particular, was slammed.
While the butterfly wings in Greece seem, at least to some degree, to be rattling markets all over the world, one hedge funder and blogger is hardly sweating the Hellenic end game.
“There’s a lot we can’t know. But there’s also a lot we do know, and pretty much all of it has changed for the better,” Mark Dow, author of Behavioral Macro, wrote. “When I look at Grexit, I see a world in much better fundamental position to avoid the cascading systemic contagion we (rightly) feared as recently as a year ago. Now is the time to do what the system could not handle in 2010: get Greece off the toxic medication and onto a path of growth and dignity.”
Key market gauges
Dow YMU5, -1.01% and S&P ESU5, -1.03% futures are down about 1%. EuropeSXXP, -2.06% is also faltering in the early going while Asia ADOW, -1.86% closed with deep cuts after an abysmal stretch last week. The euro EURUSD, -0.3761% is moving lower, as expected. Gold US:GCM5 was higher, but oil CLU5, -1.12% fell into the red.
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Central Banks Are Pointing A Weapon Of Financial Mass Destruction—–Right At The Global Bond Markets
Central Banks Are Pointing A Weapon Of Financial Mass Destruction—–Right At The Global Bond Markets
For the first time in its country’s history, Portugal sold 6 month T-bills at a negative yield. The 300 million euros ($333 million) worth of bills due in November 2015 sold at an average yield of minus 0.002%. A negative yield means investors buying these securities will get back less money from the government than they paid when the debt matures.
To put this in perspective, the 10 year note in Portugal now yields just 2.38%, down from 18% a mere three years ago. Back in 2012, creditors grew wary of the countries referred to as PIIG’s (Portugal, Ireland, Italy and Greece) and their ability to pay back the massive amounts of outstanding debt. Consequently, creditors drove interest rates dramatically higher to reflect the added risk of potential defaults.
If a person had fallen into a deep slumber in the midst of the 2012 Eurozone debt crisis and awoke a week ago, they may make some reasonable assumptions as to why there was a collapse of Portuguese bond yields on the long end of the yield curve; and even displayed negative yields on the short end.
Perhaps Portugal had finally balanced their budget? Or even is now enjoying a budget surplus? To the contrary, that is not even close to the truth. Portugal has not balanced its budget…its budget deficit now sits at over 3% of GDP.
Or perhaps there was a massive restructuring of outstanding debt? Upon joining the Euro, Portuguese national debt was below the 60% limit set by the Maastricht Treaty criteria. By the start of the debt crisis in 2009, that level of public sector debt had edged up to 70% of GDP. However, the recession of 2009-12, saw a rapid increase in the level of debt. Despite recent efforts to reduce public spending and austerity measures pursued by the government, Portugal still has an immense and growing debt load, with a current National Debt to GDP ratio of over 130%.
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Thomas Piketty on the Euro Zone: ‘We Have Created a Monster’
Thomas Piketty on the Euro Zone: ‘We Have Created a Monster’
SPIEGEL: You publicly rejoiced over Alexis Tsipras’ election victory in Greece. What do you think the chances are that the European Union and Athens will agree on a path to resolve the crisis?
Piketty: The way Europe behaved in the crisis was nothing short of disastrous. Five years ago, the United States and Europe had approximately the same unemployment rate and level of public debt. But now, five years later, it’s a different story: Unemployment has exploded here in Europe, while it has declined in the United States. Our economic output remains below the 2007 level. It has declined by up to 10 percent in Spain and Italy, and by 25 percent in Greece.
SPIEGEL: The new leftist government in Athens hasn’t exactly gotten off to an impressive start. Do you seriously believe that Prime Minister Tsipras can revive the Greek economy?
Piketty: Greece alone won’t be able to do anything. It has to come from France, Germany and Brussels. The International Monetary Fund (IMF) already admitted three years ago thatthe austerity policies had been taken too far. The fact that the affected countries were forced to reduce their deficit in much too short a time had a terrible impact on growth. We Europeans, poorly organized as we are, have used our impenetrable political instruments to turn the financial crisis, which began in the United States, into a debt crisis. This has tragically turned into a crisis of confidence across Europe.
SPIEGEL: European governments have tried to avert the crisis by implementing numerous reforms. What do mean when you refer to impenetrable political instruments?
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