Central Banks Promise To Save World On Monday If Greece Elects A Crazy Person This Weekend

I laughed SO hard when I saw this!! SO, the assholes that got us into this mess are claiming they can save everyone...sounds a little desperate to me....


Central Banks Promise To Save World On Monday If Greece Elects A Crazy Person This Weekend

Stella Dawson, Reuters | Jun. 14, 2012, 4:26 PM

WASHINGTON (Reuters) - Central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading, G20 officials told Reuters.

A senior U.S. official cautioned that the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis.

But if severe market strains emerge after an unusual confluence of three elections this weekend - there are important polls in Egypt and France as well - central bankers are on standby to ensure enough cash is flowing through the financial system.

"The central banks are preparing for coordinated action to provide liquidity," said a senior G20 aide familiar with discussions among international financial diplomats. His statement was confirmed by several other G20 officials.

Wall Street stocks jumped sharply on the news, with the S&P 500 and the Dow Industrials both up more than 1 percent. The euro added to gains and U.S. government debt prices fell, boosting yields.

A move to boost liquidity could mark a dramatic backdrop to the G20 summit of world leaders, who will gather in Los Cabos, Mexico, on Monday and Tuesday where Europe's escalating crisis tops the agenda.

Leaders will be accompanied by finance ministers playing an advisory role. The ministers, who usually keep a low profile at these summits, have scheduled a working dinner on Monday and lunch on Tuesday.

Depending on the severity of the market response, an emergency meeting of ministers from the Group of Seven developed nations could be held on Monday or Tuesday in Los Cabos, with central bankers joining by phone, a second G20 official said.

Their first line of defense probably would be a statement that policymakers are ready to take whatever steps are needed to assure market stability.

This usually is a signal for technical steps to keep cash flowing through the financial system. Currency swap lines already are in place, which can be drawn upon to ensure there are enough dollars available if global investors rush into the safety of U.S. assets. Central banks also can hold extra auctions to flood banks with short-term cash via repurchase agreements.

Currency intervention also is possible, though less likely to be sanctioned by the G7. Japan and Switzerland might intervene to weaken their currencies if a rush to safe-haven assets pushes up the yen and the Swiss franc.

Japan already has indicated to its G7 partners concerns about yen strength and it had considered acting earlier this month, several sources with direct knowledge said.

The International Monetary Fund took the unusual step on Thursday of sanctioning currency intervention for Japan to counter stresses from Europe, noting its currency is "moderately over-valued.

As for Switzerland, it has drawn a line in the sand at 1.20 francs to the euro. Swiss National Bank Chairman Thomas Jordan and the country's finance minister, Eveline Widmer-Schlumpf, on Thursday both threatened capital controls to prevent the franc soaring if Europe's crisis deepens.

"The SNB will not tolerate this," Jordan said.

TOGETHER TO SOOTHE MARKETS, ALONE ON ECONOMIES

As if the election in Greece were not enough, investors will need to parse the impact of a presidential election in Egypt that could roil oil markets and an election in France that looks set to put socialists in control of parliament after gaining the presidency in May.

While central banks might stand together to counter credit tightness and market volatility, the bar would be far higher for coordinated monetary easing, which is considered unlikely.

The last time central banks cut interest rates collectively was in October 2008 after Lehman Brothers collapsed. In that episode, credit evaporated with overnight interbank rates shooting above 4 percent and stock market volatility as measured by the VIX fear index hitting a record above 80.

None of these measures is approaching severe stress today.

While volatility has risen sharply since March as global stock markets lost ground, at 24 the VIX is way below crisis levels. Interbank lending costs, measured by three-month LIBOR, EURIBOR and EONIA, are near record lows.

"Presently there is enough liquidity in the system," said Erik Nielsen, chief economist at UniCredit.

Global Central Banks Ready to Act as World Prepares for Greek Vote


Friday, 15 Jun 2012 08:12 AM


Central banks from Tokyo to London checked their ammunition on Friday in preparation for any turmoil from Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

ECB President Mario Draghi said his bank was ready to step in and fund any viable eurozone bank that gets in trouble, and painted a picture of a deteriorating economy with no inflation danger — conditions for monetary easing.

"There are serious downside risks here," Draghi told the annual ECB Watchers conference in Frankfurt, two days before a Greek vote that could set Athens on a path out of the eurozone and stoke turmoil in financial markets.

"This risk has to do mostly with the heightened uncertainty."

Japan's top financial diplomat Takehiko Nakao warned that authorities in Tokyo would respond to unwelcome currency moves as appropriate, a clear threat of intervention if investors seeking safety push the yen too high.

The Bank of England followed up on Thursday's joint announcement with the government of a 100 billion pound ($155 billion) offer of loans to banks by saying it will start next week with a charge of just 0.75 percent.

Officials from the G-20 nations, whose leaders are meeting in Mexico next week, say numerous central banks are preparing to take steps to stabilize financial markets — if needed — by providing liquidity and prevent any credit squeeze.

European Council President Herman Van Rompuy convened a conference call on Friday afternoon with the leaders of Germany, France, Italy and Britain, officially to discuss preparations for the G-20 summit, expected to be dominated by the eurozone debt crisis.

Depending on the depth of any turmoil, an emergency meeting of ministers from the Group of Seven developed nations could be held on Monday or Tuesday during the summit in Los Cabos, Mexico, sources said.

The focal point for all is Sunday's repeat general election in Greece, a knife-edge race that could be won by parties vowing to tear up the harsh economic terms that the European Union and International Monetary Fund imposed as conditions of a bailout for the near-bankrupt state.

Such an outcome could drive Greece into default and possibly out of the eurozone, a prospect that could undermine faith in the currency bloc and add to pressure on the finances of bigger economies such as Italy and Spain.

Madrid's borrowing costs rose above 7 percent on Thursday, a level that is widely considered unsustainable. They fell slightly on Friday and European shares and the euro gained on expectations of global central bank response.

"At best, we are going to have a situation that is extremely serious on Monday," Swedish Finance Minister Anders Borg told journalists. "In all likelihood, whatever the outcome, we are going to have a government which is going to find it hard to live up to the agreements they (the Greeks) have signed up to."

WORSENING OUTLOOK

In a sign of growing strain between Europe's central powers, German Chancellor Angela Merkel hit out at France on Friday in response to President Francois Hollande's proposals for joint eurozone bonds and a joint bank deposit guarantee scheme.

"Europe must discuss the growing differences in economic strength between France and Germany," Merkel told German entrepreneurs, two days before the decisive second round of a French parliamentary election.

Responding to Hollande's call for more eurozone solidarity, she said Germany had wanted to give the European Court of Justice the power to reject national budgets that breach EU rules but others had objected. She meant France.

Draghi said the ECB was ready to provide money to solvent banks if they needed it, a clear plan to avoid the kind of credit crunch that occurred during the Lehman Brother crisis in 2008.

"The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term - and this is what we will continue to do," he said.

Draghi also said that no eurozone country faces an inflation risk, which is the bank's main concern. That gelled with comments from ECB policymakers a day earlier that the central bank might be open to cutting interest rates.

Britain did not wait for the Greek vote to announce action. Bank of England Governor Mervyn King said on Thursday the country would launch a scheme to provide cheap long-term funding to banks to encourage them to lend to businesses and consumers.

The central bank would also activate an emergency liquidity supply, King said in his annual Mansion House policy speech to London financiers.

King said the eurozone's problems were causing a crisis of confidence in Britain that was leading to a self-reinforcing weaker picture of growth.

"The black cloud has dampened animal spirits so that businesses and households are battening down the hatches to prepare for the storms ahead," he said.

On Friday, the bank said it will hold a first emergency liquidity operation for banks next week with at least 5 billion pounds on offer. Loans would be at a minimum of the Bank Rate, 0.5 percent, plus an additional 25 basis points.

STAND-OFF IN ATHENS

In Athens, the election was seen as too close to call.

Alexis Tsipras, leader of the main anti-bailout leftist party SYRIZA, said on Thursday the deal with Greece's international lenders, which has helped push the economy into a depression, would not last beyond the weekend.

"The memorandum of bankruptcy will belong to the past on Monday," Tsipras, who has rapidly emerged from fringe politics to challenge the mainstream for power, told his last campaign rally in Athens.

European leaders, however, have warned that Greece will get no help if it reneges. Officials have also hinted that Athens might be granted more time to achieve its fiscal targets if a new government sticks to the core reforms in the program.

French President Francois Hollande warned Greek voters about seeking what Tsipras has promised — a future in the euro while ditching the 130-billion-euro bailout deal sealed earlier this year and its demands for punishing austerity policies.

Hollande said on Greek TV that he wanted the country to stay in the euro, rather than reviving its drachma currency.

"But I have to warn them, because I am a friend of Greece, that if the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the eurozone which will prefer to finish with the presence of Greece in the eurozone."

SYRIZA is running neck-and-neck with the mainstream conservatives for Sunday's parliamentary vote, a re-run of an election last month that produced a stalemate in which neither the pro- nor anti-bailout camps was able to form a coalition.

Greek banking stocks soared more than 20 percent on Thursday amid market talk that secret opinion polls were showing that a government favorable to the international bailout agreement was likely to emerge after the June 17 election.


© 2012 Thomson / Reuters. All rights reserved.

Greek election is euro versus drachma, Samaras says



New Democracy leader Antonis Samaras says Greece will recover from its problems but will not leave the euro


Sunday's Greek election is a choice between staying in the euro and going back to the drachma, the leader of the centre-right New Democracy party has told a final campaign rally in Athens.
The general election, the second in six weeks, is seen as crucial to Greece's future in the eurozone.
New Democracy broadly accepts the EU/IMF bailout of debt-laden Greece but wants changes to the terms.

Main opponents Syriza reject the terms of the bailout but back the euro.
Syriza surged into second place on 6 May, in an election that produced an inconclusive result, with no party or coalition able to form a government.

Unofficial opinion polls suggest a fall in support for anti-bailout parties.

Under Greek election law, official opinion polls are banned in the two weeks before the election.
Tough austerity measures were attached to the two international bailouts awarded to Greece, an initial package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up last year worth 130bn euros.

The two main parties in the previous government, New Democracy and the centre-left Pasok, agreed to the terms for the second bailout, incurring the anger of many Greek voters.
New Democracy's support slipped from 33.5% in 2009 to less than 19% of the vote while Pasok's share plummeted from 43% to just over 13%.

While five of the seven main political groups reject the last bailout, only one - the Communists - wants the country to abandon the euro.
Germany, which has the eurozone's most powerful economy, insists Greece, like other member-states which have received international bailouts, must abide by the austerity conditions.

German Bundesbank (central bank) chief Jens Weidmann repeated the warning on Friday, adding that the eurozone could not allow any country to "blackmail" it with the threat of financial contagion.
Spanish exampleMr Samaras told his supporters on Friday that Greece would exit its financial crisis but not the euro.

"The first choice the Greek people must make is: euro versus drachma," he told the rally in front of parliament in Syntagma Square.
"We will exit the crisis; we will not exit the euro. We will not let anyone take us out of Europe," he said.

Mr Samaras has accused other parties of "playing poker" with Greece.

At Syriza's final rally on Thursday, leader Alexis Tsipras renewed his pledge to tear up the bailout conditions, which involve drastic spending cuts, tax rises, and labour market and pension reforms.
"The memorandum of bankruptcy will belong to the past on Monday," he told supporters in Omonia Square.

"Brussels expect us, we are coming on Monday to negotiate over people's rights, to cancel the bailout."
Pointing to the huge bank loan package deal between the EU and Spain on Sunday, he argued that a bailout was possible without the kind of drastic cuts demanded of Greece.

"Spain negotiated and succeeded in taking financial support without a fiscal consolidation package, despite the lenders' threats and blackmail," Mr Tsipras said.
Interviewed by Spanish daily El Pais, Jens Weidmann called for the eurozone to impose broad conditions on Spain over its loan package, worth up to 100bn euros.

He warned that Greece, but also the Irish Republic and Portugal, had been given the impression that this was a "rescue with no conditionality outside the financial system" and this was "already eroding the commitment to the terms of the existing programmes".

"But foot-dragging on addressing the structural problems will perpetuate the crisis, and the market reaction reflects this concern," Germany's top banker said.