Category Archives: Economy

We get some strong deflation signs in USA last 3 months

We get some strong deflation signs in USA last 3 months, economic numbers not too good only thing rising is debt and consumer confidence.

 

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    The price of iron ore has been crashing as well. It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China… There is no better measure of the true contraction underway in China…
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  • 78
    Half of the 41 fracking companies drilling for shale oil and gas in the US will be dead or sold by year-end amid steep crude price declines, Bloomberg reports.  An executive with Weatherford International Plc said slashed spending by oil companies has put much of the US fracking industry at risk.…
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  • 78
      Source : http://www.alhambrapartners.com/2015/08/14/the-dollar-run-hits-the-corporate-bubble/ The ‘Dollar’ Run Hits The Corporate Bubble by Jeffrey P. Snider in Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets Tags:asian flu, asset bubbles, china, convertibility, corporate bond bubble, dollar run, eurodollar standard,global recession, high yield, interbank, junk, leveraged loans, Repo, wholesale funding, yuan By the behavior of…
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  • 78
    The fast food chain is targeting 700 poor performing restaurants for closing this year, according to a McDonald's news release in which it reported losses not only in the United States, but in Europe and Asian as well. First quarter comparable sales in the United States decreased 2.6 percent and…
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Oil producers need to find half a trillion dollars to repay debt.

At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

If oil stays at about $40 a barrel, the shakeout could be profound, according toKimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 4.5 percent to $40.32 a barrel at 10:51 a.m. in London.

“The look and shape of the oil industry would likely change over the next five to 10 years as companies emerge from this,” Wood said. “If oil prices stay at these levels, the number of bankruptcies and distress deals will undoubtedly increase.”

Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. A total of about $550 billion in bonds and loans are due for repayment over the next five years.

U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.

In the U.S., the number of bonds yielding greater than 10 percent has increased more than fourfold to 80 over the past year, according to data compiled by Bloomberg. Twenty-six European oil companies have bonds in that category, including Gulf Keystone Petroleum Ltd. and EnQuest Plc.

Pressure Builds

Gulf Keystone can “satisfy all its obligations to both its contractors and creditors” after authorities in Kurdistan, where the company operates, committed to making monthly payments for crude exports from September, Chief Financial Officer Sami Zouari said in an e-mail.

An EnQuest spokesman declined to comment.

Slumping crude prices are diminishing the value of oil reserves and reducing borrowing power, even as pressure builds to find replacement fields.

Some earnings metrics are already breaching the lows of the 2008 financial crisis. The profit margin for the 108-member MSCI World Energy Sector Index, which includes Exxon Mobil Corp. and Chevron Corp., is the lowest since at least 1995, the earliest for when data is available.

“There are several credits which simply won’t be able to refinance and extend maturities and they may need to raise additional equity,” said Eirik Rohmesmo, a credit analyst at Clarksons Platou Securities AS in Oslo. “The question is: would they be able to do that with debt at these levels?”

Credit Ratings

Some U.S. producers gained breathing space by leveraging their low-cost assets to raise funds earlier this year and repay debt, Goldman Sachs Group Inc. wrote in a Aug. 6 report. This helped companies shore up their capital and reduce debt-servicing costs.

That may no longer be an option because energy companies have been the worst performers in the past year among 10 industry groups in the MSCI World Index.

Credit-rating downgrades are putting additional strain on the ability of oil companies to raise money cheaply. Standard & Poor’s cut the rating of Eni SpA, Italy’s biggest oil company, in April, while Moody’s Investors Service downgraded Tullow Oil Plc’s debt in March.

Spokesmen for Eni and Tullow declined to comment.

The biggest companies, with global portfolios that span oil fields to refineries, will probably emerge largely intact from the slump, Norton Rose’s Wood said. Smaller players, dependent on fewer assets, could have problems, she said.

“Clearly, those companies with debt to pay will have one eye firmly on oil prices,” saidChristopher Haines, a senior oil and gas analyst at BMI in London. “With revenues collapsing and debt soon to mature, a growing number of companies may find themselves unable to meet repayment schedules.”

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    October 22, 2014 Santiago, Chile The US government’s debt is getting close to reaching another round number—$18 trillion. It currently stands at more than $17.9 trillion. But what does that really mean? It’s such an abstract number that it’s hard to imagine it. Can you genuinely understand it beyond just…
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The ‘Dollar’ Run Hits The Corporate Bubble

 

Source : http://www.alhambrapartners.com/2015/08/14/the-dollar-run-hits-the-corporate-bubble/

The ‘Dollar’ Run Hits The Corporate Bubble

By the behavior of the Chinese yuan itself, given the financial size here, we can readily assume that any “dollar” problem that is clearly causing the PBOC’s actions are sizable. Currencies throughout Asia are being roiled not unlike 1997 and oil prices sunk to a new “recovery” low. While that all suggests far away turmoil relevant only to those foreign shores, there are many domestic and internal eurodollar problems that leave little doubt about unification and singularity. As I wrote this morning, there is only one currency war and that is the “dollar” as it implodes onto itself.

The spread of financial irregularity, including stumped and deviating central banks (the list only grows, PBOC the latest casualty), signals the decay that began on August 9, 2007, as it has accelerated since last year. Internal interbank rates have risen, especially lately, which is central to all this “dollar” turmoil. Repo rates surged in the past two weeks, and while the GC rate paused yesterday (MBS down only from 30.7 bps to 30.1 bps), it remains at a noticeably elevated station.

ABOOK Aug 2015 Run Repo GCABOOK Aug 2015 Run Repo GC QE Comp

With all that in mind, Jason Fraser of Ceredex Value Advisors alerted me to greater and certainly related turmoil in the less visible high yield spaces. The Bank of America/Merrill Lynch High Yield CCC Yield got absolutely slammed yesterday, rising from 13.58% to16.18%! That would suggest, as all listed above, that there has been inordinate and tremendous “dollar” pressure not in foreign, irrelevant locales but creeping into the contours of the domestic and internal framework. While that may be energy, as Jason points out, it cannot all be energy.

The surge there far surpassed the 2013 summer meltdown and actually equals the 2011 crisis crash.

ABOOK Aug 2015 Run BofAML HYs  CCC

In fact, other junk indicators were similarly taken out in a manner that we have seen before. The Bank of America/Merrill Lynch Master II yield was far less dramatic but still indicating a serious liquidity event in that risky space. As both yield indices make plain, the last time prices were so slammed was early to mid-December – right when the ruble was crashing and the franc/dollar problem was testing the Swiss National Bank’s last resolve.

ABOOK Aug 2015 Run BofAML HYs  Master II

December 16 also marked the low point in the S&P LSTA Leveraged Loan 100 Index. When last we left that part of the junk/risk market, it was selling off and only a few ticks above that December low. S&P has not updated its figures for the index since August 10, curiously going dark during all of this “dollar” turmoil. I emailed them directly for clarification, and the response I got was, “Just a lag in getting the data.”

I have no specific reason for doubting the sincerity of that reply and explanation, though I can’t help but note that it is awful curious that they would be having such pricing problems when the rest of their similarly situated class within the corporate bubble is as churning and possibly illiquid as the yuan. I cannot recall a similar lag in updating the index, but, again, I have no specific inside knowledge on their internal workings.

ABOOK Aug 2015 Leverage Lev Loan

The cumulative assessment of all these factors, great as they are in their individuality, is that the global financial system just endured this week another “dollar” run. We can say with some reasonable assurance there was one in early December, as well as one centered on October 15. They seem to be increasing in intensity and now reach, penetrating deeper into the bowels of the “dollar” system as well as taking down central banks with each successive wave.

As I wrote, again, this morning:

The higher currency fix signals that whatever great “dollar” run hit the China funding markets this week may have passed – even if only temporarily. In short, the actions of the PBOC, seen in light of what was a convertibility mini-crisis, a “run” of sorts, make sense where the yuan fix as some kind of “stimulus” in devaluation does not (or is at least far too inconsistent to be explanatory). The PBOC held the yuan steady to a near plateau for five months hoping for cessation of “dollar” pressure, but, like a coiled spring, it only intensified until there was no holding back anymore.

It will be interesting once S&P updates the leveraged loan index to see how much effect and maybe devastation was experienced there during this run. For now, it seems today as if the acuteness has abated and calm has been restored.

That does not mean, however, that all this is over; far from it. These tremors are warnings that the “dollar” system’s decay is reaching critical points. The mainstream will tender that this is really no big deal, just a tantrum of spoiled markets unwilling to easily treat the coming end of ZIRP and accommodation; that is simply and flat out false. There is a systemic liquidity problem that is and has been fatal, exposed to a greater degree by the continued withdrawal of eurodollar bank participation – the real “printing press.”

In a credit-based monetary system neither the economy nor its ultra-heavy financial component can move forward without ever-growing financialism; dark leverage and all that. There has been a continuous withdrawal dating back to, again, August 2007, but met with amplifications first in 2011, again in the middle of 2013 and then last year. This is not policy but a total systemic reset, as “money dealing” activities have never been settled this entire time. The dealer network simply withdrew starting in August 2007 with central bank balance sheets taking up the slack, belatedly as usual which is why there was a panic and crash. Dealers are again removing what little presence they have left but central banks seem totally unaware that that is the case, and that there is really nothing left for “money” intermediation upon that and their withdrawal.

I wrote back in May upon this very topic, as some very good and smart people, Perry Mehrling and Zoltan Pozsar, were attempting to gameplan the coming monetary shift. My view hasn’t changed, namely that the transition will not be a transition at all, but a potentially awaiting systemic decapitation:

I personally find way too much complacency in blindly believing that going from B to C will be only a minor inconvenience. It would be dangerous even under the circumstances where the system shifted from the dealers to the Fed and back to the dealers, with an infinite series of potential dangers even there. But to undertake a total and complete money market reformation from dealers to the Fed to money funds? There are no tests or history with which to suggest this is even doable under current intentions. Poszar and Mehrling’s contributions more than suggest that difficulty, but I think that still understates whether or not we ever get that far.

This latest “dollar” episode has continued to bear that out. How much further will it go before central banks wake up and see that their fantasy of a recovery and “resilient” financial system was a now-eight year old lie? That is, of course, a rhetorical question as they will not act until all is over. That is the problem, because this hollowed-out global “dollar” is supporting, badly, the main bubble, so the penetration into the corporate space is a highly unwelcome development (though welcome in the long run sense of actual and helpful balance) as this remains awaiting resolution upon increasingly unstable circumstances:

ABOOK June 2015 Bubble Risk Subprime to Junk Lev Loans CLOsABOOK June 2015 Bubble Risk Eurodollar Standard2

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    We get some strong deflation signs in USA last 3 months, economic numbers not too good only thing rising is debt and consumer confidence.  
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  • 74
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    Half of the 41 fracking companies drilling for shale oil and gas in the US will be dead or sold by year-end amid steep crude price declines, Bloomberg reports.  An executive with Weatherford International Plc said slashed spending by oil companies has put much of the US fracking industry at risk.…
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Greek debt tracker by FT

Greek debt tracker

 

As the government in Athens haggles with its lenders over economic reforms,Greece is running out of money. Here is what it owes in the upcoming months.

http://www.ft.com/ig/sites/2015/greek-debt-monitor/

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If Greece defaults on IMF? then …

Greece could take a risky step into the unknown tomorrow if it misses, as expected, a 1.5 billion euro debt payment to the International Monetary Fund.

For the moment, credit rating agencies though would not declare Greece officially “in default” on its debt, because the missed payment is to an official lender and not the commercial funding market.

Although the Greek government has put the deal offered by creditors to a referendum vote next Sunday, IMF Managing Director Christine Lagarde said earlier this month that “there will be no period of grace” for the country.

To help fund a budget shortfall and keep current on all its obligations, Athens has been negotiating to get another 7.2bn in bailout funds from the IMF and European Union.

The talks have broken down, and the Greek government – which was allowed to bundle together several IMF payments due this month into one – is not expected to have enough money on its own for the 30 June payment.

If Athens does not make the payment it would immediately be cut off from access to Fund services and facilities.

If the Greek government misses tomorrow's payment, it will be declared “in arrears” by the Washington-based institution.

Greece has borrowed about 32bn from the global crisis lender since 2010, some of which has already been repaid.

It could also theoretically be placed on track for expulsion from the IMF

Only one country in IMF history has been kicked out: Czechoslovakia, during the Cold War in the 1950s.

Expulsion would require support of a large majority of the Fund’s members, who usually prefer to avoid extreme outcomes.

Long in default on their IMF loans, Sudan, Somalia and Zimbabwe have kept their memberships.

 

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Britain’s biggest bond funds has urged investors to keep cash under the mattress

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress.

Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, including the flagship Moneybuilder Income fund, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008, which began in Britain with a run on Northern Rock.

“Systemic risk is in the system and as an investor you have to be aware of that,” he told Telegraph Money.

The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts. But he went further, suggesting it was wise to hold some “physical cash”, an unusual suggestion from a mainstream fund manager.

His concern is that global debt – particularly mortgage debt – has been pumped up to record levels, made possible by exceptionally low interest rates that could soon end, and he is unsure how well banks could cope with the shocks that may await.

He pointed out that a saver was covered only up to £85,000 per bank under the Financial Services Compensation Scheme – which is effectively unfunded – and that the Government has said it will not rescue banks in future, hence his suggestion that some money should be held in physical cash.

He declined to predict the exact trigger but said it was more likely to happen in the next five years rather than 10. The current woes of Greece, which may crash out of the euro, already has many market watchers concerned.

Mr Spreadbury’s views are timely, aside from Greece. A growing number of professional investors (see comment, right) and commentators are expressing unease about what happens next.

The prices of nearly all assets – property, shares, bonds – have been rising for years.

House prices have risen by 26pc since the start of 2009, and by 68pc in London. The FTSE 100 is up by 75pc.

Although it feels counter-intuitive, this trend of rising prices should continue if economies remain weak, because it gives central banks licence to keep rates low and to carry on with their “quantitative easing” programmes.

Conversely, if the economy does pick up and interest rates need to rise, the act of doing so is likely to stall the economy and force them to be reduced again. Once more, demand for those mainstream assets would be rekindled and the asset boom continues.

But then there is the shock event. Daily Telegraph columnist Jeremy Warner also captured some of the concerns this week when he wrote that the trigger for an “inevitable correction” could come from “a clear blue sky – a completely unanticipated event”.

How are fund managers preparing for this gloomy possibility?

Mr Spreadbury sticks to bonds because of the remit of his funds. Within that world, he said a shock to the system would cause a flight to safety and the price of British government bonds, or gilts, would rise sharply. He also holds bonds of companies that would be most protected in times of turmoil – water companies, power network operators – and those where the bonds are secured on a solid asset, such as land or buildings.

Examples include Center Parcs and Intu, which owns shopping centres.

Marcus Brookes, another well regarded fund manager who looks after billions of pounds worth of investments, is less constrained in where he invests, because of the different remit of his funds. Schroder Multi-Manager Diversity, for example, can pick and choose between assets.

Mr Brookes said the probability of a major shock event was small but even he holds 29pc of the Diversity portfolio in cash, a huge proportion compared with most funds. This decision is due to his concern that bonds are overvalued and may fall. He aims to deliver returns of 4pc above inflation so can’t afford to put too much in assets that he believes will lose money.

“The problem is that people are struggling to work out how to diversify if QE programmes stop,” he said.

Mr Spreadbury added: “We have rock-bottom rates and QE is still going on – this is all experimental policy and means we are in uncharted territory.

“The message is diversification. Think about holding other assets. That could mean precious metals, it could mean physical currencies.”

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Raising the interest rate on 10-year Treasury bonds from today’s 2% to 4% — in line with Fed expectations — would halve the present value of the stock market.

If you’re thinking of investing in stocks (or bonds) because you can’t think of anywhere better to put your money, you might want to take a pause and ponder what Stanley Fischer, the vice chairman of the Federal Reserve, just said at a conference in Tel Aviv, Israel.

Fischer, speaking this week, said the Fed expects to raise short-term interest rates from its current 0% to around 3.25% to 4% within the next three or four years.

That was not his personal guess, he said, but the central target being used by the economists at the Federal Reserve.

Three-and-a-quarter to 4%. Compared with 0% today.

If short rates go there, then history says the 10-year Treasury bond rate TMUBMUSD10Y, -0.49%  may rise from today’s 2% to about 4.25% to 5%.

And from those two simple things, a gigantic chain of dominoes all across the stock market — and the world, for that matter — will start to fall.

How?

Raising the interest rate on 10-year Treasury bonds from today’s 2% to 4% — in line with Fed expectations — would halve the present value of the stock market.

No one will want to buy a 2% Treasury bond when they can buy a 4% or 5% Treasury bond. So the Treasuries you own will get marked down, massively, to compete.

No one will want a 5% corporate bond with a risk of default when they can buy a 5% Treasury bond with no such risk. History says that, in order to compensate for their risks, corporate bonds will have to yield considerably more than equivalent Treasuries to compete — so they, too, will be marked down sharply.

Bad news for your bond funds.

And then we come to stocks.

How easy it is to forget, amid the news and noise of corporate earnings, buybacks and sundry other deals, that half of the value of the stock market has nothing do to with what companies or stocks are doing.

Half the value of the stock market lies, instead, in the so-called “cost of capital” — in other words, the rate of interest you could earn by ignoring stocks and sticking your money somewhere else.

So when the interest rate on Treasury bonds rises, stocks become a lot less attractive by comparison.

Their price has to fall in order to keep the same relative appeal. That is simple mathematics.

Based on the standard financial model used on Wall Street, raising the interest rate on 10-year Treasury bonds from today’s 2% to 4% — in line with Fed expectations — would halve the present value of the stock market.

Yikes.

That, I hasten to add, is neither a forecast nor a guesstimate nor really an opinion. It is simply what happens when you take the predictions offered by the vice chairman of the Federal Reserve and plug them into Wall Street’s standard model for valuing stocks.

Make of it what you will. School will soon be out for the summer. But mathematics, I’m afraid, never takes a vacation.

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Will Greece have until late July to come to an agreement with its creditors ?

Greece probably has until late July to come to an agreement with its creditors before potentially being forced out of the monetary union. Possible delays in payments to the International Monetary Fund in June shouldn’t prompt the European Central Bank to shut off vital liquidity to Greek banks. By contrast, a default on marketable debt — specifically the failure of the Greek government to pay 3.5 billion euros due to the ECB on July 20 — would probably force the central bank’s hand. The Greek government and its creditors are still likely to reach a deal on a list of reforms before that crucial date.June 5: Greece will have to make a payment of about 240 million SDRs to the IMF. That equals about 303 million euros. Greek Finance Minister Yanis Varoufakis has stated Greece will seal a deal with its creditors by this date. This is a medium-risk event. The raid from Greece’s own reserve account at the IMF to make a recent payment to the fund suggests the Syriza-led government is running out of cash to pay its creditors and will be unable to make this payment in the absence of additional bailout funds, though the immediate consequences of missing a payment to the IMF would be limited.June 12: Greece will have to make a payment of about 270 million SDRs to the IMF. That equals about 341 million euros. This is a medium-risk event, similar to June 5.

June 12: Greece must roll over 3.6 billion euros of Treasury bills. This is a low-risk event.

June 16: Greece will have to make a payment of about 451 million SDRs to the IMF. That equals about 568 million euros. This is a medium-risk event. (See June 5.)

June 18: The Eurogroup will meet. This seems like a low-risk event because the finance ministers would still be able to discuss Greece at their next meeting even if an agreement were to remain elusive.

June 19: Greece will have to make a payment of about 270 million SDRs to the IMF. That equals about 341 million euros. This is a medium-risk event. (See June 5.)

June 19: Greece must roll over 1.6 billion euros of Treasury bills. This is a low-risk event.

June 25-26: The European Council meets in Brussels. German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras could use this opportunity to speak about financial aid to Greece. The heads of governments could force their officials to move in a particular direction, though the finance ministers are the government representatives who have to sign an agreement. This seems like a low-risk event because the Eurogroup will meet again on July 13.

End-June: The extension expires for the “Master Financial Assistance Facility Agreement,” as Greece’s bailout is known. This will probably be a medium-risk event. If Greece were no longer officially in a bailout program, the ECB could decide to re-assess its collateral rules linked to Emergency Liquidity Assistance, though the most likely outcome of this soft — and arbitrary — deadline is an extension if an agreement remains elusive.

July 10: Greece must roll over 2 billion euros of Treasury bills. This is a low-risk event.

July 13: Greece will have to make a payment of about 360 million SDRs to the IMF. That equals about 454 million euros. This is a medium-risk event. (See June 5.)

July 13: The Eurogroup will meet. This will probably be a high-risk event because it is the last scheduled Eurogroup meeting ahead of the July 20 payment to the ECB. In other words, this may be the last opportunity for the finance ministers to agree on the disbursement of funds ahead of that date.

July 17: Greece must roll over 1 billion euros of Treasury bills. This is a low-risk event.

July 19 and 20: Greece must make the largest coupon payments of the month — about 199 million euros and 104 million euros, respectively — on government bonds. The total for the month is 810 million euros. In addition, Greece’s 3.5 billion-euro bond held by the ECB matures on July 20. This is a high-risk event. A default could cause the ECB to cut off Greek banks’ access to ELA. That would probably be the first step to an exit of the beleaguered country from the monetary union.

Aug. 1: Greece will have to make a payment of about 141 million SDRs to the IMF. That equals about 177 million euros. This is a medium-risk event. (See June 5.)

Aug. 7: Greece must roll over 1 billion euros of Treasury bills. This is a low-risk event.

Aug. 14: Greece must roll over 1.4 billion euros of Treasury bills. This is a low-risk event.

Aug. 20: Greece must make the largest coupon payment of the month — about 194 million euros — on government bonds. The total for the month is 211 million euros. In addition, Greece’s 3.2 billion-euro bond held by the ECB matures. The riskiness of these events is path-dependent. If Greece has managed to secure bailout funds by this date, the payment shouldn’t create a problem. If it hasn’t secured the funds, Greece will probably have defaulted on the July 20 payment already and this second payment might be immaterial. If Greece hasn’t secured bailout funds and managed to somehow make the July 20 payment, this would be a high-risk event.

This post is courtesy of Bloomberg Intelligence Economics.

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Do you own Gold ? You should … Listen why

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Greece Readies for Another Week of Deadlines

Warnings of an accidental default loom over debt-swamped Greece as Prime Minister Alexis Tsipras’ anti-austerity government heads for another confrontation with an increasingly testy German-led bloc of creditors.

Greece needs at least a symbolic show of progress at Monday’s meeting of euro-area finance ministers in Brussels to persuade the European Central Bank to keep emergency funds flowing to Greek banks at the current pace. The next hurdle comes just a day later, when Greece has to pay about 750 million euros ($840 million) to the International Monetary Fund.

Tsipras met with top cabinet ministers for several hours on Sunday to brief them on the negotiations. Athens expects the Eurogroup to officially acknowledge important progress, a Greek government official, speaking on the condition of anonymity as the talks were private, said after the meeting. Tsipras and his ministers confirmed the need for a mutually beneficial deal within the framework of the government’s mandate, the official said.

The meeting in Athens took place under mounting pressure to abandon election promises made just months ago for more generous retirement benefits and to recommit to selling government-held stakes in companies to raise cash. No one outside of Athens knows for sure how long the country can stay afloat.

Schaeuble’s Warning

“Experience elsewhere in the world has shown that a country can suddenly become unable to pay its bills,” German Finance Minister Wolfgang Schaeuble said in an interview with Frankfurter Allgemeine Sonntagszeitung published Saturday. Schaeuble said if Greece is forced out of the euro “it won’t be because of us.”

Tsipras’s determination to junk the budget cuts associated with Greece’s 240 billion-euro bailout — and to tap creditors for more money after that — has hammered Greek markets since he took power. Greek 10-year bonds now yield 10.67 percent, up from 8.41 percent on the eve of the Jan. 25 election. The yield touched 13.64 percent last month.

Strains are emerging in Tsipras’ Syriza party, a novice at governing. Tsipras took the job of dealing with creditors away from Finance Minister Yanis Varoufakis, who was accused by euro ministers following the last meeting on April 24 of lacking rigor and wasting time.

Agreement Elusive

The personnel change has improved the structure and organization of the negotiations, a European Union official said on Friday. While there has been a rapprochement with Greece in a number of areas, no final agreement is in sight, the official said on condition of anonymity under Brussels briefing rules.

Greece’s program runs until the end of June. The EU official said that while deadlines aren’t cast in stone, a technical agreement on a revised program needs to be struck by early June to allow time for approval by creditor governments.

An accord “will surely not be reached at the Eurogroup meeting on Monday,” Dutch Finance Minister Jeroen Dijsselbloem, the meeting’s chairman, told Italy’s Corriere della Sera newspaper. “We will need more time, but I don’t know how much.” The meeting starts at 3 p.m.

Varoufakis’ Position

While day-to-day deliberations are now in the hands of Deputy Foreign Minister Euclid Tsakalotos, Varoufakis will be Greece’s chief representative at the Brussels meeting. He denied being demoted, telling BBC World on Thursday: “I am the chief negotiator for the Greek government.”

Enthusiasm for Tsipras’s cause has been sapped by Greece’s economic ordeal and the potential choice between a shrunken welfare state inside the euro or an unknown future outside it. Fifty-four percent of Greeks back the government’s negotiating strategy, down from 82 percent in February, a Marc poll for Efimerida Ton Sintakton showed Saturday. Still, Syriza continues to outpoll other parties.

Whether Greece yields before the northern creditor governments’ patience snaps is an open question. Some members of German Chancellor Angela Merkel’s Christian Democratic bloc are challenging her intention to keep Greece in the euro, and some officials in the German Finance Ministry are leaning toward the conclusion that the euro area would be better off without Greece, two people familiar with internal German discussions said.

“In Greece there is a growing awareness that time is running out,” Italian Finance Minister Pier Carlo Padoan said in a Sunday interview with Messaggero.

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