Greek bank deposits plunge most since nation joined euro

By Christos Ziotis and Marcus Bensasson

Greek bank deposits held by businesses and households fell in October by the most since Greece joined the euro amid uncertainty over continued financing for the country from the European Union and International Monetary Fund.

Deposits fell 3.7 percent to 176.4 billion euros ($235 billion) from 183.2 billion euros, the Athens-based Bank of Greece said in a statement on its website today. The 6.8 billion-euro drop is the biggest since the country joined the 17-nation currency bloc in January 2001.

European Union leaders agreed on a 130 billion-euro bailout package for Greece on Oct. 26 after inspectors from the EU and the IMF determined that a 110 billion-euro bailout in May 2010 package wouldn’t be enough to keep the country’s debt to a sustainable level. The European Commission forecast last month that Greece’s debt would reach almost twice the size of its economy next year.

“The outlook remains fragile and political and macro developments, as well as the depth of recession, will drive deposit evolution in the coming months,� Euroxx Securities SA research director Manos Giakoumis said in an e-mailed note.

Bank deposits by consumers and businesses have declined 33.2 billion euros, or 16 percent, since December 2010.

Bank of Greece Governor George Provopoulos told lawmakers on Nov. 29 that the deposit flight continued at the start of November after former Prime Minister George Papandreou called an aborted referendum on the terms of the Oct. 26 accord, roiling markets. Deposits stabilized after Lucas Papademos, a former vice president of the European Central Bank, replaced Papandreou on Nov. 11.

Greek bank reliance on ECB liquidity declined to 74.3 billion euros from 77.8 billion euros in September, the Bank of Greece said in a separate statement. Reliance on Emergency Liquidity Assistance stood at 36.3 billion euros, according to Bloomberg calculations.

Bloomberg News

Posted in:Economy, Investing  Tags:bank run, credit crunch, debt crisis, deposits, eurozone, Greece, Greek banks, Greek crisis, recession

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Five economic themes to watch for in 2012

Dec 8, 2011 – 1:38 PM ET| Last Updated: Dec 8, 2011 1:41 PM ET

With the eurozone on the precipice of collapse, the United States grappling with its own debt issues and even China slowing down, what does 2012 hold for the global and Canadian economies?

CIBC World Markets Inc. released a handful of economic forecasts Thursday. Here are five key developments to look for in the year to come:

A hurdle for Canada’s unstoppable real estate market?

Benjamin Tal, CIBC’s deputy chief economist, said data on household debt and the health of the residential real estate market suggests a levelling off in prices in the next year or two with a more dramatic drop down the road.

“Further out, the most likely scenario is that the eventual increase in interest rates will lead to a modest decline in prices, probably in the magnitude of 10% to 15%,� he said.

But Mr. Tal said absent a trigger like the sub-prime mortgage crisis that triggered the recent U.S. housing market meltdown, a violent market correction is likely not in the cards for Canada.

Sluggish global growth in 2012 and not much to look forward to

“Excepting Europe, we’re not destined for recession, but global growth will barely top 3% next year, and 2013 won’t be a whole lot better, well below the bounteous 5% pre-recession pace,� said Avery Shenfeld, chief economist at CIBC.

The United States could defer its first round of budget tightening by extending tax measures for another year, he said, noting that if it does, “it will be feeling an even tougher fiscal squeeze in 2013.�

Meanwhile, Europe may have clawed its way back up somewhat by 2013 but growth there is still likely to be “lacklustre,� Mr. Shenfeld said.

The dark side of austerity measures

Apart from the pain felt by pension-holders, taxpayers and other stakeholders, harsh austerity measures being implemented across Europe may not be a silver bullet for return to growth.

“The myth that shrinking government brings an automatic offsetting boost to private sector spending is simply that — a myth,� Mr. Shenfeld said.

“The countries in Europe that have been first to tackle budget deficits through tax hikes or spending cuts have paid the price in growth.�

2011 GDP growth in countries that have tightened their belts already, including the United Kingdom, Spain, Greece, Ireland and Portugal, hovers at around 0.7% while other European Union nations had GDP growth closer to 2%.

“What helped Canada survive fiscal tightening in the 1990s — an ultra-cheap currency, strong growth outside our borders and falling bond yields — isn’t on the menu for Europe or the U.S. in 2012,� Mr. Shenfeld said.

Canadian growth stuck at 2%

Mr. Shenfeld predicted a pace of growth of about 2% over the next two years for Canada, which, as an open economy, can’t avoid the effects of a global economy on pause.

“Domestic fundamentals should guard against recession risks, but we will need a big lift from interest-sensitive domestic spending to keep the economy growing at even a 2% pace through 2013,� he said.

Although home building in Canada survived the recession, business construction and equipment spending will be in the spotlight over the next several years, Mr. Shenfeld said.

“Spending in energy, aluminum smelting, shipbuilding facilities and other private sector megaprojects will provide at least some antidote to the retreat underway in public sector capital spending as the recession’s stimulus is wound down,� he said.

He predicted exports would suffer, feeling the pinch from global economic slowing, but oil patch prices should hold up enough …

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Exchange CEOs Square Off Over NYSE Takeover

By AARON LUCCHETTI

In 2008, NYSE Euronext Chief Executive Duncan Niederauer arrived at an investor conference early to hear comments by Robert Greifeld, the head of rival exchange operator Nasdaq OMX Group Inc.

Mr. Niederauer cringed at Mr. Greifelds description of market-share gains in stock trading by Nasdaq over the Big Board, denouncing the numbers as dishonest.

Hes running for president. I am the president, the NYSE chief told the crowd, alluding to a line about actor Michael Douglass political enemy in the 1995 movie The American President.

The rival CEOs have a long history of tough talk and ferocious competition that could soon explode if Mr. Greifeld decides to make an audacious bid to break up Deutsche Börse AGs proposed takeover of NYSE Euronext.

For the past month, the 53-year-old Mr. Greifeld has been discussing with Nasdaq directors and other exchanges how to snare NYSE Euronexts stock-trading businesses, which is anchored by the 219-year-old New York Stock Exchange. A decision on whether to proceed with a bid is expected soon.

If Mr. Greifeld can torpedo the Deutsche Börse deal and walk away with the Big Board, he also would likely become Mr. Niederaurers boss. Analysts say the Big Board chief, a former trader at Goldman Sachs Group Inc., probably would quit, a move that would entitle him to exit-related payments of $34.3 million.

These are two competitive guys that have a history of going straight up against each other, says Richard Repetto, an analyst at Sandler ONeill Partners. Mr. Greifeld lives and breathes the Nasdaq, and he sees this as another showdown.

ChinaFotoPress/Getty Images for Robert and Bloomberg News for Duncan

A Nasdaq spokesman says Mr. Greifelds animosity toward Mr. Niederauer, 51, isnt personal. Neither chief executive would comment about the other for this article.

If the Deutsche Börse deal goes through, the combined company would tower over Nasdaq, marooning Mr. Greifeld without a major merger partner for the electronic market, launched in 1971 by Wall Street securities firms.

After last Mays flash crash, when stocks fell sharply and then rebounded within a few hours, Mr. Greifeld, in a CNBC interview, blamed the NYSE for turning off some of its systems when trading grew volatile.

Lets stop the finger-pointing, Mr. Niederauer countered in his own interview on CNBC. He said the NYSE system worked just as it was designed to, and that a tangled web of fast-trading electronic systems like Nasdaqs had pushed prices around.

Earlier this year, when Mr. Niederauer was discussing Mr. Greifeld with an investor, the NYSE chief executive started cursing, said a person briefed on the conversation. An associate of Mr. Greifeld says Its not really personal. He just doesnt have that much respect for him professionally.

Mr. Greifeld uses the rivalry as motivation. He gets up in the morning every day ready to beat the NYSE, says a former colleague.

During the 2008 investor conference, sponsored by Sandler ONeill, Mr. Greifeld crowed to a group that included Mr. Niederauer that Nasdaqs market share in stock trading was climbing, while a key gauge of the NYSEs clout had slipped below 28%.

It wasnt too long ago … we were trying to get [NYSE share] below 39%, then 35, then 33, then 30, and now its gone below 28%, he said. He didnt stick around to hear Mr. Niederauers rebuttal, according to attendees.

In the past few years, NYSE officials have started telling analysts and investors that the companys primary U.S. competitor is CME Group Inc. Duncan is like the political incumbent that doesnt want to give his opponent more credit by uttering his name, one …

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Devastated Corzine Defends Actions | Penny Stocks to Watch

Devastated Corzine Defends Actions

By SCOTT PATTERSON And ANDREW ACKERMAN

WASHINGTON—A contrite Jon Corzine expressed both sorrow and a firm defense of his actions Thursday in his first public appearance since the collapse of MF Global Holdings Ltd. in late October.

[1208corzine]Reuters

Former MF Global CEO Jon Corzine takes his seat to testify about the firms bankruptcy during a hearing before the U.S. House Agriculture Committee.

Like all of you, I am devastated by the enormous impact on many peoples lives resulting from the events surrounding the MF Global bankruptcy, Mr. Corzine said at a hearing by the House Agriculture Committee, which subpoenaed the former MF Global chief executive last Friday. Of course my distress and sadness pale in comparison to the losses and hardships that customers, farmers, ranchers and others—employees and investors—have suffered.

Mr. Corzine, who resigned as chairman and CEO of MF Global after its Oct. 31 bankruptcy filing, is a former U.S. senator and governor of New Jersey.

He faced tough questioning by the Republican-led committee, creating an atmosphere fraught with political drama. Mr. Corzine, 64 years old, received President Obamas support in 2009 for his unsuccessful campaign for re-election as governor, and more recently held a fund-raising dinner for Mr. Obama.

Some of the initial questioning focused on a significant shortfall in customer funds at MF Global. As Mr. Corzine scrambled to stabilize the firm in its last days, it was discovered that hundreds of millions of dollars were missing in customer accounts.

Mr. Corzine said repeatedly that he became aware of the shortfall in customer accounts on Sunday night, referring to late Oct. 30 or early Oct. 31.

The trustee overseeing MF Globals liquidation estimates the amount at $1.2 billion. Mr. Corzine said that he had little to do with the mechanics of moving customer cash and collateral and that he was stunned when he learned the money was missing.

I simply do not know where the money is, he said, noting that there were an extraordinary number of transactions during MF Globals last few days.

The state of the firms books and records reflected chaos in the brokerages final days, he said.

Still, Mr. Corzine mounted a defense of his tenure at MF Global, arguing that he cut leverage at the company from 37.3 to 1 in the first quarter of 2010, when he took charge at MF Global, to 30 to 1 at the end. He also defended his bet on European debt. Mr. Corzine, who was also a former Goldman Sachs Group Inc. chairman, took the helm of MF Global in March 2010 and quickly started making big bets on European government bonds.

Mr. Corzine defended his decision to invest in European sovereign bonds of countries including Italy, Spain and Portugal. The bet grew to more than $6 billion in a strategy that was repeatedly discussed by the companys board.

I strongly advocated the trading strategy, Mr. Corzine said, noting that he had identified the yields on the bonds as favorable at a time when he and senior traders at the firm were discussing ways to improve the firms profitability.

He also noted that the firm structured the trade as a repurchase to maturity, which reduced some of MF Globals financing risk and market risks on the strategy.

I believed that [MF Global’s] investments in short-term European debt securities were prudent, Mr. Corzine said. There were discussions at board meetings, at which the transactions were described, analyzed and debated.

Mr. Corzine said that on Aug. 15, 2011, he met with officials from the Financial Industry Regulatory Authority and the Securities and Exchange …

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Germany rejects EU draft proposals

Germany rejects EU draft proposals

Germany rejected some measures in draft conclusions from a summit of EU heads on Thursday, including giving the European Stability Mechanism (ESM) a banking licence and issuing common eurozone debt, a senior German source said.

The conclusions seen by Reuters earlier said the permanent ESM rescue fund would get a banking licence and run alongside the EFSF, bolstering its ability to tackle the eurozone debt crisis.

“We are rejecting this in negotiations,� the source said, speaking on condition of anonymity.

In the draft, EU leaders said they were committed to a new “fiscal compact� for the eurozone, including much tighter budget deficit rules and debt issuance procedures, draft conclusions from a summit of EU heads of state showed on Thursday.

The draft also showed that the eurozone plans to bring forward the introduction of its permanent bailout fund, the European Stability Mechanism, to July 2012, and give the facility a banking licence.

Such a move would give the ESM access to European Central Bank liquidity, bolstering its ability to tackle the eurozone debt crisis. The draft conclusions also said the ESM should have the ability to directly recapitalise banks.

“The European Council is determined to preserve the integrity of the EU and the coherence between the euro area and the EU as a whole,� the draft conclusions read.

“With this overriding objective in mind, and fully determined to overcome together the current difficulties, we agreed today on a new “fiscal compact� and on significantly stronger coordination of economic policies in areas of common interest.

“General government budgets shall in principle be balanced. Member states may incur deficits only to take into account the budgetary impact of the economic cycle or in case of exceptional economic circumstances,� it said, adding that the structural deficit limit would be 0.5% of GDP.

On the ESM, which the draft said would have a capacity of 500 billion euros, the leaders agreed:

“Our common objective is for the ESM to enter into force in July 2012… The ESM will have the possibility to directly recapitalize banking institutions and to have itself the necessary features of a credit institution.�

It said the existing bailout fund, the EFSF, would continue to operate until mid-2013.

© Thomson Reuters 2011

Tags: banking-licence, bolstering-its, draft, efsf, european, eurozone, eurozone-debt, fiscal-compact, german, introduction, overriding, possibility, source, structural, thomson-reuters

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