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Europe shocked by Greek referendum on bailout deal
Next up: the army arrives in full party regalia to pay the capital a visit
"Mr. Papandreou is dangerous, he tosses Greece's EU membership like a coin in the air," said Yannis Michelakis, spokesman for the opposition New Democracy.
such as parliament's vote of confidence in government on Friday.
Also november 10th should be interesting, with the republican event on the 9th.
* Italy CDS Rise 45.5 bps to 491; update +53 495/505
* France CDSs rise 14 bps to 190; update + 17 191/196
* Spain CDSs rise 33.5 bps to 374.5; update + 41 375/385
* Portugal CDSs rise 57 bps to 1,028; update + 71 1015/1055
And the hits just keep on coming, with the Greek government now just one vote away from total collapse
* ONE GREEK RULING SOCIALIST LAWMAKER QUITS PARLIAMENTARY GROUP - STATE TV MORE - RTRS
* GREEK MP'S MOVE REDUCES PM PAPANDREOU'S MAJORITY TO 152 OUT OF 300 DEPUTIES - RTRS
As a reminder 151 votes are needed to pass a vote. But that's not all:
* Senior member of Italian opposition says party has asked president Giorgio Napolitano to form new government before G20 summit in Cannes
Oh yes, Italy, the one place everyone was terrified about before Greece stormed back to center stage with a bang. Result:
* ITALY 2-YR BOND YIELD SPREAD VS GERMANY HITS NEW EURO LIFETIME HIGH ABOVE 500 BPS
From Reuters: "Greek Prime Minister George Papandreou had not informed his Finance Minister, Evangelos Venizelos, he was going to announce a referendum on the latest EU aid deal, a Greek government official said on Tuesday.
Intessa Sanpaolo celebrates by being halted down over 14%..... and Banco Popolare.
Peter Tchir, of TF Market Advisors, puts it best this morning: "Everything I have read over the past couple of weeks coming out of Italy, tells me that if there was one country prepared to "screw" the Euro and go it alone, it would be Italy.
* ANOTHER GREEK RULING PARTY LAWMAKER CALLS FOR ELECTIONS, NATIONAL UNITY GOVT - GREEK MEDIA
Former PBoC Monetary Policy Committee Member: "Beijing Will Not Ride To Eurozone’s Rescue"
Manufacturing ISM Follows Chicago PMI With A Miss; Declines To 50.8 On Expectations Of Rise
RT @Alea_: greek gov bonds maturing 03/2012 ==> yield 510%
"The pace of growth in the U.S. manufacturing sector unexpectedly slowed in October, in line with trends in China, Britain and Canada in data reported on Tuesday.
The slowdown in the U.S. manufacturing sector followed data on Tuesday showing similar trends in Canada, Britain and China suggesting the pace of economic growth is continuing to slow.
This is all from an article in Reuters- Why does every article I read sound like economists are surprised?
US deficit panel heads to warn deal cutting USD 1.2trl won't solve fiscal woes
"MF Global filed for bankruptcy protection on Monday, putting a sudden end to Corzine's drive to transform the more than 200-year old MF Global into a mini Goldman by taking on more risky bets on euro zone sovereign debt.
"We're sitting out here with risk that we can't cover," said Jonathan Barratt, head of Sydney-based Commodity Broking Services. MF Global was one of the largest participants in the country's agricultural futures market. And it is all only going to get worse as the liquidity outflow avalanche is realized, following the market's most recent distraction with Europe.
As we detailed 11 months ago, LCH.Clearnet now stands at the fulcrum of today's price action in Europe as the critical 450bps spread to Bunds on European sovereign debt - which will trigger considerable rises in margin requirements
The International Monetary Fund may create a six-month credit line for countries facing shocks, officials from Group of 20 governments and IMF said, as the European debt crisis rocks global financial markets.
The amount would be capped at five times a nation’s contribution to the Washington-based IMF, known as a quota, making the credit line best suited for smaller countries, the people said. It is likely to be endorsed at a meeting of G-20 leaders this week in Cannes, France, where European nations will seek financial support from other members, said the three officials, who declined to be identified because the plan hasn’t been made public.
IMF May Create 6-Month Credit Line for Countries Facing Shocks
It is understood that the personnel changes took many members of the government and of the armed forces by surprise.
Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose by $80.7 billion to $518 billion, according to the Bank for International Settlements. Almost all of those are credit-default swaps, said two people familiar with the numbers, accounting for two-thirds of the total related to the five nations, BIS data show.
The payout risks are higher than what JPMorgan Chase & Co. (JPM), Morgan Stanley and Goldman Sachs Group Inc. (GS), the leading CDS underwriters in the U.S., report. The banks say their net positions are smaller because they purchase swaps to offset ones they’re selling to other companies.
“Risk isn’t going to evaporate through these trades,” Cannon said. “The big problem with all these gross exposures is counterparty risk. When the CDS is triggered due to default, will those counterparties be standing? If everybody is buying from each other, who’s ultimately going to pay for the losses?”
Five banks -- JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America Corp. (BAC) and Citigroup Inc. (C) -- write 97 percent of all credit-default swaps in the U.S., according to the Office of the Comptroller of the Currency. The five firms had total net exposure of $45 billion to the debt of Greece, Portugal, Ireland, Spain and Italy, according to disclosures the companies made at the end of the third quarter. Spokesmen for the five banks declined to comment for this story.
The CDS holdings of U.S. banks are almost three times as much as their $181 billion in direct lending to the five countries at the end of June, according to the most recent data available from BIS. Adding CDS raises the total risk to $767 billion, a 20 percent increase over six months, the data show.
When prices of mortgage securities started falling in 2008, AIG was required to post more collateral to its CDS counterparties. It ran out of cash doing so, and the U.S. government took over the company. If AIG had collapsed, what the banks saw as a hedge of their mortgage portfolios would have disappeared, leading to tens of billions of dollars in losses.
U.S. banks are probably betting that the European Union will also rescue its lenders, said Daniel Alpert, managing partner at Westwood Capital LLC, a New York investment bank.
“There’s a firewall for the U.S. banks when it comes to this CDS risk,” Alpert said. “That’s the EU banks being bailed out by their governments.