Jew World Order

14.38 While all this has been going on, the ECB has just
released a separate statement saying it will start accepting
Greek government bonds again as collateral.

The ECB stopped accepting Greek bonds early last week after Standard
Poor’s downgraded Greece to “SD” – or “selective
default”. The ECB’s decision to start accepting the bonds as
collateral follows a €35bn payment guarantee backed by the EFSF
– or temporary eurozone bailout fund. The ECB said:

The Governing Council of the European Central Bank (ECB) has acknowledged the
activation of the buy back scheme, provided to underpin the quality of
marketable debt instruments issued or fully guaranteed by the Hellenic
Republic. In light of this, the Governing Council has decided that the
aforementioned debt instruments will be again accepted as collateral in
Eurosystem credit operations, without applying the minimum credit rating
threshold for collateral eligibility until further notice.

This buy back scheme has been agreed by the Heads of State or Government of
the euro area on 
21 July 2011 and confirmed on 26 October 2011, together
with a number of other measures aimed at assisting Greece in its adjustment
programme. The scheme is backed up by bonds issued by the European Financial
Stability Facility with a nominal value of €35 billion.

14.32 He is also confident that the fiscal compact will be implemented,
and will work. The general sense shared by all countries and heads of states
is:

that the monetary union to continue needs to be subject to discipline that
cannot be changed by governments.

He adds that it is clear that if countries don’t release some national
sovereignty re: fiscal policy then there is no way they can be together. We
can’t have situation where some countries pay for everyone else, he says.
There must be “pillars of trust” between countries. This trust is
essential in a monetary union.

14.27 On the eurozone’s firewall, he says that a permanent bailout fund
has to take into account many different governments, countries and budgets,
and this is why it has taken so long to set up. He is confident that the
efforts will “bear fruit”.

_{ECB President Draghi speaks during the monthly news conference in
Frankfurt (Photo: Reuters)}

14.23 However, the average borrowed by German banks was much
lower than by banks in other countries, Mr Draghi says. The money is
now closer to small and medium sized enterprises than before. 80pc of
eurozone employment depends on SMEs, he adds.

14.22 More than half of the banks that participated in the second
LTRO were German – 460 out of the 800, Mr Draghi says.

14.17 Mr Draghi reiterates something he said at the last ECB press
conference: there is no plan B when it comes to the eurozone and Greece:

to have plan B is to admit defeat, and we don’t want to be defeated.

14.11 More on the LTRO, and rumours of German dissent:

I dont think Bundesbank is isolated. The decision on LTRO was unanimous. It’s
not Germany against everybody else. I dont remember the Bundesbank being
alone. We are determined to do the right thing and do it together.

14.09 The eurozone’s recovery will be “very, very slow,” Mr
Draghi says.

He’s also asked if the ECB will consider releasing minutes to try and
prevent leaks such as the Weidmann letter. Mr Draghi says the
idea that “if you have leaks, you have to be transparent is a little
stretched,” adding that the “ECB is very transparent”

We are not the same thing as US or UK. We are not one country. You want to
keep deliberations as separate as possible from national identity of various
members of council.

14.08 You can read
Mr Draghi’s opening remarks in full here.

_{Mario Draghi speaks at a press conference in Frankfurt on Thursday}

13.53 Mr Draghi is taking questions.

CNBC asks: what are the chances of a third LTRO?

Mr Draghi says the LTRO has been an “unquestionable success” and
“great progress has been achieved” compared with the situation in November
(when Italy’s borrowing costs hit 7pc). He says that the ball is now in the
court of governments and banks to support the recovery.

He’s also asked how concerned he is “by the leaked (Jens Weidmann)
Bundesbank letter?” (The letter, leaked to Germany’s
Frankfurter Allgemeine Zeitung, warned that the ECB’s relaxation of
rules could endanger its reputation. Mr Weidmann also said that risks
stemming from some ECB policies could prove costly to Germany, which
has bankrolled much of the eurozone’s rescue operation.

Mr Draghi says he has an “excellent” relationship with Mr Weidmann,
and that nobody is isolated at the ECB, especially the Bundesbank.
He says:

We are all in the same boat. There is nothing to gain in fighting and arguing
publicly outside the governing council. […] We owe a lot of what we
learned about stability culture to Bundesbank and Germany. Now we are all
sharing same view and ideals.

13.43 The ECB has cut its eurozone growth forecasts since
December. The eurozone’s 2012 growth range is now forecast to be between
-0.5pc and 0.3pc (versus -0.4pc to 1pc).

13.38 The ECB’s €1 trillion LTRO “bazooka”
should continue to help the eurozone, Mr Draghi says.

13.37 There are signs of stabilisation in the economy, Mr Draghi
says. Of course, there are “downside risks,” but not the “substantial
downside risks” described in previous meetings.

Rising energy prices are likely to keep inflation above 2pc in 2012 he
adds.

13.34 Mario Draghi enters the ECB press conference room in
Frankfurt. Here we go…

13.31 Charles Dallara, managing director of the Institute of
International Finance (IIF) has told reporters in Brazil that he
expects very high investor participation in the Greek debt swap, but
is unsure if it will reach the 90pc “voluntary” level.

13.20 The ECB press conference will start in 10 minutes. You
can watch it live here.

13.12 Anyone else want to hazard a guess?

13.01 Stock markets continue to rise. The FTSE 100 in London is
up by 1.31pc, while the CAC 40 in Paris and Frankfurt’s DAX 30
are both up by 2pc. Today’s gains have almost reversed Tuesday’s heavy
losses.

12.47 The ECB has also kept its benchmark interest rate
unchanged at 1pc. Mario Draghi will hold a press conference at
1.30pm GMT.

12.14 And this from Vicky Redwood, chief economist at Capital
Economics, is enough to make any saver weep (my emphasis):

Having only last month announced a £50bn extension to its quantitative easing
(QE) programme, the MPC was never likely to do anything today. But today’s
meeting was still notable for marking for third year anniversary of interest
rates falling to their record low of 0.5%. We think that that they could
stay there for another three years. And while the consensus now
thinks that the MPC is unlikely to extend its asset purchases any further,
we still expect even more QE later this year.

12.06 The Bank of England announcement was widely expected. Ian
McCafferty, chief economic adviser at the Confederation of British
Industry (CBI), said:

Since the MPC has been signalling that the current policy stance is broadly
appropriate, it appears that the economic climate would have to deteriorate
to prompt a further extension of QE.

Nevertheless, with economic conditions fragile and the level of uncertainty
high, monetary policy decisions are still likely to be finely-balanced.

12.03 QE was kept at £325bn. In a statement, the Bank of
England said:

The Committee expects the announced programme of asset purchases to take
another two months to complete. The scale of the programme will be kept
under review.

12.01 BREAKING

The Bank of England has kept interest rates at 0.5pc. It has been three
years since the Bank slashed rates to an all-time low.

11.55 The ISDA
was quick to note in its FAQs that:

Publication of this list does not indicate that ISDA or the EMEA
Determinations Committee believes that a credit event with respect to the
Hellenic Republic will occur.

But the fact it is preparing a list at all speaks volumes. Barring
a “miracle,” as Louise Armitstead puts it, Greece
will almost certainly have to activate collective action clauses to
get sufficient participation in the debt swap, and the
ISDA has said all along that:

the use of [CACs] to effect a reduction in coupon or principal or one of
the other events set out in the definition of the Restructuring Credit Event
could trigger [a credit event] if the other requirements of the
Restructuring Credit Event were met (for example decline in
creditworthiness), as its effect would be to bind all holders of the
relevant debt.

11.48 It
is prudent for ISDA to be prepared in the event that a credit event is
determined to have occurred.

That was the declaration yesterday from the International Swaps and
Derivatives Association, which is the body that officially decides when
a “credit event” has occured, and credit default swaps (CDSs)
paid out.

In fact, the ISDA is so prepared that it has drawn
up a list of “potential deliverable obligations” that
market participants “reasonably believe are likely to be delivered into
standard credit default swap contracts”.

In other words, financial institutions have submitted to the ISDA a
list of bonds they think are covered by CDS insurance. These bonds
will be reviewed by the ISDA if a “credit event” occurs –
although the ISDA warned that:

Inclusion of an obligation in the list does not imply that the contributor,
ISDA or the EMEA Determinations Committee has verified that the obligation
actually is deliverable under the terms of a standard credit default swap
contract.

11.14 Greece will announce the results of its bond swap tomorrow,
finance minister Evangelos Venizelos (right) told parliament this
morning.

“A historic process will be completed tonight,” he declared.

…if “all goes well,” he added (quotes taken from Bloomberg).

11.05 German industrial output rose by 1.6pc in January, versus a
revised 2.6pc fall in December, according to figures just released by Germany’s
economy ministry.

This was higher than the 1.1pc rise forecast by economists in a Bloomberg
survey.

Yesterday, a surprise fall in German industrial orders saw seasonally and
price-adjusted order intake fall by 2.7pc, as orders from outside the
eurozone fell by 8.6pc.

10.31 Greece’s decline in 140 characters or less:

10.26 CHF17.8bn (£12bn). That’s how much it cost the Swiss
National Bank (SNB) to keep the Swiss economy competitive last
year, according to the central bank.

The SNB said it spent nearly CHF18bn to stem the “massive
overvaluation” of the Swiss franc and enforce the minimum exchange rate
of 1.20 versus the euro.

10.10 BREAKING

The unemployment rate in Greece hit a record high of 21pc in
December, according to figures just released.

This compares with a rate of 14.8pc in December 2010, and 20.9pc in November,
the Hellenic
Statistical Authority reported.

Youth unemployment now stands at a staggering 51.1pc.

_{The unemployment rate in greece has risen sharply over the past few
months (Source: EL.STAT)}

10.01 Praise to all the newspaper graphic artists this morning, who
were busy last night trying to turn something as complicated as this (the
Greek debt swap):

…into something a bit more user friendly.

This is the FT’s
take on PSI participation, while the Wall Street Journal has
opted for a more classic look. This tweet from the FT’s Peter
Spiegel made me chuckle this morning:

All donations gratefully received.

09.44 Earlier, a government official told Reuters:

The pace of responses to the bond offer is good, the percentage of
bondholders tendering voluntarily is very high.

According to an emailed statement, Greek PM Lucas Papademos will hold a
cabinet meeting this afternoon that will include a briefing by finance
minister Evangelos Venizelos on what the Greek government needs to do
before its second bailout can be finalised.

09.32 Even if Greece’s debt swap goes through, the country will
require “real debt relief” within the next 12 months to put the
country on a sustainable path, Peter Bofinger, economic adviser to
the German government, told Bloomberg this morning.

Despite finance minister Wolfgang Schaeuble’s admission yesterday that
he had openly discussed a Greek euro exit with its finance minister Evangelos
Venizelos, Mr Bofinger insisted that an exit is considered
by “nobody” in Germany.

He added that the country was the exception rather than the rule, and no other
writedowns would follow Greece.

09.13 This afternoon will also see interest rate decisions in the UK
and eurozone. Both rates are expected to remain unchanged at 0.5pc
and 1pc respectively.

ECB chief Mario Draghi’s press conference at 1.30pm GMT should
prove more interesting.

You can expect him to be quizzed on the bank’s latest long term refinancing
operation (LTRO) and of course, any more hints on Greece.

Overnight deposits
at the ECB fell to €806.9bn last night, and despite several
rumours following the second LTRO, the ECB hasn’t bought any
bonds via its Securities
Markets Programme (SMP) since mid-February.

08.50 Deputy editor Benedict Brogan says the idea is “bold,
but don’t expect the Chancellor to embrace [it]”. More from his Morning
Briefing:

Not only would it be extremely costly – at a cost of around £1,000 per
pensioner – it would also primarily benefit relatively better-off pensioners
(as those without other sources of income are already protected from tax by
the personal allowance).

If anything, as The Times reports , he’s more likely to go for people with
private pension pots than help them out: their p3 headline is “pensions in
red as Treasury plots its raid”. Not only is QE driving up the size of
deficits in corporate pension funds (as the FT reports in its splash ), the
Government is likely to cut pension relief even further, perhaps reducing
the maximum amount that anyone can contribute to a pension tax-free in a
year to £30,000.

08.46 More than 5m middle-class retired people could be freed
from paying income tax on their state pensions, the Treasury’s tax
advisers have suggested. James Kirkup reports:

In a move that would be worth up to £1,000 a year each, the Office for Tax
Simplification said that scrapping the levy should be considered because
many pensioners considered it “unjust”.

The advisers, an independent body set up by the Chancellor, George Osborne,
made the suggestion in a report that condemned “confusing”, over-complex tax
rules facing people in retirement.

Almost 5.6 million people receiving the basic state pension pay income tax,
HM Revenue and Customs estimates. Usually it is because private pension
payments and savings interest take their total income above the tax
threshold.

More than 1.5 million of them have to fill in a self-assessment form.

08.38 Let’s take a quick look at this morning’s business headlines:

08.31 After edging back above 5pc on Tuesday, Italian and Spanish
borrowing costs have fallen today. Yields on 10 year Italian bonds
are currently down 10 basis points at 4.811pc, while Spanish 10 year
yields have fallen 8 basis points to 4.965pc.

08.25 Europe’s stock markets are open. The FTSE 100 is up 0.5pc
at 5,819.61, while the CAC 40 in Paris is up 0.8pc at 3,419.04 and
Frankfurt’s DAX 30 is up 0.65pc at 6,714.48.

08.19 But its problems don’t end there. As the FT’s Sam Jones
highlights, another thorn in Greece’s side is the €29bn
of Greek bonds issued under foreign law:

When, on Tuesday, the Greek
debt management agency declared that it simply did not have the
money to pay stubborn bondholders who rejected a debt restructuring it did
so with one group in mind: investors holding the €20bn or so of Greek bonds
issued under foreign, as opposed to Greek, law.

The problem laid bare by Athens is simple. The Greek government was able to
retrofit €177bn of bonds issued under its own law with one single,
overarching “collective action clause” by which recalcitrant bondholders can
be made to swallow a restructuring by majority vote of all bondholders. But
no such force can be easily brought to bear on the foreign-law issuance.

Instead, Greece can only force holders of foreign-law bonds to participate
by use of CACs on a bond issue-by-issue basis, making it much easier for
hedge funds to assemble blocking stakes.

In key foreign-law bond issues, some hedge funds have now done so.

“There are bonds trading north of 40 cents on the euro,” says a portfolio
manager at one large London-based global macro hedge fund. “The people that
are buying them at those levels – they’re almost certainly holdouts.”

For the hedge funds that hope to profit by second-guessing the Greek
government’s actions, blocking-stakes in key foreign-law Greek bonds could
be wildly successful bets

07.58 Economists at Societe Generale also looked into their
crystal balls last night, outlining the possible outcomes and probabilities
in a note. Like many analysts, SogGen believes the bond swap will
proceed, but only with a bit of arm twisting.

In its view, a disorderly default:

is highly unlikely […] given the number of banks and investors that have
accepted to go to the offer and said so publicly.

Equally:

We think it is unlikely that participation would be above 90%, even if the
late threat from Greece to treat hold outs unfavourably causes a late rush
on Thursday.

SocGen also highlights a grey area:

Where participation in the offer is between 75% and 90% and the consent
solicitation is accepted. Then ‚the Republic, in consultation with its
official sector creditors, may proceed to exchange the tendered bonds
without putting any of the proposed amendments [CACs] into effect.

It isn’t clear, based on the current available information, whether
participation will be below 75% or above. But it is likely that the 66%
threshold on consent solicitation will be reached. So the PSI exchange will
proceed.

We suspect that participation will be too far from 90%, hence CACs would be
activated.

07.49 Louise has also compiled a handy
guide to the the possible outcomes of the debt swap. In her words,
there are are three ways this could play out:

1.) A miracle

2.) A forced deal

3.) Armageddon

How comforting.

07.38 Three British banks signed up to the deal yesterday. However,
reception elsewhere has been lukewarm, leaving Greece
on the brink of default. Louise Armitstead reports:

The Royal Bank of Scotland, Barclays and HSBC joined 30 European banks and
institutions in declaring their acceptance of the deal – but the tally was
still far short of the 95pc needed to avoid being officially declared in
default.

The International Institute of Finance (IIF), the body that has negotiated
with the Greek government on behalf of bondholders, put out several
announcements on Wednesday, counting the proportion of the vote as it inched
up. The latest statement said bondholders “amounting in aggregate to €84bn,
or 40.8pc of the €206bn total eligible debt” would support the deal.

The regular updates coincided with provocative comments from Germany’s
finance minister, Wolfgang Schaeuble, who said he had discussed with
Greece’s finance minister Evangelos Venizelos whether it would be better for
the country to leave the euro.

07.32 To swap or not to swap, that is the question. Tonight is the
final deadline for Greece’s private sector investors to decide
whether they want to sit in the barber’s chair and take a 53.5pc haircut on
the value of their debt.

07.30 Good morning and welcome back to our live coverage of the
eurozone debt crisis.

Debt crisis
live: archive