Not so bad

Hey, it could have been a lot worse:

The FTSE 100 fell more than 2% in early trade, and by the close was still down 133.22 points, or 1.97%, at 6,620.48.

As it is, we are merely back to where we were at the beginning of the year, as this graph demonstrates:

Furthermore, the recovery has already begun in Asian markets:

In Japan, the Nikkei 225 share index was up 0.36% at 20,181.55 points.

...

In Australia, the benchmark S&P/ASX 200 was up 0.25% at 5,436.10 after closing down more than 2% on Monday.

In South Korea, the benchmark Kospi was up 0.25% at 2,065.69 after suffering its biggest daily percentage fall since late May on Tuesday.

...

In Hong Kong, the benchmark Hang Seng index was in positive territory however, up 0.54% at 26,100.74.

So, reasons to be cheerful.

   

Quote of the day

From CityAM  (here):

Yes, the Greeks lied about their numbers to get into the Eurozone in the first place; but the creditor states didn’t much care. Yes, Athens should not have borrowed money like a drunken sailor, but German and French banks were more than happy to lend it to them. Yes, Greeks should not get to retire in their 50s with German-sized pensions (and without German productivity), but Greek economic fecklessness is hardly a new phenomenon Brussels was unaware of.

Finally, yes, Tsipras and his even more overrated finance minister Yanis Varoufakis are pathetically hiding behind their people in proposing a plebiscite on the creditor’s terms, rather than leading as statesmen ought to do. But the long commented-upon democratic deficit in EU institutions means such a cowardly strategy actually has some merit.

The bell is tolling for Tspiras and his Syriza party, who will surely squander the benefits of the upcoming devaluation of the new drachma relative to the euro in a series of Marxist fantasy policies, when what they ought to be doing is collecting taxes and launching structural reforms (which they will never do). Greece will become just another poor Balkan country; and that is a tragedy.

But the bell is not just tolling for the Marxist schoolboys in Athens. By failing to master a crisis that ought to have been dealt with ages ago (debt relief for structural reforms, anyone?), Europe has destroyed any claim it might have had to be the future; frankly, it now becomes an open question as to whether Europe has a future, as it surely has proven it simply cannot take effective decisions in a crisis.

Bad to worse

No fun being Greek.  The Guardian reports:

In a brief, televised address to the nation, Tsipras threw the blame onto the leaders of the eurozone. But he did not say how long the banks would remain shut, nor did he give details of how much individuals and companies would be allowed to withdraw once they reopened.

Greek banks will not open until July 7 in an attempt to avoid financial panic, after ECB capped the emergency funds keeping them running.  

It later emerged that the banks would be kept shut until after the referendum on 5 July and withdrawals from cash machines would be limited to €60 – about £40. Cash machines are not expected to reopen until Tuesday.

Greece’s finance ministry later announced that the strict withdrawal limits would not apply to holders of credit or debit cards issued in foreign countries.

How long, do you suppose, before the machines run out of notes?

Meanwhile, we can expect a bloody day on the markets:

Share prices began to plummet across Asia on Monday as hopes dwindled for a resolution to the Greek debt crisis.

Japan’s Nikkei stock average briefly fell by more than 500 points in early trading, while the euro dropped more than 3% to 133.80 yen, its lowest level for five weeks. The common currency fell as much as 1.9% to $1.0955, its lowest level in almost a month.

The Nikkei fell 2.1%, while MSCI’s broader index of Asia-Pacific shares outside Japan dropped 0.8%. US stock futures dived 1.8%, hitting a three-month low, while US Treasuries futures price gained almost two points.

More than $35bn was wiped off the Australian stock market in the first hour of trading on Monday as investors brace for an increasingly likely Greek exit from the eurozone.

The BBC has the latest exchange rate for the euro against the £ at 1.4267 (which means that my lunchtime pint in my Spanish local now costs me the equivalent of less than a £ - it's an ill wind that blaws naebody any guid),

EU solidarity?

Extraordinary report in The Observer of last week's European Summit:

Matteo Renzi, the Italian prime minister, was incensed by the refusal of several countries, including Hungary, which has taken in 60,000 refugees since the beginning of the year, and the Czech Republic, to agree to take part in a compulsory refugee-sharing scheme to help ease Italy’s burden. Cameron kept fairly quiet. The UK has opted out of EU asylum policy and Renzi, who was in an emotional state, did not need to be reminded of its non-participation. But others took up the cudgels as the row intensified across the table. Dalia Grybauskaite, the Lithuanian president, told Renzi in no uncertain terms that her country would not take part either. Bulgaria, one of the EU’s poorest countries, took a similar line. Disputes flared. European commission president Jean-Claude Juncker, prime mover behind the idea of compulsory burden sharing, and council president Donald Tusk tore strips off each other over what should be done, as inter-institutional solidarity broke down.

Angela Merkel said that the migration challenge was the most serious and difficult she had encountered in the EU during her time as German chancellor (Greece is also somewhat on her mind) as Renzi railed against fellow leaders for betraying the EU’s values. A voluntary scheme was all that was agreed. “Do as you like,” Renzi protested. “If this is your idea of Europe, keep it for yourself … you do not deserve to call yourself Europe. Either we have solidarity or we waste our time!”

These guys are not getting enough sleep.

 

Crunch time?

Is the Greek crisis nearing resolution?  I am beginning to doubt if there is a means by which the Greeks can avoid default.  And Tsipras' decision to hold a referendum next Sunday seems more like an act of defiance to throw in the teeth of EU finance ministers.

Meanwhile, Draghi and the ECB are between a rock and a hard place:

The ECB has been providing life support to Greece for months by supplying billions in liquidity to the Greek banks. If Draghi pulls the plug, he could be held responsible for potential riots on the streets of Athens and national unrest. If he keeps the funding channels open, he will be accused of acting illegally and overstepping his mandate by financing a eurozone government.

In all the circumstances, it is increasingly difficult to see how some kind of agreement could be patched together.

An apology to my Italian friends

Yes, I regret to say that it is part of Scottish culinary practice to bake macaroni in a pie.

And, yes, I am sorry to say that the decision by a fast food emporium to desist from selling this less than savoury amuse-bouche was greeted by a howl whimper of protest, to the extent that the matter was raised in parliament.

The only consolation in this sorry affair is that Greggs (for they are the business concerned) remain steadfast in their intention to banish the macaroni pie from their shelves.

You can read about it here.

   

Donald duck

Puerile schoolboy humour

Prime Minister's Questions, yesterday:

Dave just can’t help letting himself down, either with the failure of his internal logic – employers have been gagging to get rid of tax credits so they can increase salaries – or by being a sucker for a bad gag.

“You don’t want FFA, full fiscal autonomy,” he sniggered at the SNP’s Angus Robertson, “You want FFS, full fiscal shambles.” FFS! Dave had got FFS into Hansard. High fives and lols all round in Downing Street. Coming next week, WTF. Working Tax Fraud.

Pretty pathetic.

 

Dirty work at the crossroads?

Was Buck House being naughty?  Was it the old bait and switch routine?  The Guardian reports:

On Tuesday the official in charge of the Queen’s accounts, Sir Alan Reid, expressed his worries about the implications for the royal household of a decision to allow Holyrood to control nearly all crown estate assets in Scotland.

On Wednesday Reid, the keeper of the privy purse, issued an unreserved apology, saying that a briefing on royal accounts that he hosted was “never intended to be a criticism of Scotland or of the first minister or to suggest that the first minister had cast doubt on the continued funding of the monarchy”.

He said: “As we made clear at the briefing, Scotland contributes in many ways to the Treasury’s consolidated fund – out of which the sovereign grant is paid.

“We said explicitly that to imply Scotland would not pay for the monarchy was simply wrong and we accept unreservedly the assurances of the Scottish government that the sovereign grant will not be cut as a result of devolution of the crown estate.”

If the palace hoped to divert attention from the meagre sums given by Treasury to support the royal establishment or the disgraceful state of Buckingham Palace, they probably succeeded.  But someone twigged that they had gone too far  Hence the retraction?

   

Game theory

The London press remains obsessed with Nicola.  CityAM believes in a conspiracy theory:

,,, there are differences between Scotland and Greece. The Scots, for example, have shown themselves to be much more adept practitioners of the esoteric discipline of game theory. Yanis Varoufakis, former academic turned Greek finance minister, specialised in the subject. A sound knowledge of game theory can often be very useful. Chris Ferguson, for example, winner of no fewer than five World Series of Poker championships, teaches game theory at UCLA. The deluded Greek Trotskyist, however, seems to have convinced himself that his theoretical knowledge would give him a decisive advantage in the negotiations with the Troika of the IMF, the ECB and the European Commission. But he seems to have forgotten that the purpose of playing a game is to win.

...

Nicola Sturgeon and David Cameron have manoeuvred themselves into a lucrative strategy of co-operation. The game began during the election campaign. The SNP needed to destroy Labour in Scotland. They trumpeted their intention to help Ed Miliband get into Downing Street. The Conservatives seized on this and used the SNP bogeyman to frighten the voters in marginal seats in England.

The game goes on. Cameron needs to make some concessions to Sturgeon so she can boast about them to the Scottish electorate. But the SNP also needs to maintain a set of grievances, which is the party’s raison d’etre. Neither side actually wants to redress them, so that both continue to gain and keep Labour out. Practical politicians are often much better game players than so-called expert theorists.

Rather fanciful, I would suggest ...

 

Music of the week

Pedantry up with which we are prepared to put

At last. somebody has made a stand for proper grammar:

Michael Gove, the justice secretary, has issued his civil servants with detailed orders on using good grammar, two years after he circulated similar “golden rules” to officials in the Department for Education.

The senior cabinet minister has wasted little time since his appointment after the general election in telling his staff how he wants them to draft letters and briefing papers.

The instructions tell officials to write “make sure” instead of “ensure” and to avoid using the word “impact” as a verb. He is also unhappy with the use of contractions, such as “doesn’t”, and the deployment of “yet” and “however” at the beginning of sentences.

About time, too.  There's far too much slipshod writing around.  And things have been getting worse in recent years.  However, I don't suppose it'll make much of a difference ...

 

Quote of the day

Are we reaching the end of the line?  Or is a twelfth hour deal on the cards?  The Guardian speculates:

So what might the deal look like? The usual can-kicking exercise, in all likelihood. In Brussels, the talk is of Greece being prepared to offer some compromises on pensions and tax in exchange for enough money to meet its immediate needs, along with the promise of debt relief later provided it sticks to its reform programme. This would resolve little. Greece’s economy will continue to struggle, the government will go slow on reform, and its bailout money will be depleted. Tickets for the new autumn production of the drama will shortly be going on sale.

 

The Pilton-Moldova Connection

The biggest bank robbery in European history?  $1 billion nicked from three Moldovan banks?  With the involvement of limited partnerships based in an Edinburgh housing scheme (not usually noted as a centre of financial expertise)?

The BBC has part of the story:

According to the Kroll report, based on Moldovan National Bank records, the equivalent of $498m in loans was transferred to three Scottish limited partnerships.

All have partners registered in offshore tax-havens, and all allegedly deposited the money in a single bank in Latvia.

Meanwhile the collection rights to those loans - and to others made to companies registered in Northern Ireland and Hong Kong - are said by Kroll to have been acquired by another Scottish limited partnership - Fortuna United LP.

The total sum owed to Fortuna United is $1bn - equivalent to the complete proceeds of the alleged Moldovan bank fraud.

But, surprisingly, the partnership shares an address with 420 other companies - including 258 other limited partnerships - at a flat in Pilton, the district of north Edinburgh famous as the setting for "Trainspotting", the novel about heroin addicts.

Extraordinary stuff.  Where can I get hold of the movie rights?

 

Timeo Danaos et dona ferentes

Down to the wire; The Guardian reports:

... the chances of a Greek default are now higher than they have ever been. The IMF called its negotiating team home from Brussels last week because the talks were going nowhere. Attempts to get them going again were abandoned on Sunday after less than an hour. The rhetoric has become angrier and angrier as positions have hardened.

Normally, the choreography that precedes a euro fudge would see the two sides edging closer together. The officials that prepare the ground for a deal would be piecing together 90% of the final agreement, leaving ministers the other 10% to haggle over on Thursday. That does not appear to be happening, which is why both sides are preparing for a default.

Can it be prevented? Yes, but it would either require the troika to moderate their key demands on pensions, tax and labour market reform, or for Tsipras to cross his red lines on the same issues. Neither looks likely.

Even so, it is difficult to believe that they will not cobble together some kind of agreement that will allow the can to be kicked a little further down the road.

   

Music of the week

La nostalgie de la boue:

Quote of the day

From The Spectator (here):

David Mundell, the somewhat improbable Secretary of State for Scotland, had at least one good line yesterday: “The SNP are asking for something they don’t really want, but of course they will complain if they don’t get it.”

     

Blackmail?

CityAM reports:

HSBC moved a step closer to leaving the UK yesterday, piling pressure on chancellor George Osborne to take action to persuade the bank to stay.

Chief executive Stuart Gulliver set out details of HSBC’s review of the location of its headquarters, looking at 11 different criteria, including taxes, the government’s attitude to finance, and the stability of the economy and regulatory environment.

I trust that Chancellor Osborne will tell them to bugger off if that's what they want to do.  Does HSBC really wish to entrust itself to the tender mercies of the New York regulatory authorities?  And a move to Hong Kong would bring it under the aegis of Beijing, hardly an improvement on London.  Furthermore, given their sanctions-busting, money-laundering, tax-avoiding history, who would want HSBC on their patch?

Better than expected

The way it's going to be

The Guardian's report of yesterday's debate on the Scotland Bill:

We’re giving you everything you want and more, Mundell [Secretary of State for Scotland] reiterated time and again. “We will be implementing the Smith Commission in full.” Scotland would be God’s paradise on Earth, a land of milk and heather where anything Holyrood wanted, it could have – except the bits it couldn’t.

For some reason, the SNP members were disinclined to take him at his word and frequently interrupted him. “Isn’t it the case that the bill would allow the UK parliament to veto anything Scotland did that it didn’t like?” asked Peter Wishart.

“Heavens no,” sobbed an utterly distraught Mundell. “The word veto is such an ugly word.” And he only wanted to speak in happy, fluffy words. “There is no veto. Just a right to disagree so strongly you can’t do it.”

Up stepped Alex Salmond. “The Scottish Daily Record argues that the proposals go nowhere near to implementing the Smith Commission,” he said. “They do, they do,” Mundell replied, “But even if they don’t, then that’s why we’re having the debate so you can make some amendments."

Difficult to imagine Mr Mundell sitting in cabinet.  He is the living proof of the Peter Principle.

 

Music of the week

Why the World Cup went anywhere other than England

The Sunday Times reports:

One thing has become very clear from the scandal engulfing Fifa. England is simply not punching its weight when it comes to handing out bribes. When we were bidding for the World Cup, the most our lot could manage was to bung the wives of the crooked and thick-as-mince delegates a few Mulberry handbags.

...

Our bribes were so half-hearted it makes you ashamed to be British.

I think he means English ...

   

Round and round the mulberry bush

The BBC's Peston casts an interesting light on the Greek demands for a bailout (my emphasis):

Greece desperately needs those few billions of euros to pay its maturing debts to... the IMF and the European Central Bank.

With 300m due to the IMF on Friday, and a further 1.3bn euros later this month, this has always been a row about book-keeping entries and the accounting treatment of debts.

It is a dispute about whether the eurozone's creditors will release funds so that they can pay themselves and avoid having to call Greece in default.

Or to put it another way, it is all about whether the IMF and eurozone can keep up the pretence that Greece is a sound and solvent debtor.

But doesn't it normally tell you something pretty important about those who owe you money when you have to lend to them so that they can keep up the payments to you?

History suggests that at some point the IMF, ECB and eurozone will have to recognise that Greece's 320bn euros of sovereign debts is a lot of spilled milk that will have to be cleaned up.

I rather doubt if our teutonic friends would see the matter as essentially about book-keepiong and accountancy.  For them, it is a question of moral hazard - the Greeks have been naughty and must be punished.  But, as Mr Peston points out, it is difficult to see a way out of the impasse without some element of debt forgiveness.