Items of interest - the pain in Spain - pension ponzi version . JPM's whale's 100 billionCDS position would make him the seventh largest bank holding ( what could go wrong ) .Greek losing cheap labor - GDP going to further collapse .
EUROBLOWN: SLOG’S ALLEGATIONS OF SOCIAL SECURITY HOCK FINALLY QUANTIFIED
In Spain, unpaid bills, public company debt, and Spanish sovereign bonds amount to 870 billion euros. More disturbing still – I’ve posted about this before many times – is the degree to which Spain’s social insurance budget is also deep in hock. The social security reserve fund is where the Spanish are supposed to be accumulating resources to help pay for their pensions. But this is the last thing they’re doing.
According to this btand new report from the fund managers, at the end of 2010 the fund had assets valued at just under 65 billion Euros under its charge. Of this sum, 56.6 billion Euros (or over 5% of GDP) were invested in Spanish government bonds, while 7.8 billion Euros were invested in bonds of other EU states.
So in short, the entire Spanish pension budget is invested in junk eurobonds. Oh dear.
Hat-tip to Spaineconomy blogpost for quantification of the problem alleged by Slog Madrid contacts for some ten months past.
Meanwhile, the dependence of the Portuguese banking system on the European Central Bank rose to a record high in March, as banks took advantage of easier borrowing conditions.
Greece’s industrial production fell sharply in February, pointing to a further contraction of the country’s recession-ravaged economy. The Hellenic Statistical Authority, also known as Elstat, said that industrial production fell 8.3% on the year.
In Italy, industrial production in January 2012 fell 2.5%. So too did its foreign trade balance, producing a deficit of €4.4 billion…over twice that of the previous month. And the unemployment rate zoomed to 9.6%.
But if you thought it was all bad news among the ClubMeds, never mind: the news is terrible in France.
Despite attempts by Sarkozy to position the ClubMeds as backward spendthrifts, the story in France appears also to be one of fiscal incontinence and a rapid decline in its manufacturing base. The past decade has been miserable for France’s industry, and over 355,000 production jobs have disappeared during Sarko’s Presidency.
While the French President has promised several times to slash France’s welfare spend and uncompetitive worker guarantees, the financial burden of the country’s infamous “social model” remains pretty much in place. Infrastructural largesse in particular (about which the Slog has posted for years) seems to be largely untouched.
The person who presided over this lack of touch, by the way, was none other than the IMF’s Queen of Austere Stimulation, Christine Lagarde.
The eurozone looks less and less like a game of two halves as the months pass: more often now it looks like a game of end to end stuff – viz, a crock from everywhere. But whatever happens, one thing is guaranteed: in the light of these data, next week will be a big one for bollocks in the eurozone.
With the story of Bruno Iksil refusing to be swept under the rug (for now), we had the urge to show just how his position stacks up in comparison to the CDS holdings for all the bank holding companies tracked by the Office of the Currency Comptroller. Recall: "Iksil may have built a position totaling as much as $100 billion in contracts in one index, according to the market participants, who said they based their estimates on the trades and price movements they witnessed as well as their understanding of the size and structure of the markets." We used a log scale index although even in simple linear terms the story is quite straightforward: we are not sure what is worse - that one trader may have amassed a CDS position (with an associated VaR that is in the billions) which is greater than the combined holdings of all except for 6 banks (and is greater than the combined CDS exposure of a Wells Fargo among others), or that the top 5 banks together account for 96.5% of all CDS holdings? One thing we are certain of, is that JPMorgan's $71 trillion in assorted derivatives is all purely for hedging purposes. After all Dick Bove just said so.
Another Nail In The Greek Coffin: Cheap, Migrant Workers Are Now Returning Home To Albania
Four months ago we presented what was easily the clearest and most undiluted by media propaganda clue about the future of the European experiment, when we noted that even immigrants from places such as Afghanistan and Bangladesh, using Greece as a stepping stone onward to the gateway Shengen country of Italy, no longer have the urge to pursue their European dreams, and instead return home. As Art Cashin explained, "Over the decades, immigrants from Afghanistan, Bangladesh and other poor nations would work their way to Patras. They would stay for days or weeks awaiting a chance to smuggle themselves on to a freighter headed for Italy. Once there, they could make their way north into Europe to find hope and opportunity and maybe a job. Last week his relatives told him that things were changing. The immigrants still come to their way station of Patras (hope still blooms). But now, after a couple of weeks in Greece, they are trying to hop ships going the other way. They are going back home. Life was better, or at least no worse, where they came from and they had friends and family for support back there." It appears that the immigrant boycott is spreading, only this time instead of "discretionary" immigrants, or those that have not been fully assumed by society (think "cheap labor" along America's south, such as California, Texas and Arizona), it is starting to hit the core of the cheap PIIGS labor force: the migrant workforce, and in this case the Albanian diaspora working out of Greece at a fraction of the normal cost. And as one Albanian migrant worker, so critical to keeping the Greek construction sector supplied with cheap jobs puts it, "It looks like there's no money left," he said of Greece. "It all dried up." As a result even the Greek illegal-yet-symbiotic-aliens are giving up and going back home. Yes folks: the "indicators" on the ground are telling us that it is now easier to make money in Albania than in Greece.
As the world watches Greeks trying to cope with rising unemployment, tax hikes and plummeting salaries, a silent community of hundreds of thousands of Albanians – 60 percent of the migrant workforce in Greece – is weighing up its future.
Many face a stark choice: return to the impoverished country they left behind and try to start anew, or stick it out and face the threat of drifting into illegality in the crisis-hit country they made home.
Many thousands of Albanians have made the journey home, seeking the security of family networks but bringing with them children born and raised abroad for whom Albania is a strange land.
So aside from labor costs about to spike as employers have no choice but to hire local workers, not used to below minimum wage salaries, and thus margins to go even more negative (we leave it up to our readers to calculate what this means for government tax revenues), this latest unpredicted consequence means that sources of migrant labor into Europe will see far less cash transfers (usually via Western Union equivalents) in the future, and further slow down the velocity of money there where it is most needed: placed that do not have access to the ECB's perpetual crap collateral acceptance facilities.
With the crisis in Greece and Italy – another hotspot for Albanian migrants – showing no sign of abating soon, questions are being asked about the wisdom of Albania relying so much on remittances to support growth, and whether a wave of returning migrants could be a boon or a burden.
The country is one of Europe's poorest, suffering from the ripple effect of the sovereign debt crisis in the euro zone and particularly its main trading partners and investors, Greece and Italy.
Remittances from Albanians working abroad have halved since 2007, when 951m euros accounted for 10 percent of Albania's gross domestic product (GDP).
But who really cares about Albania: no crude to be liberated, no World Bank "projects" to be funded, no massive credit boom to be incepted: it is an F-grade actor in the globalization play at best. What people probably still do care about is the myth that is Greek GDP. And with a core support pillar - cheap labor - about to be yanked, that number is about to slide even more (if that is indeed possible).
The construction sector, where many Albanians make their start, has culled almost half its workforce, down to just 240,000 last year from around 400,000 in 2008.
The number of migrant residence permits issued has fallen by 20 percent annually since the crisis began, Triandafyllidou said.
Migrants can lose their legal status if they are jobless for long periods. Many are forced to accept work for lower pay or without social security benefits.
"What many migrants suffer from now is 'de-legalisation', which is tragic," said Triandafyllidou.
"People who have been here for more than 10 years, just because their stay was interrupted or they didn't manage to get their 10-year permit in time are left high and dry," she said.
It is unclear if Apple has a manufacturing facility in Crete. What is clear is that Foxconn workers and Albanian migrant laborers, have roughly the same arsenal in expressing their views on the world:
On Thursday, police on Crete said a 38-year-old Albanian man killed himself when he jumped from the roof of a building.
The motive was not known, but a police official who declined to be named said the Albanian father of two had been living in Greece for 15 years, and had recently been looking for work in Albania, without success.
It came a day after 77-year-old retired pharmacist Dimitris Christoulasa shot himself in the head on Syntagma Square, leaving hand-written notes saying he would rather die than scavenge for food.
With an official unemployment rate of around 13.4 percent, Albania is poorly placed to absorb returning migrants looking for work.
And while the increasing possibility of wage parity between China and the US is all the rage these days, it has already taken place between Albania and Greece