Category: Economy

German resistance may prove ‘fatal’ to Europe: George Soros

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Germany’s resistance to a banking union and stimulus measures is in the way of a solution to Europe’s debt crisis, and could turn this week`s meeting of the region`s leaders into a “fiasco”, according to billionaire investor George Soros.

German Chancellor Angela Merkel has so far rebuffed all proposals to help relieve Spain and Italy from the jump in their borrowing costs and has resisted allowing the European Central Bank (ECB) to step up buying of peripheral sovereign debt. That poses a threat to the region`s stability, Soros said in an editorial in the Financial Times on Monday.

“This threatens to turn the June (28) summit into a fiasco which may well prove fatal because it will leave the rest of the euro zone without a strong enough firewall to protect it against the possibility of a Greek exit,” Soros wrote.

“Even if a fatal accident can be avoided, the division between creditor and debtor countries will be reinforced and the “periphery” countries will have no chance to regain competitiveness because the playing field is tilted against them.”

France and Italy are urging Germany, the region`s largest economy, to take decisive action to end the two-and-a-half-year old debt crisis as Spain`s 10-year bond yields jumped to more than 7 percent last week. Merkel has opposed “premature” proposals for issuing euro-area bonds backed by the ECB, arguing that such debt can`t be sold until there is a full fiscal union for the region.

This is however “unrealistic and unreasonable”, Soros said, adding that a political, fiscal and banking union have to be “developed together step-by-step”.

The first step towards this would be for the EFSF (European Financial Stability Fund) to immediately take over the ECB`s holdings of Greek bonds, and the ECB to start buying Spanish and Italian bonds. This will calm financial markets and pave the way for a political and banking union, Soros said.

Concerns over Europe, particularly Spain`s and Italy`s ability to finance their debt, caused the two nations` bond yields to spike earlier in the week. They have since retreated, aided by speculation that European leaders will take action at the Brussels meeting on Thursday.

Spain`s 10-year-bond yields retreated to 6.38% on June 22 and comparable Italian yields slid to 5.8% after climbing to as much as 6.17% on June 18.

A longer-term solution has to be found for the crisis in Europe, Soros said, and he proposed a so-called European Fiscal Authority (EFA) to be set up to buy Spanish and Italian bonds in exchange for structural reforms.

Under Soros` proposal, this fund will buy the bonds with European Treasury Bills issued and backed by the ECB and every euro zone member-nation. These Bills would therefore receive a zero-risk weighting from regulators and have very low yields.

There should be plenty of demand for the Treasury Bills, especially from banks which urgently need risk-free liquid assets, Soros added.

“Banks are currently holding more than 700 billion euro (USD 878 billion) of surplus liquidity at the ECB, earning only one quarter of one per cent interest,” Soros said. “This assures a large and ready market for the Bills at one percent or less.”

The EFA would also have the authority to impose a fine or other form of penalty should a participating country fail to live up to its commitments, Soros said, adding that the countries would then have to agree on debt reduction programs, which would not jeopardize economic growth.

This should pave the way towards banking, fiscal and political union and the German parliament should not be in the way of such a solution, Soros said.

“If the rest of Europe is united behind this proposal and the Bundestag (German parliament) rejects it, Germany must take full responsibility for the financial and political consequences,” he warned.

– By CNBC`s Jean Chua

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Treasury yields will hit 1% by year end: Market Watchers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US 10-year Treasury yields will hit 1% by the end of the year, as the so-called “fiscal cliff” has investors running to the safety of government debt, several market watchers told CNBC on Monday.

Gerard Minack, Asset Manager at Morgan Stanley, got the bearish ball rolling on CNBC Asia’s “Squawk Box.” He said investor anxiety about the tax increases and spending cuts which will happen at the start of next year, could be the catalyst for a US recession and a fresh plunge in yields.

“We know exactly when the next US recession is going to start. It’ll start January 1, 2013,” said Minack. “We see a very small window from the first Tuesday in November (election day) to December 31 to sort that mess out. It’s going to make last year’s debt ceiling debate look like a walk in the park.”

The debt-ceiling debate was a major risk event in the US last year which triggered a plunge in stock markets. The crisis was eventually resolved through a complex deal where the Congress agreed to raise the debt ceiling and reduce proposed increases to future government spending.

Nick Maroutsos, Portfolio Manager at Kapstream, agrees with Minack, saying the 10-year Treasurys could “absolutely” hit 1%  by the time we ring in the New Year. “Government officials are dragging their feet in Europe and the US economy is slowing down, so the likelihood of hitting 1% is certainly out there,” said Maroutsos, who recently sold out of government bonds completely in favor of highly-rated corporate debt.

US Treasurys prices fell on Friday as investors prepared for USD 99 billion in new short- and intermediate-dated debt this week, reducing safe-haven demand. The benchmark 10-year notes fell 17/32 in price to yield 1.675%.

Darryl Guppy, CEO of GuppyTraders.com layered a concurring technical opinion on top of the pessimistic calls.

“If you take a long-term trend line into 2013, yes, the bottom of that is down around the 1% level. It’s possible,” said Guppy.

While economist Tony Farnham of Patersons Securities is fully on board with the 1% call in the near term, he believes the US dollar may soon lose its appeal and reduce demand for Treasurys.

Some point the US dollar will lose a degree of its safe haven status and with that, of course, people won’t need to go to the good old trusted US dollar parking area of Treasurys,” he said.

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Moody’s downgrade of banks ‘absurd,’ says Dick Bove

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The downgrade on Thursday of 15 major international banks and securities firms by Moody’s Investors Service is “absurd” as the financial health of these institutions is at the best it has been in years, one analyst tells CNBC.

“This is one of the most absurd things that Moody’s has ever done perhaps in the history of the company,” said Dick Bove, Vice President of Equity Research in the Financial Sector at Connecticut-based Rochdale Securities.

The fundamentals of the American banking industry point to balance sheets that have improved “dramatically” over the last 4 years, Bove said. Equity-to-assets ratio is as high as they were in 1938, liquidity as a percentage of assets is at a 30-year high, their reserves against bad loans are up, bad loans are down, he said.

“In any metric that you look at… the banks have shown improvement in earnings in every one of the past 11 quarters year over year. If you go into the bond market, where Moody`s did the downgrade, prices of bank bonds are going up. Not only are they going up, they are going up faster than the prices of Treasurys, so what in heavens` name is Moody`s doing?” Bove said.

Bove has been a consistent advocate of buying bank stocks, particularly the large institutions that he says have unfairly become targets of government overreach.

The ratings agency said it downgraded the credit rating of banks that included Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley, because their long-term prospects for profitability and growth are shrinking.

Bove disagrees, saying that banks can easily withstand a “moderate” downturn and even a severe recession as shown by the stress tests at the beginning of the year.

“Since we are not talking about a depression, nor a depression that`s worse than the one that occurred in the 1930s, I don`t see how a downturn of moderate size is going to cause any problem with banks` balance sheet,” he said. “What it will do is to lower the growth of bank earnings. Banks do not do well in weak economies, so it will lower the growth rate of their earnings.”

Stress tests conducted by the Federal Reserve at the beginning of the year showed that the majority of the largest US banks will continue to have enough capital to satisfy regulators, even if they suffer a financial shock that includes unemployment hitting 13 percent and a 21 percent drop in housing prices.

But a moderate slowdown will not impact the banks` financial health, says Bove. “It will not impact their balance sheets, it will not create a financial crisis of any nature,” he added.

– By CNBC`s Jean Chua.

Copyright 2011 cnbc.com

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Domestic critics slow potential LNG export boom

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Heated debate over the impact of liquefied natural gas exports on domestic prices is threatening to derail them at a crucial time for the US industry.

A sudden abundance of natural gas and unprofitably low prices – the result of fracking technology that`s opened up previously unreachable shale-gas reserves – has the industry looking for new markets.

But Massachusetts Rep. Edward Markey, a top Democrat on the House Natural Resources Committee, is pulling out the stops to slow exports.

He began worrying about the impact of liquefied natural gas (LNG) exports on US prices, when he saw permit applications piling up at the Department of Energy.

So, Markey and Sen. Ron Wyden, D-Ore., another key voice on US energy policy, introduced bills requesting a timeout on LNG permit approvals until 2025.

“We saw a policy shift to exports without even a debate,” says Jonathan Phillips, a senior policy adviser to Markey on the Democratic staff of the Natural Resources Committee. “Yet all the studies show that exports will increase domestic prices. We`re not going to race ahead, allowing oil and gas companies to reap large profits at a cost to consumers.”

Consumer and environmental groups are also dead-set against the export of LNG, which converts natural gas into liquid form through a rapid chilling process for easier transport. The chemical industry has voiced dissent because it depends on cheap natural gas to produce fertilizers and feed stock.

This domestic push-back is slowing the approval process, while other countries are ramping up production to natural gas-hungry customers like Japan, which is trying to compensate for the loss of the Fukushima nuclear power plant in 2011.

As a result, only one US terminal has been given the go-ahead. A dozen-plus others are on hold, any regulatory action delayed until an Energy Department study on the economic impact is completed later this the year.

Cheniere Energy was the lucky one to win federal approval to build the first liquefied natural gas export terminal in decades. The Blackstone Group will supply some USD 2 billion in financing. When complete in 2015, the Sabine Pass, La., facility will be capable of exporting about three percent of the total US supply.

Cheniere and the seven other energy companies behind the 14 stalled permits for facilities – in states as far-flung as Georgia, Maine and Oregon – all want to export to Japan, Spain and other non-free trade countries, those that have not eliminated trade tariffs and quotas.

The only LNG export terminal currently serving the group of nations is ConocoPhiliips` aging facility in Alaska, where supply is dwindling.

South Korea and Taiwan are also big importers, and demand is rising in India and China, which is building huge import terminals.

The non-free trade block is a highly profitable market for liquefied natural gas. Importers like Japan pay nearly four times the price paid in the US market.

Huge markets aside, the natural gas industry says there`s plenty of gas to go around without any negative impact.

“Higher US natural gas prices are an unfounded fear,” says Rocco Canonica, director of energy analysis at BENTEK Energy. “The US will produce more gas over just a few years to make up for exports.”

Studies on the effect of exports on prices, however, differ widely.

One by Deloitte found that by 2035, daily exports of 6 billion cubic feet, or about 1 trillion BTUs, will result in an average domestic price increase of 1.7%. On the other hand, a study by ICF International concluded that the same number of exports over the same period would increase domestic prices by 11%.

Some experts say the regulatory slowdown is almost certain to dampen pricing.

“It isn`t feasible for eight projects to hit the market fast,” says Charles Ebinger, director of the Brookings Institution Energy Security Initiative. “So there is less market impact.”

Guy Caruso, a senior adviser in energy and national security at the nonpartisan Center for Strategic and International Studies, estimates it could take five to 10 more years to achieve even modest amounts of natural gas exports.

Furthermore, most energy experts say LNG exports will ultimately amount to some 10% of total US sales at best.

Modest as that may seem, there is formidable competition abroad.

Qatar, Indonesia and Malaysia are already major exporters, but new suppliers like Australia and Nigeria are ramping up production.

“Australia will eventually be a bigger player than Qatar,” predicts Ebinger.

“And Russia has been lobbying against exports,” adds Caruso, noting that Moscow wants to preserve its sizable market share based on a series of pipelines that stretch all the way to Siberia.

For some, the issue seems much ado about nothing in a country that some estimate has a 100-year supply of natural gas ready to be fracked out of shale formations.

“We`ve got to get rid of our supplies somehow,” says Canonica.

Copyright 2011 cnbc.com

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Regardless of what Fed does, markets may be disappointed

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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No matter what the Fed does, some corner of the financial markets will be unhappy Wednesday afternoon.

In the last several weeks, as Europe`s sovereign crisis flared and US economic news simultaneously worsened, the expectations on Wall Street have gone from no new Fed easing to the Fed potentially launching a new extraordinary, quantitative easing program at the end of its two-day meeting Wednesday.

The consensus appears to lie somewhere in between, with the most odds seemingly on an extension of the Operation Twist program that is currently scheduled to end at month end. Even while some analysts question how much the Fed can ease with near record low rates, they still expect to see some action.

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“I think tomorrow`s meeting has a bit more surprise potential than we`ve seen in the past, and I think the market is appropriately cautious ahead of that event,” said Ian Lyngen, senior Treasury strategist at CRT Capital. “I think stocks continue to trade on the assumption that the Fed will deliver something. If not QE, then it will be a version of Operation Twist which they see as positive.”

Lyngen said the bond market is expecting Twist, not quantitative easing.

Operation Twist is a Fed program that involves the sale of shorter duration Treasurys and the purchase of longer duration securities, in an effort to pressure longer term rates. QE, or quantitative easing, is different and it involves the Fed making asset purchases but adding them to its balance sheet rather than holding the size of the balance sheet steady with asset sales. There are expectations that a new QE could involve mortgage securities, or even that an extended Operation Twist may target them.

“As the data`s gotten worse, the odds go up,” said JPMorgan economist Michael Feroli. “Basically my view of the Fed reaction function hasn`t changed that much. It`s just that the data deteriorated.”

Stocks soared Tuesday, with the S&P 500 gaining nearly a percent, and the dollar fell, reflecting some expectations for easing. Markets were also buffeted by a variety of headlines from Europe which quoted sources showing some willingness by euro zone officials to renegotiate Greece`s bailout and stories that both suggested and knocked the idea of Europe`s bailout mechanisms buying more sovereign debt.

Treasurys were also reacting in part to the recent sell off in German bunds, resulting in a five-week high yield, as traders see the euro zone successful in buying more time towards a solution.

The bond sell off, along with weaker mortgage prices, was also seen as a move by some investors to take off some bets on Fed easing, in case Operation Twist or QE does not materialize.

“Many market participants are expecting some kind of accommodative move tomorrow from the Fed in the form of an extended twist or `verbally` by saying rates will stay low beyond 2014. Given the markets` run of the last 4 days, profit-taking on the news, good or bad, may be in order,” Stifel Nicolaus strategist Elliot Spar said in a note.

He said the S&P 500 reached his target of 1,358 and investors should consider taking profits or hedging with options though the market could surprise to the upside.

BTIG chief global strategist Dan Greenhaus said if the Fed announces just Twist in its 12:30 pm ET statement Wednesday that may not do much for the stock market, but no action would be taken as a negative. A new round of QE would drive stocks higher.

“We knew when they started stepping into these programs, we knew that things were getting esoteric and we knew they had run out of the types of things that people fully understand, and once you get into Operation Twist and the communications strategy, then you enter a realm where the effects are not fully understood,” he said.

Greenhaus said he believes the Fed should refrain from continuing Twist because it does not have much impact, saving its firepower if it needs to use a full QE program. “I`d like to see them say the economy is on stable footing. Its being influenced by external factors and we stand ready to provide support if necessary. But to be clear, the economic data points have worsened,” he said.

The Fed also releases its revised economic forecast at 2 pm ET and Fed Chairman Ben Bernanke then speaks to the media in his quarterly briefing.

JPMorgan`s Feroli had previously expected no Fed action, but he`s changed his view as the weaker data piled up and he simultaneously pared down his expectations for second quarter GDP, now at 2%.

“We think they extend twist and they push back guidance to 2015,” he said. The Fed`s current guidance for extremely low rates is through 2014.

Feroli said the Fed has been caught off guard by the rate at which the economy deteriorated, and its communications have been overtaken as a result.

That could explain the wide range of views. Goldman Sachs economists say their base case is for a third round of QE, with an extension of Operation Twist at the very least.

Pimco says it`s all too close to call, according to strategist Tony Crescenzi. But personally, Crescenzi expects the Fed to hold off.

“I think the Fed will wait until the next meeting, and if necessary depending on more data and the outcome in Europe, deliver outright QE. If you`re going to do something, do something, rather than extend Twist,” he said.

Crescenzi said the Fed will likely strengthen the language about easing if needed. “What the Fed wants to do is put a safety net under markets in case the data is weak,” he said.

“Europe is driving conditions in financial markets, and the Fed can`t control that…so they might want to be ready to react to it,” Crescenzi said. “Why not pull the guns out when the battle really begins?…Financial conditions haven`t changed all that materially. There`s still a question about this slow down and what`s behind it.”

Follow Patti Domm on Twitter: @pattidomm

Questions? Comments? Email us at marketinsider@cnbc.com

Copyright 2011 cnbc.com

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Forget QE3, Dick Bove has another idea to fix the economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Taking the handcuffs off the American banking system will do more to stimulate the economy than another round of money-printing, analyst Dick Bove said.

As the Federal Reserve contemplates a third round of quantitative easing to spur the slumping US economy, Bove, the vice president for equity research at Rochdale Securities, asserted that removing capital and liquidity requirements for banks would get lending rolling again and stimulate activity.

“It seems clear that the United States economy`s growth is slowing and that the global economy is facing major challenges. This suggests a need for some action by the Federal Reserve and other central banks,” Bove said in a note to clients. “It also appears to be just as evident that lowering interest rates to zero and printing more money are not effective options.”

The Fed is winding down its most recent stimulus action, a USD 400 billion program nicknamed Operation Twist in which the central bank sells short-dated notes and buys an equal amount of longer-dated debt.

While the Fed is ostensibly a nonpolitical body, congressional leaders have expressed opposition to more balance sheet expansion and money-printing. Some on Wall Street, meanwhile, have begun to clamor for more easing.

Relaxing the bank regulations instituted after the financial crisis of 2008 would be a way to avoid the pitfalls of QE3.

The Dodd-Frank rules seek to make sure banks have enough cash on hand to buffet any dramatic losses such as those suffered when the subprime mortgage industry collapsed. That left banks with hundreds of billions of toxic assets on their balance sheets and necessitated a costly government bailout.

Jamie Dimon, CEO of JPMorgan Chase, which expanded during the crisis largely because of its strong capital position, has criticized portions of Dodd-Frank as regulatory overreach.

“It is possible that the regulators are beginning to understand that by taking the banks out of the financial system they are crippling the economy and pushing unemployment rates higher,” said Bove, long a critic of increased bank regulation. “If they do understand this they might reverse the absurd actions they have taken and assist the economy.”

As an example, Bove said rules that mandate a greater risk weighting of private loans than government loans make it harder for banks to meet capital requirements, and to supply money to the economy.

But bank lending has been improving lately.

Total loans increased USD 8 billion last week and are up 18 percent for the same period in 2011, according to financial services firm Keefe, Bruyette and Woods.

Commercial and industrial lending has been particularly strong in the second quarter, while consumer loans – primarily credit cards – have surged as well, while real estate loans are lagging.

Large domestic banks have been lending at a faster pace than smaller institutions, while foreign banks are seeing lending up 15% over 2011, with the gains concentrated in CandI loans.

On the other hand, some investors are bracing for difficult times ahead for regional banks, which are pressured in particular by the low-rate environment that the Fed has fostered since the 2008 financial crisis.

Credit Suisse recently warned of a likely 10% drop in the stocks of regional banks due to a likely lowering in earnings estimates

“There is more than enough money in the world to solve the financial issues that are in abundant evidence. The problem is that available funds are not being used,” Bove said. “The money is not being used because the world`s central bankers have taken banks out of the financial system. Bank money is being used to pay government debt. Bank reserves must be reduced to stimulate economic growth.”

Despite a monetary base that has grown 33.6 percent over the past four years, banks are parking most of their cash at the Federal Reserve because of the capital requirements, he said.

The blood-lust to kill banks and bankers in the United States is not killing the banks; it is killing the economy and preventing job creation,” Bove said. “The government and the press must rethink what they are doing and commit themselves to economic growth and this means freeing the banks.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How long before Greece is in crisis again?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The boost given to markets by New Democracy’s victory in Sunday’s Greek election may not last for long, as the struggling Mediterranean country’s problems are far from over.

New Democracy and Pasok, which look likely to form a coalition government with smaller Democratic Left this week, have swapped power between them for almost four decades, and so must take at least partial responsibility for the current Greek morass. And the historical rivalry between the two seems to have been deepened rather than healed by Greece’s recent struggles.

“These are not parties who are used to being in coalition together,” Pavlos Yeroulanos, former minister of culture and tourism for Pasok, told CNBC.com. “It’s going to be very difficult because Pasok will see Syriza taking support from them. Decisions may take too long to make. We could be back here again this year.”

Even those who are likely to form the new government don’t envisage it lasting for the usual length of time for a Greek coalition. Fotis Kouvelis, leader of the Democratic Left, has said he thinks the new government will last until European elections in 2014 – which many on the ground in Athens think is rather optimistic.

Syriza’s charismatic leader Alexis Tsipras vowed to lead a strong opposition on Sunday night. His straightforward refusal to negotiate with New Democracy for a coalition this time around indicates that he may see a bigger prize months down the line, when his party, formed from a coalition of smaller leftist groups, is better integrated and better able to govern.

“What Syriza should do is plan for power. They gain support when they talk about getting into power, and lose it when they talk about being in opposition,” Yeroulanos said. “They could still lose their gains again.”

Much will depend on whether the new government can wring any concessions from the troika of the International Monetary Fund, European Central Bank and European Commission, a group that is in charge of its bailout. Troika officials will arrive in Athens once a new government is formed, and it is hoped that they will agree to give Greece more breathing room on their repayments of the 240 billion euros (USD 305 billion) bailout.

There were already signs of thawing from Germany, viewed as the most pro-austerity of Greece’s European partners, on Monday. “It is clear to us that Greece should not be over-strained,” German Deputy Finance Minister Steffen Kampeter told German TV station ARD.

The troika is likely to compromise on this year’s budget deficit target but insist on measures for continued consolidation in next year’s budget, according to analysts at Unicredit – a concession which could ease the pressure for the next six months, but will keep worries about Greece being governed outside its borders to the forefront. Concerns about Greece being ruled from Berlin or Brussels have helped propel far-right Greek party Golden Dawn into its biggest-ever share of the vote.

Any measure to promote growth in jobs would be welcomed by a population struggling with 22.6% unemployment.

“So far the problem has relied on revenue management and across the board cuts. Hopefully that will change now because the new government will have to come out with new proposals,” Miranda Zafa, former board member at the IMF and chief executive of E.F. Consulting, told CNBC Monday.

While Sunday’s election removed the immediate threat of Greece having to default on its debt repayments and crash out of the euro, its fundamental economic and structural problems remain.

“It is difficult to get changes through quickly because of the bureaucracy,” Yeroulanos said.

Many on the ground believe that there could be another election by the end of the year.

“We need to be cautious because everything is going to be extremely difficult from now on,” Yeroulanos warned.

Written by Catherine Boyle, CNBC. Twitter: @catboyle01

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‘We are anchored’ to Euro: Samaras to CNBC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Antonis Samaras, the leader of the New Democracy party which won the most votes in Sunday`s election, told CNBC that investors should be reassured by his parties victory over radical leftist Syriza party.

“First of all I feel great relief for what happened. They (investors) should be reassured,” Samaras said in an interview as he left a news conference to try and form a coalition government.

“What is happening today is we made sure with the vote of the Greek people that we are anchored within the euro; that we believe Europe can stand together with Greece, with every country that believes in the European orientation, as we do as the Greek people do,” he said.

Samaras said it is important that the new government do its best to boost social cohesion and development while honoring his countries commitments.

“But at the same time allow for growth oriented policies that will allow us to recover,” said Samaras

“If we don’t…the unemployment levels have reached such incredible…50% numbers for the youth for instance, that will disable anyone to do anything,” he added.

“We have to allow for the recovery at the same time we have to be stable within Europe,” said Samaras, who added that a lack of security for the Greek people is another issue he plans to tackle following an increase in burglaries and attacks on immigrants. “I’m confident we can do it.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Real question for Greece is what now: Wilbur Ross

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Wilbur Ross, the billionaire investor and Chairman of private equity firm, WL Ross and Co., says the real question facing Greece is what policies the new government will implement after the pro-bailout New Democracy party won the most votes in Sunday’s vote.

New Democracy’s leader Antonis Samaras told CNBC, the election results should reassure investors that Greece was anchored to the euro. His comments are likely to provide some relief to investors worried that the election result would lead Greece out of the euro zone.

Risk assets, including the euro and oil edged higher on Monday morning in early Asia trade.

But the Greek government still faces a huge gap between its liabilities and revenues and the country risks running out of cash.

According to Ross, the government should prioritize selling off state assets such as real estate and government-owned companies, a move that wouldn`t be as unpopular as austerity measures, which have hurt incomes and employment.

“I think that what this government really needs to do is to start out with the privatization of some of the assets that they`ve been sitting on that never should have been governmentalized in the beginning and show that they will do good faith,” Ross told CNBC Asia’s “Squawk Box” on Monday morning.

Asked if his firm would be interested in buying some of these assets, Ross said he didn`t know what assets the government would sell and added: “I don`t really want to inflate the price by saying this, that and something else.”

Ross also said the government has to improve tax collection for a more permanent solution to the country’s debt problems and said higher revenues would allow the country to ease up on austerity measures.

“The tax avoidance in Greece – including by government officials – is ridiculous. The black economy is a ridiculously high percentage,” he said. “Those are the problems they have to deal with and if they can deal with those than more limited austerity is what`s needed.”

Copyright 2011 cnbc.com

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Greece sinks into despair: There’s nothing here anymore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Extreme political uncertainty, rampant corruption, queues forming at soup kitchens, and aid from non-governmental organizations (NGOs)—all these are more commonly associated with countries still developing Western-style economies.

Yet they are now a daily reality for many Greeks, prompting some to mutter that the country is in danger of regressing decades in its development.

“We are moving from being a Western country to a poor country,” George Protopapas, national director of international charity SOS Children’s Villages, told CNBC.

“I’m worried that it’s going to be like in Ceausescu’s Romania or Bulgaria in the early 1990s.”

Of course, the concept of the Third World, which dates from the Cold War, is dismissed by many as outdated. There is no universal concept for how to label developing and developed countries, and development isn’t always a linear process.

What really differentiates Greece from struggling developing countries is its large, well-educated middle class and cultural identification with the West.

It’s difficult to sit in Syntagma Square—the central Athens square that is home to the Greek parliament, with its upmarket hotels and shops—and see Greece sinking back. Yet many of the people in suits chatting on their iPhones have had their pay slashed in the past year, and there are few shops that are busy.

Greece itself, with its strange mixture of capitalism and socialism, was always one of the least developed of the European Union countries. There are many now who argue that it should never have been allowed to join the euro at all.

It is often mentioned as the country where the foundations of modern democracy were laid millennia ago, but its current democracy is less than four decades old.

Greece’s 20th-century development was notoriously hampered by political upheaval, including a fascist dictatorship, an army-led coup, and a period of occupation by Nazi Germany — one of the spectres being raised by those opposed to external forces like the troika having input into Greek policy.

After recent stringent cuts as part of the bailout, non-governmental organizations are providing some of the services, like health, normally provided by the government. This kind of aid is much more often associated with the developing world. Diseases such as HIV and malaria are on the rise.

The medical charity Medecins du Monde — Doctors of the World — known for its work in the Third World, saw the number of Greeks coming to its clinics double in 2011.

“Many patients are retired elderly citizens whose pensions have been substantially reduced because of the austerity measures implemented by the government in recent years,” the charity noted in recent research. And such charities are paying taxes on donations for the first time, as well as facing rising costs across the board.

Immigrants from developing countries are starting to see more chance for prosperity in their home countries than Greece.

Ade, who emigrated from Nigeria in 2005, is planning to go back home as soon as she can afford to.

“There’s nothing here for me anymore, and I can’t contribute to society if I can’t work,” she told CNBC as she waited for free medical treatment (she is four months pregnant) at a center funded by the Orthodox Church.

There are also concerns that the escalating cost of heating and electricity, the result of tax rises brought in by the government following the bailout, coupled with a rising number of unpaid invoices, could lead to power cuts.

Energy companies in Greece are already struggling. State-run PPC needs to pay $657.2 million (which it doesn’t have in its coffers after recent falls in revenue) by June 22 or persuade its banks to roll over its debts. And people increasingly can’t pay their bills.

Close to a third of the Greek population — the highest level in Europe — was considered at risk for poverty or social exclusion by Eurostat in 2010, when the economic and political situation was not as dire as it now appears. And nearly 20 percent of Greek children live in homes unable to afford at least 3 out of 9 basic items.

“We are the band that’s still playing on the Titanic. We have to play on and keep working even though the ship is sinking,” Protopapas told CNBC about his charity, which helps struggling families and has seen a dramatic increase in calls for its help.

© 2012 CNBC.com

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow