joi, 12 februarie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Austerity Queen Angela Merkel Ready for Compromise on Greece?

Posted: 12 Feb 2015 07:11 PM PST

Talk of Compromise is in the air. Reports suggest that German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras may both be willing to compromise. However, details are still sketchy.

Bloomberg reports Greece, Germany Said to Offer Compromises on Aid Terms
Greek Prime Minister Alexis Tsipras met his European Union peers at a summit for the first time Thursday and said afterwards he sees political will to agree on what happens after the current aid program expires this month. Greece's goal remains a six-month bridge agreement that would lead to a new deal with euro-area authorities, he told reporters.

Behind-the-scenes negotiations resumed in Brussels hours after euro-area finance ministers failed to reach a joint conclusion. Greek negotiators and officials from its euro-area creditors plan to meet in Brussels Friday to discuss the way ahead as they struggle to decide whether to call the arrangement an extension, a new program or a bridge deal, officials said.

Deal Elements

Germany won't insist that all elements of Greece's current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece's budget-surplus requirement and conditions to sell off government assets.

Greece's willingness to hold to more than two-thirds of its bailout promises shows that Greece is broadly prepared to stick to the program, the German officials said. Improving tax collection and fighting corruption will win German backing, and getting a deal will depend on Greece's overall reform pledges.

Greece is prepared to commit to a primary budget surplus, as long as it's lower than the current 4 percent of gross domestic product, according to Greek government officials. Tsipras's coalition also might compromise on privatizations, one of the officials said. The officials asked not to be named because the deliberations are private and still in progress.

Greece wants a "a new contract" in which " our commitments for primary fiscal balances will be included and continuation of reforms," Tsipras told reporters after the EU summit. "This also obviously needs to include a technical solution for a writedown on the country's debt, so the country has fiscal room to return to growth." 

Shifting Tone

In a bid to restart work toward a solution, Tsipras also met Thursday with Dutch Finance Minister Jeroen Dijsselbloem, who heads meetings of his euro-region counterparts. The Greek side agreed to let a team of euro-area experts "engage with the Greek authorities to start work on a technical assessment of the common ground" on future financing, Dijsselbloem spokeswoman Simone Boitelle said in an e-mail.
Austerity Queen Willing to Talk

Reuters reports Greece Agrees to Talk to Creditors
Greece agreed on Thursday to talk to its creditors about the way out of its hated international bailout in a political climbdown that could prevent its new leftist-led government running out of money as early as next month.

"(We) agreed today to ask the institutions to engage with the Greek authorities to start work on a technical assessment of the common ground between the current programme and the Greek government's plans," Dijsselbloem tweeted. This, he said, would pave the way for crucial talks between euro zone finance ministers on Monday.

Dijsselbloem was cautious about prospects for a deal, telling reporters: "It is going to be very difficult. It is going to take time. Don't get your hopes up yet."

On Wednesday night, euro zone finance ministers had failed to agree even on a statement on the next procedural steps because Athens did not want any reference to the unpopular bailout, nor to the despised "troika" of lenders enforcing it.

German Chancellor Angela Merkel, vilified by the Greek left as Europe's "austerity queen", said Berlin was ready for a compromise and finance ministers had a few more days to consider Greece's proposals before next Monday's meeting.

"However, it must also be said that Europe's credibility naturally depends on us respecting rules and being reliable with each other," she said.

"The real risk in Athens seems to be that Tsipras has raised expectations to such an extent that he could find it extremely difficult to back down from his rhetoric and strike a deal which the rest of the Eurozone could accept," Berenberg Bank economists wrote in a note on Thursday.
Both sides seemingly want a deal. If a deal occurs, both sides will claim they gave up nothing. We will see.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Stratfor Says "Russia Comes Out Ahead"; Colonel Cassad Chime In; Ambiguities of Ceasefire

Posted: 12 Feb 2015 02:13 PM PST

In Ceasefire in Ukraine; Description of the Negotiations I asked a number of questions.
Will This Hold?

I don't know. This sounds like the limited autonomy arrangement in the last failed Minsk accord. But what's in the footnote? Does this mean a limited Federation without using those words? Is everyone tired enough of war to make this stick?
Let's take a look at what Colonel Cassad and Stratfor have to say.

Colonel Cassad on Results of Minsk

Here is a link to a Google Translation of Colonel Cassad on Results of Minsk.

A skeptical Cassad calls the results a half-hearted solution which on the one hand outlines the terms of the cease-fire, and on the other, a series of questions hanging in the air.

"The Truce on February 15 (if it takes place), will mean that the fighting will continue for 2 days where changes will mark the frontline border"

Cassad notes the "incomprehensible situation of the Debaltsevskim boiler [cauldron]. Poroshenko argues that there is no boiler, and Putin argues that trapped forces must lay down their arms."

"With regard to the remaining items, there is more wishful thinking than concrete solutions. France and Germany do not accept any responsibility for the implementation of these agreements, it is solely the responsibility of Russia, and of the junta [Ukraine] with the People's Republic. The threat of escalation of the confrontation was not removed, but simply postponed."

Autonomy

The critical question of autonomy will likely make or break this accord Cassad. Here is an unedited translation of Cassad.
Leaders of the DNI and LC actually publicly disown Declaration of State Sovereignty of People's Republic and gave their consent to the actual stay within Ukraine. The idea of federalization and autonomy of Ukraine were publicly buried that Poroshenko has already declared his major success. At the same reservation had been made ​​in the case of violation of the agreements more talks will follow. This is probably one of the required Russian guarantees. Of course, if hypothetically assume that all points of the agreement are met and the Donbass will remain a part of Ukraine, proposals laid with new agreements that do not allow us to say that the Donbass stub can be used as a lever to correct the Kremlin Ukraine in the desired way. At the same time official Kiev is still evading the Kremlin's attempts to seat Poroshenko and managers DNR and LC for the negotiation table. That is the direct contacts between the junta and the People's Republic is still there, and the next "truce" is pushed under the verbal assurances of the Russian Federation, Germany and France.
Cassad Conclusion
A full-fledged document on the settlement did not happen, the question hung in the air of the Crimea. In general, in my opinion, if the truce will not be torpedoed right now, we will have another respite and renewal of intense fighting. From what discussed and what was signed and that in my opinion can be done - a truce, divorce and heavy weapons exchange of prisoners. Everything else at this stage malovypolnimo, even without taking into account the expected action by the US escalation of the conflict.
The above translation is also unedited.

Ambiguities of Ceasefire

Stratfor, like Cassad discusses various ambiguities in Terms of Ukraine's Ceasefire.
Following marathon talks in Minsk that lasted more than 17 hours, the leaders of Germany, France, Russia and Ukraine reached an agreement that appears to align with the Kremlin's demands. The document calls for a cease-fire to begin Feb. 15, the withdrawal of weapons and the enactment of constitutional reforms in Ukraine. Though Ukrainian President Petro Poroshenko has denied that the agreement includes provisions for the creation of autonomous regions or the federalization of Ukraine, the document on the whole does fulfill several of the Kremlin's long-standing demands with regards to the status of Donbas.

The new cease-fire agreement is based largely on the original one that went into effect Sept. 5. It focuses on the withdrawal of heavy artillery systems, which have been prominent throughout the conflict, within 14 days of the cease-fire's implementation. The new cease-fire requires these artillery systems to be withdrawn far beyond their maximum effective ranges, a move that will create a buffer to prevent escalation and heavy artillery fire on the demarcation line. Missing from the agreement, however, is a decision on the fate of the still heavily contested Ukrainian positions in Debaltseve. Because both sides will have to withdraw their artillery systems, the result will be a very deep area without artillery cover in the center of the demarcation line.

The signing of the new Minsk agreement, as well as Russian President Vladimir Putin's direct participation in the negotiations, points to the Kremlin's willingness to at least partially de-escalate the conflict at this time. The agreement includes some vague measures and conditions that all sides may ultimately chose not to implement. Several key points of contention remain unaddressed, and there are still many opportunities for the agreement to break down if they are not resolved. Therefore, political will, rather than the actual terms of the agreement, will determine whether a significant de-escalation is to take place.
"Russia Comes Out Ahead"

In a second writeup, Stratfor says In Minsk Talks, Russia Comes Out Ahead
Following marathon talks in Minsk that lasted more than 17 hours, the leaders of Germany, France, Russia and Ukraine reached an agreement that appears to align with the Kremlin's demands. The agreement reflects Ukraine's increasingly weak negotiating position as well as Germany's wish to avoid confrontation with Russia while trying to save the eurozone. Though the deal includes some notable provisions regarding a cease-fire and the withdrawal of arms, it also contains several points, most importantly constitutional changes, that will challenge Kiev and give the Kremlin control over key parts of the agreement.

Ambiguity and Political Will

The political provisions of the agreement largely favor the Kremlin. The agreement prescribes constitutional reforms in Ukraine that would transition the country to a more decentralized system of governance — although it offers few details as to what that decentralization would entail. The accord also outlines a requirement for the Ukrainian government to enshrine into law a special status for Donetsk and Luhansk provinces that would allow them to form local militias and work with the central government to appointment local prosecutors and formulate economic and social policies for the regions.

Nevertheless, local elections and plans for Ukrainian forces to take control of the border areas between Donbas and Russia will not happen under the terms of the agreement unless Ukraine first conducts constitutional reforms. This leaves much room for ambiguity regarding the types of reforms and the extent of decentralization that would be deemed acceptable to the separatist and Russian sides before other elements of the deal could be implemented.

The ambiguity of constitutional changes gives the Kremlin options and allows Russian troops to continue controlling parts of the border, giving them access to Donbas. Moreover, the participation and cooperation of top-level separatist leaders at Minsk highlighted the Kremlin's continued influence over separatist groups, signaling that Russia will likely maintain a strong hold over the local leadership if Donbas receives its special status.

The German and French leaders who negotiated the deal have highlighted the fact that the agreement does not completely resolve the conflict. Following the talks, German Chancellor Angela Merkel said there is much work left to do, but she did note that the negotiations offered hope for a solution.

Notably, the United States was not formally represented during the nightlong negotiations in Minsk, but its reaction and willingness to support the agreement will be crucial.

Several key points of contention remain unaddressed from a military and political perspective, and there are still many opportunities for the agreement to break down if they are not resolved. Therefore, political will, rather than the actual terms of the agreement, will determine whether a significant de-escalation is to take place.
Current Cauldron Map



Poroshenko's claim "there is no boiler" is preposterous. Map from LiveJournal.

Ceasefire Problem Area



Above map from Stratfor, I added purple highlights. Clearly, key questions remain. If the ceasefire does hold, it is not clear who "won". It all depends on how numerous ambiguities are resolved.

Addendum:

Cassad concluded with "A full-fledged document on the settlement did not happen, the question hung in the air of the Crimea. In general, in my opinion, if the truce will not be torpedoed right now, we will have another respite and renewal of intense fighting. From what discussed and what was signed and that in my opinion can be done - a truce, divorce and heavy weapons exchange of prisoners. Everything else at this stage malovypolnimo, even without taking into account the expected action by the US escalation of the conflict."

Jacob Dreizin informs me that "malovypolnimo" translates as "not realistically fulfillable"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Ceasefire in Ukraine; Description of the Negotiations; Will This Hold?

Posted: 12 Feb 2015 11:30 AM PST

After 16 hours of talks in the Belarusian capital Minsk the leaders of Germany, France, Ukraine and Russia agreed to a ceasefire. This meeting took place in two locations, Minsk and Russia, because Ukrainian president Petro Poroshenko refused to meet rebel leaders.

Here is a link to the Full Text of the Ceasefire.

The accord sets boundaries, grants amnesty and pardons, and requires release of prisoners on both sides.

Points 10-12 are where it gets interesting.

In a move that mainly targets Russia but also affects mercenaries fighting on the Ukrainian side, point 10 of the accord calls for "Withdrawal of all foreign armed formations, military equipment, as well as mercenaries from the territory of Ukraine under monitoring of the OSCE. Disarmament of all illegal groups."

Point 11 calls for "Carrying out constitutional reform in Ukraine with a new constitution entering into force by the end of 2015 providing for decentralization as a key element (including a reference to the specificities of certain areas in the Donetsk and Luhansk regions, agreed with the representatives of these areas), as well as adopting permanent legislation on the special status of certain areas of the Donetsk and Luhansk regions in line with measures as set out in the footnote until the end of 2015."

Point 12 says "Based on the Law of Ukraine 'On interim local self-government order in certain areas of the Donetsk and Luhansk regions', questions related to local elections will be discussed and agreed upon with representatives of certain areas of the Donetsk and Luhansk regions in the framework of the Trilateral Contact Group. Elections will be held in accordance with relevant OSCE standards and monitored by OSCE/ODIHR."

I do not see the footnote mentioned in point 11.

Description of the Negotiations

In intense negotiations Chancellor Merkel was the main go-between with Putin.
In this lies hope," tweeted Ms Merkel's spokeperson, who was the driving force behind negotiations that Mr Hollande had described as a "last chance" to halt the spiralling violence in a conflict that has so far killed more than 5,300.

"It was not easy, and de facto all sorts of unacceptable conditions were put forth to us," Mr Poroshenko said. "But we did not go along with ultimatums."

Mr Poroshenko said Ukraine rejected a push to grant separatist regions autonomy, contending that agreements signed on Thursday envision full reintegration though with greater regional governing authority, after local elections his year.

Mr Putin listed plans for a political settlement that would deal with border and humanitarian issues. But he did not clarify whether or how the sides had resolved their disagreements over Kiev's demands that it regain control over its border with Russia — one of the thorniest issues in the talks.

Mr Putin said he and Mr Poroshenko were both consulting their military experts to understand and resolve the situation in Debaltseve, the eastern Ukrainian town that has become the scene of the heaviest fighting in recent days, with rebels claiming to have encircled thousands of Ukrainian troops there.

The closed-door talks in Minsk were described in a Facebook posting by Valeriy Chaly, deputy head of Ukraine's presidential administration, as a "battle of nerves".

Outside the main Minsk talks, representatives of the eastern Ukraine separatists were meeting representatives from Kiev, Moscow and the Organisation for Security and Co-operation in Europe in a separate building. The dual track negotiation was necessary because Mr Poroshenko refused to talk directly with the separatists.
Will This Hold?

I don't know. This sounds like the limited autonomy arrangement in the last failed Minsk accord. But what's in the footnote? Does this mean a limited Federation without using those words? Is everyone tired enough of war to make this stick?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Greece Talks Break Down; Parties Cannot Even Agree On a Statement

Posted: 11 Feb 2015 11:33 PM PST

At midnight, Greece turns into a pumpkin. The clock is clearly ticking but is this the 10th or 11th hour?

Given the eurozone propensity to extend deadline after deadline, it's hard to say precisely what time this is. But we can say Greek Bailout Talks with Europe Break Down.
Eurozone finance ministers' first attempt to grapple with the bailout demands made by the new Greek government broke down in recriminations after the two sides failed even to agree a way to take negotiations forward after six hours of talks in Brussels.

Jeroen Dijsselbloem, the Dutch finance minister who chairs the committee of his 18 colleagues, said that while he had hoped a blueprint for future talks could have been agreed at the session, no negotiations were scheduled ahead of a self-imposed deadline to reach agreement on a bailout extension by Monday.

Although no final deal on Greece's proposals was in the offing at Wednesday's meeting, senior eurozone officials had hoped that, following days of public sniping over what a new bailout programme might look like, Athens and its creditors could at least find a road map to resolving the standoff.

But officials said even those low expectations were not met and there are currently no talks expected before another meeting of finance ministers on Monday, where eurozone leaders had hoped a deal could be clinched.

According to eurozone officials involved in the talks, a joint statement had been agreed between the finance ministers and Yanis Varoufakis, their new Greek counterpart, that would have held out the chance of reaching a deal to extend Greece's current €172bn programme beyond its February 28 expiration.

But after the meeting broke up, Mr Varoufakis consulted officials in Athens and then raised new objections to the statement's wording, and despite efforts to find an 11th-hour compromise, the statement was scrapped. Greek prime minister Alexis Tsipras has vowed not to extend the current bailout.
Does Anyone Really Know What Time It Is?

In honor of the 10th, 11th, or whatever hour, I offer this musical tribute.



Link if video does not play: Does Anybody Really Knows What Time It Is?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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