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Ad Hoc Commentary

Monday May 28th 2012

Monday, May 28th 2012
Full Plumage
Markets closed: USA closed for Memorial Day. Denmark, Iceland, Luxembourg, Norway and Switzerland are closed for Whit Monday.
Greek opinion polls are a fluid as olive oil that has has been warmed by the sun and note that in recent weeks we have seen the lead in the polls changing on an almost daily basis between New Democracy (ND)  {Pro Austerity and bailout terms} and Syriza (SY) {pro Euro but so long as someone else pays for most of Greece's bills).   However, the markets have shot higher today as several different opinion polls carry a general theme that ND had achieved a lead over Syriza - of between 0.5 to 5.7%. In fact 2 polls suggest that  that ND and Pasok (which also supports the current bailout programme), would win enough seats to secure a majority.
Is the reality that May was the protest vote? Now that the reality of the true cost of leaving the Euro is appreciated, the Greek electorate will vote for ND or Pasok even though they are frustrated by doing so? If this is the case, we can look forward to many summits at the European top table where yet more compromises are fashioned so as to stop the Euro Zone urn cracking anymore. 
How much?
In March when the Greek bailout was negotiated by the IIF, the Managing Director, Charles Dallara criticised analysts that questioned the success of the Greek debt restructuring. Well, over the past few weeks as the markets have really questioned the ability of Greece to be kept in the fold he has started ask if the Euro Zone and its institutions can afford for Greece to leave. he suggests that the cost will be more than EUR1Tn and that the level of exposure the ECB carries to Greece, even with the generous haircuts that were applied is over twice the ECB's capital. Exactly the point Spotlight raised before  in that we would be right to question the structure of the EB's balance sheet. Even President Draghi has alluded to such a matter in recent weeks.
What can we say ahead of the June 28/29 summit?
It used to be Merkal and Sarkozy telling the rest what to do. Now Hollande is leading a counter revolution against Merkel...but we very little from the French President about reforming his own economy and bureaucracy.
The seemingly constant petty, posturing, preening and displays of full national plumage have not vanished with the departures of Berlusconi or Sarkozy. Politicians and bureaucrats vie on a regular basis to grab the limelight. Forget further European integration, what we see is the continual playing to the domestic political gallery ahead of the greater European good. is it any wonder that the market...which is the only sound judge of value...has reached a stage where its patience is as thin as tissue paper?
More accounting tricks:
Weekend press in the UK reported that the EU is working on plans to estabish a fund designed to rescue ailing banks, capitalized by levies imposed on them.  
Step; 1   EU transfers money to banks   Step 2: Banks dress up their capital buffers   Step 3: Banks assign payments back to the EU
Unless the repayment is delayed by a number on months or even years, is this not shaping up to be another accounting trick ...ah yes, but Europe is the past master of smoke and mirrors. Once again we are coming back to the burning issue that no one wishes to put out.

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