Mish's Global Economic Trend Analysis

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Greece Rejects 25th Hour Request to Change Course; Tsipras Asks Eurozone for Third Bailout; Rajoy Seeks to Save His Own Ass Posted: 30 Jun 2015 09:08 AM PDT Coordinated Meddling Eurozone leaders are pouring it on thick again today with warning after warning. Yesterday, German chancellor Angela Merkel, French president Francois Hollande, and European Commission president Jean-Claude Juncker were all I in on the Coordinated Meddling hoping to convince Greece citizens to accept the current offer. Rajoy Seeks to Save His Own Ass Today Spain's prime minister, Mariano Rajoy, joined the hit parade. Like yesterday's trio, he issued another blunt warning to Greek voters that a No vote will force the country to leave the eurozone. Rajoy also argued that it would be "good for Greece" if Mr Tsipras, who is backing a No vote, was defeated in the Greek plebiscite and forced out of office. Recall that Tsipras is good friends with Podemos leader Pablo Iglesias. Like Tsipras, Iglesias wants to halt Eurozone austerity rules. Moreover, Iglesias has threatened to take Spain out of the Eurozone. I suggest Rajoy is worried about his own ass in Spanish national elections later this year as Podemos has surged in the polls and is within striking distance of winning the election. Greece Rejects 25th Hour to Change Course In spite of the pleas, Greece Rejects Creditor Pleas to Change Course. Greece's government entered its final day in an EU bailout defiantly rejecting eleventh-hour pleas from its eurozone creditors to change course. It is now on a path that will lead to default on a €1.6bn loan repayment to the International Monetary Fund and being without a financial safety net for the first time in five years. The IMF default, confirmed by Yanis Varoufakis, the finance minister, on Tuesday, will make Greece the first developed country in history to go into "arrears" with the fund. But it is not expected to have a direct impact on the country's status in the eurozone. Credit rating agencies and EU bailout lenders have signalled they will not consider non-payment a "credit event" that triggers other defaults — a move that would bankrupt Athens immediately. "The exit of Greece from the euro area, which used to be a theoretical question, can unfortunately no longer be ruled out," Benoit Coeuré, the ECB board member responsible for Greek issues, said in an interview published on Tuesday in the French financial daily Les Echos. Mariano Rajoy, Spain's prime minister, on Tuesday joined fellow eurozone leaders in a blunt warning to Greek voters that a No vote will force the country to leave the eurozone. He also argued that it would be "good for Greece" if Mr Tsipras, who is backing a No vote, was defeated in the plebiscite, paving the way for talks with "another government" in Athens. "If Tsipras loses the referendum, this will be good for Greece. If he wins the referendum, Greece has no alternative other than to leave the euro," Mr Rajoy told the Cope radio station. Greece Asks Eurozone for Third Bailout Curiously, Greece Just Asked Eurozone for New, Third, Bailout Alexis Tsipras, the Greek prime minister, has asked eurozone authorities for a new, third bailout in a dramatic bid to try and secure a financial lifeline hours before the country's current rescue deal expires. The request, sent to the eurozone's €500bn rescue fund on Tuesday, would cover Greece's needs for the next two years, according to a statement from the prime minister's office. It also makes a specific request for debt restructuring, the statement said. Political Ploy This request by Tsipras is nothing but a political ploy. For those wavering, Tsipras provides hope that Greece will stay on the euro. He intends to convince older voters that Greece can still stay on the euro. The youth, with unemployment rates over 50% would prefer to start all over. This move gives Greek voters of all ages a reason to vote "no" on the referendum. The meddling by Germany, France, and now Spain also will take a toll on the Troika cause. Thus, a decisive "no" vote appears to be in the cards. As pertains to game-playing, Greek leaders have run circles around the eurozone nannycrats. 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.

Obama Urges Congress to Pass Law Letting Puerto Rico Declare Bankruptcy; Great Idea, Let Illinois Do the Same Posted: 30 Jun 2015 07:03 AM PDT Puerto Rico is bankrupt. The key problem is that while municipalities can declare bankruptcy, states and territories cannot.  President Obama recognizes the problem. He says No Federal Bailout for Puerto Rico. Instead he urges Congress to pass a bill allowing Puerto Rico to declare bankruptcy. The White House threw cold water Monday on the notion of bailing out Puerto Rico from its financial crisis, instead urging Congress to consider changing the law so the island can declare bankruptcy. On the heels of a dismal economic report, Puerto Rico's governor has warned that the commonwealth can't pay its $72 billion public debt, delivering a serious blow to Puerto Rico's recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources — but not a bailout. The Obama administration declined to offer Detroit a bailout, and the city declared bankruptcy under Chapter 9 of the Bankruptcy Code in 2013. As a U.S. territory, Puerto Rico can't file for bankruptcy under that chapter, which is limited to municipalities such as Detroit. But Puerto Rican Gov. Alejandro Garcia Padilla has said he's considering asking Congress to change the law so that Puerto Rico's public agencies could declare bankruptcy under Chapter 9 — an idea that seemed to gain traction at the White House. Earnest said the White House was encouraging Congress to explore possibilities to allow Puerto Rico to make use of Chapter 9, which would allow the commonwealth to restructure its debt amid a nearly decade-long economic slump. Garcia is seeking to defer debt payments while Puerto Rico negotiates with its creditors. Idea Long Overdue I welcome this action. But why limit the bill to Puerto Rico? I say open this up to states like Illinois that will be doomed to the same fate eventually. 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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