Merkel and Sarkozy put on first road show of the new year

*Nicolas Sarkozy and Angela Merkel at a press conference on Monday (AP)*

I know, Dear Reader, that you’re sick and tired of reading exactly the same speeches from European officials every week, and I’m certainly tired about writing about them, but here we go again. German Chancellor Angela Merkel and French President Nicolas Sarkozy held their first joint press conference of the new year, in an attempt to stall for more time. Saying that medium term outlook for the euro is good, Merkel said that we must now strengthen the euro through “more Europe, not less Europe.”

“But we haven’t won back trust yet. Convincing the markets is the big challenge. … The currency was introduced as a visionary step, the foundations weren’t sufficiently prepared.

It’s not as if in Europe there’s no money to improve weaker members. We have to aim for excellence, for best practices, and not just somehow end up with mediocrity. Then as a continent, we’d have no chance.”

Is there anyone left who actually believes this stuff? Bloomberg

No sign of crisis in Greece bottoming out yet

Even the most pessimistic forecasts last year by the International Monetary Fund (IMF) for Greece this year were for a 3% contraction in Greece’s economy. But now it seems that Greece’s economy is headed for a nightmare contraction of 7% this year, according to the Economist Intelligence Unit. All this means that the government will need to find ways of securing an extra €2 billion this year, at least. Kathimerini

Merkel and Sarkozy threaten to withhold Greece’s bailout money

*Greece’s creditors will lose 50% or more of their investments (Spiegel)*

If you were paying attention last year, Dear Reader, you may recall that the Sarkozy and Merkel heralded a new momentous €109 billion ($157 billion) agreement on July 21 to bail out Greece, that would solve Greece’s debt problems once and for all, once a few details had been worked out. Well, that plan was never going to work anyway, any more than the previous plans did, those tiny little details have STILL not been worked out. At issue is the “haircut” that Greece’s bond holders will have to take. On July 21, it was to be a 21% “voluntary” haircut, which meant that all the investors would nicely agree to lose 21% of their investments without complaining. Then, when it became clear that 21% wasn’t enough, the voluntary haircut was raised to 50%. But now, it’s clear that the European assumptions were “unrealistic” (I would say “fraudulent”) from the start. But officials are not as honest as to admit the impossibility of their own mission. Instead, they continue to stall for time, pinning its hopes on private investors coming around. But negotiations with private investors are stalled, and unless there’s a resolution soon, Greece will be bankrupt in March. Let’s see if they kick the can again. Spiegel

Tibetan monk’s body paraded after self-immolation in China

A Tibetan monk died Sunday morning after drinking kerosene, throwing it over his body and setting himself on fire, to protest Chinese rule. The “body exploded into pieces” before police took it away. Angry Tibentas carried the remains through the streets. Police first refused to give up the body but relented after “the protesters smashed windows and doors of the local police station.” This incident followed two previous self-immolations on Friday. Tibetans are protesting Chinese control over Tibetan life and culture. Chinese officials have promised to strengthen the management of monasteries and “to push forward the patriotic and legal education among monks and nuns.” India Times and Radio Free Asia

German Six-Month Treasuries pay negative interest

*German 6-month Treasuries at -0.105% yields on Monday*

You hear financial pundits on TV all the time saying that the Fed cannot offer Treasuries at interest rates below zero, but that’s never been true. 0% may be a psychological barrier, but from the point of view of the markets, it has no particular significance. On Monday, Germany auctioned €3.9 billion of six-month bills at negative yields (interest rates) — at -1.05%. They’ve been trading at even lower rates recently, but Monday was the first time in history that a government auction yielded negative rates. From the point of view of the markets, it means that the demand for these German notes was so great that investors bid up the purchase price so that it was higher than the German government promised to pay to redeem them in six months. German notes are considered by many to be the safest investment in Europe, and so investors wishing to protect their assets are willing to pay Germany to hold their money for them. These kinds of situations are expected to increase as the global deflationary spiral continues, and cash becomes the safest investment. Bloomberg

Islamists plan next steps as they dominate Egypt’s parliament

Having won 2/3rds of the seats in Egypt’s parliament in the first free elections since the overthrow of president Hosni Mubarak, Egypt’s two major Islamist parties are planning their next steps. The more moderate Freedom and Justice Party (FJP), the political wing of the Muslim Brotherhood, won 41% of the seats in the new parliament, while the more conservative Salafi al-Nour party came in second, with nearly 27% of the seats. The remaining seats were split among a dozen or so liberal parties. However, Brotherhood officials are denying that the FJP is planning to form a governing coalition with the al-Nour party, and are considering possible collaborations with more liberal parties. According to one Brotherhood official, “I don’t think we will have clear collaboration between us and the Nour Party as a coalition. I think that they’ll be in the opposition.” On Islam

Philippines under Aquino becoming more assertive with China

Growing assertiveness by China in claiming vast regions of the South China Sea that historically were part of other countries has raised questions among China’s neighbors whether to focus on diplomacy, or adopt tougher rhetoric and become more confrontational with China. The previous government of the Philippines, led by Boomer generation president Gloria Macapagal-Arroyo, emphasized peaceful and norms-based approaches to the disputes, and the avoidance of confrontations with China. But Generation-X president Benigno Aquino III took office in June 2010, and has been leading a more assertive policy. The Aquino government has been openly critical of China’s assertiveness and is advocating a multilateral, rules-based approach to the disputes, in contrast to China’s oft-stated preference for bilateral talks. The new policy calls for determining which maritime areas are disputed and which are not, as a starting point in negotiating a joint cooperation zone. It has also expressed readiness to bring the issues before international adjudication, which China opposes. Chinese media reports, meanwhile, expressed suspicion that the Philippine proposal aims to provide the United States an opportunity to become involved in the disputes. S. Rajaratnam School of International Studies (RSIS)

Turkey launches ‘Sarkozy’ line of diapers and toilet paper

*Sarkozy brand diapers*

Turkey is taking a new step to avenge the passage of a bill by France’s National Assembly making it a crime to deny that Armenian genocide. A Turkish manufacturer is selling “Sarkozy” brand baby diapers, trash bags, and toilet paper. You can place your order at http://www.sarkozy.com.tr/. Turkey is also selling male condoms carrying the name of French MP Valerie Boyer, the author of the bill in question. Pan Armenian