The banks: 'They're afraid of YOU'

VICTORY: Occupy Homes MN Saves US Marine from Foreclosure

Greek 'default'

Greece battered by recession, debt and now unseasonal snowstorms

Meanwhile, a coalition of Greek businessmen implores global financial and political leaders to support the country with the slogan: 'All we are saying is give Greece a chance'

A couple seek shelter during a heavy snowfall on the mountain of Penteli in northern Athens. Photograph: Thanassis Stavrakis/AP

the Guardian, 

28 February, 2012

Greece is being battered by a perfect economic storm of recession and debt – and now an unseasonal snowstorm has arrived to add to the country's problems.

As Standard & Poor downgraded Greece's credit rating to "selective default" – the first time an advanced country has been in default since Germany after the second world war – heavy snow and gales closed the main rail line between Athens and Thessaloniki, ships and ferries stayed in port and schools closed.

A coalition of Greek businessmen has invoked the memory of John Lennon and Yoko Ono's famous "bed-in", with a campaign imploring global business and political leaders to support the country as its politicians voted through another round of drastic pay cuts. "All we are saying", says the campaign, "is give Greece a chance".

The campaign is backed by several of Greece's biggest companies, including Aegean airlines, Hellenic Petroleum, Piraeus Bank and a dozen other Greek companies.

It is aiming to win back support from the eurozone to "ensure that the sacrifices made by every Greek under the toughest austerity package in modern history do not go in vain".

The Greece is Changing campaign was launched online as the Greek cabinet met to approve swingeing private sector pay cuts and prepared to vote on Tuesday night on a fresh round of public spending cuts to meet tough demands set by the European Union. The Greek government must vote through more than 80 fresh austerity and reform measures over the next few weeks to secure ongoing support to prevent the country's economy from collapsing.

The launch of the campaign comes a day after Germany approved Greece's second €130bn (£110bn) emergency bailout and the S&P default ruling. Greece is expected to remain in selective default until its debt swap offer as part of a €206bn closes on 12 March.

Nobel prize-winning economist Paul Krugman warned that Greece is "very close to running out of alternatives" to being forced to leave the eurozone.

The new business lobby group warned that "careless rhetoric" about the country could have a "catastrophic effect" on the country's future.

"As we enter our fifth year of recession we want to rebalance the agenda [and] inject some more facts into a debate sometimes overrun by fiction," the lobby group said as it launched its internet campaign. "[Greeks] have already made sacrifices and are ready to do more and just need a chance to change Greece.

The campaign group said Greece has already made good progress in reducing its vast public spending budget. It said more than 85,000 public sector jobs have been axed since 2009, wages have been cut by 30%, pensions reduced by 10% and are due to fall by a further 4% since year.

VAT has been increased on all goods and services, with taxes on fuel, cigarettes and alcohol increased by 33%.

The minimum wage has been cut by 22%, and by 32% for those under 25. Official unemployment stands at 21%, up from 8% in 2010. The real rate of unemployment is likely to be far higher, because only people that have previously been employed are able to claim benefit.

The businessmen implored Europeans to "see through the stereotypes and realise that there is another Greece which believes in modernity, in the stability that being part of Europe brings, that is fighting a battle for change that can be won".

Greek police, firefighters and harbour police staged a rally in Athens on Tuesday night and the country's two biggest unions have called for a demonstration on Wednesday.

So Greece 'Defaults' And Europe Moves On...

Zero Hedge,

28 February, 2012

Via Peter Tchir of TF Market Advisors,

So far there are no dramatic consequences of the Greek default.  The ECB did say they couldn’t accept it as collateral, but national central banks (including Greece’s somehow solvent NCB) can, so no real change.  We will likely get a Credit Event prior to March 20th once CAC’s are used to get the deal fully done.  Will the market respond much to that?  Probably not, though there is a higher risk of unforeseen consequences from that, than there was from the S&P downgrade.

It just strikes me that Europe wasted a year or more, and has created a less stable system than it had before.  A year ago, Europe was adamant about no haircuts and no default.  I could never understand why.  Let Greece default, renegotiate terms, stay in the Euro and move on.  The key then, as now, was ensuring that banks that were solvent had enough liquidity.  Rather than take that advice, Europe proceeded to buy Greek debt, which not only failed miserably, but has complicated the situation.  The ECB holdings stick out like a sore thumb.  Had Greece been allowed (or forced) to default and restructure when the crisis first hit in 2010, the ECB wouldn’t own a single bond.

Every step of the way, the avoidance spread the risk and created contagion, rather than solving it.  EFSF was an artificial construct designed to sound impressive and never be used.  In the end it has been barely used, sounds unimpressive, and  did spread the contagion.

European leaders somehow see the “bailout” as having solved Greece’s problem.  The reality is massive debt forgiveness and losses to creditors do far more.  The leaders won’t pull back, but it would be far easier, and longer lasting, if they let Greece default (including on ECB holdings), wipe out virtually all the debt (offer 20% recovery), and have the EFSF give the €30 billion to Greece as fresh money rather than to creditors.  The IMF and ECB could still play roles too.  They won’t do it, because they continue to fight the wrong issues.  The German vote yesterday was helped along by the “incalculable” damages warning from Merkel.  That warning was based on Greece “leaving the Eurozone” which it wouldn’t necessarily have to, and doesn’t seem supported by any fact.  Just like their fear of default originally, and their fear of CDS, someone will eventually see the light, but it may be too late (at least for the Greek people).   

Whatever has been done is likely going to need to be fixed, and once again, they missed the chance to do something proper because they are all stuck in their positions, mostly based on fear, rather than critical analysis.  They will point to the SPX and say it is higher now than a year ago, and much higher than 2 years ago.  Correct.  What is hard, if not impossible to determine (except by central bankers) is what path the market and the economy would have taken if they had dealt with Greece properly.  Would contagion have spread and we hit much lower lows?  Or would contagion have been stopped in its path after some restructuring and liquidity?  What if the last year (or 2) had been spent focusing on growth for the countries in the most trouble, rather than on ways to keep them paying creditors?   What about a world where we had fewer zombie banks because they had been allowed to go bankrupt and new banks and financing companies been allowed to start?  Maybe securitization and the shadow banking system would be alive and well now, and cheap money would actually be flowing from central banks into the economy rather than just into banks and sovereign debt?  Maybe the S&P would be at 1,700 and we would have more to talk about than Apple and a QE inspired hope for housing?

We continue to try and avert short term pain at all costs.  Every plan is to get through the next month or two and doesn’t deal with the real problem.  We saw it in the US back in 2007, and it has never really stopped.  The economy and stock market are okay at best (stock market better than the economy), but still reliant on government support.  Defaults, write-downs, killing zombie banks, allowing free markets and real interest rates would have set us up for a much cleaner and optimistic future.  LTRO may help the market again tomorrow, but at what cost to the long term?  It is time to end the “it would have been worse if we did nothing” argument, and start talking about “look at how much better off we are now by doing so little” argument.

We get a lot of data today.  Home price is interesting since the price shouldn’t be impacted by the weather (sales yes, price no).  But since it is December data it is likely to be ignored if bad.  Durable goods orders estimates look low given the weather.   0% ex transport seems more likely to surprise to the upside, but with all the data and current stock prices, a surprise is likely baked in.  Richmond Fed is unlikely to do much either way unless it is massively different than expectations, and consumer confidence is likely to be strong – but who really cares?  And strong is a very relative term.

Tomorrow’s LTRO is definitely interesting.  It seems like every outcome is now bullish – big take up is bullish because of the “carry” trade.  Low take up is bullish because “banks are okay”.  I expect low take-up, partly because it was never meant to be for the carry trade anyways.  It was designed to ensure banks could deal with near term maturities.  It did that job.  Short dated sovereign has come in with it, part because banks could buy some, part because SMP was buying (looking at Greece, it looks like SMP likes the front end), and momentum chasing/stop loss trading helped things along.  With Spanish and Italian 2 year bonds trading at 2.5%, there isn’t that much left in the “carry” trade.  Any weak bank looking to borrow from the LTRO to buy sovereign debt would be insane to buy bonds longer than 3 years and take the roll risk, but on the other hand, the weakest and most insolvent, got there by doing insane things in the first place.

Corporations liable for human rights violations?

Cooments from Mike Ruppert - 

- Remember Kiobel v. Royal Dutch Petroleum. This is a case that could be a core unifier for Occupy, for Ron Paul supporters, for the Tea Party... for everybody. The Supremes are hearing arguments now. They will come back with a decision sometime within the next few months and it will be a pivotal and historic moment. The decision will almost certainly come at a time when protests are in full bloom  around the country and collapse is biting harder. Of all the issues out there, this is one of the few that I would call a "head shot" for infinite growth and economic corruption.

In short, this is the most important legal case in the world right now. The Supreme Court is sensitive to popular will. And what I would love to see happen is that all of us find a big enough voice to make it clear that if the Supremes rule in favor of corporations it will bring immediate repercussions. And I would not take violence off the table. Occupy should always remain non-violent but there are many other movements and interests out there. There is so little time left to accomplish anything material and there is nothing at the Supreme Court level offering such a clear opportunity.

I'm not betting on success either. But if I were in charge of all protest movements I would be directing that everyone, everywhere be pointed to this case and shown what is at stake. I would order mass demonstrations focusing on this one case alone. And I would let the Supremes know that indeed, the whole world is watching.

The government must be made to fear the people.

Opportunities like this are extremely rare, and the window to take advantage of them is, as usual, small and open only for a short time. -- MCR

Corporate Personhood Case Forces Supreme Court To Hack New Path

WASHINGTON -- On Tuesday morning, the Supreme Court will hear oral argument on whether corporations, like real people, can be held liable in American courts for international human rights violations.

The issue has divided four appeals courts over the past year and a half, as all but one Democrat-appointed judge has voted for corporate liability while all but one Republican-appointed judge has come down for corporate immunity.

If that pattern holds in the Supreme Court, then the five justices appointed by Republican presidents will surely be hit with more accusations of pro-business bias: Having all voted in Citizens United v. Federal Election Commission to extend to corporations the First Amendment right of actual people to independently spend unlimited sums in this country's elections, they will in the current case have refused to hold corporations responsible, as real people are, for their roles in atrocities abroad.

That kind of application of corporate personhood would be enough to make a casual observer's head explode.

Legally, however, Tuesday's case, Kiobel v. Royal Dutch Petroleum, is totally unrelated to the Citizens United decision. What the Court decides, at least in theory, should have everything to do with how the justices approach international law.

In Kiobel, about a dozen Nigerians contend that Shell Oil's parent company aided and abetted their government in its torture and extrajudicial killing of environmental and human rights protesters resisting Shell's operations in Nigeria in the 1990s.

The plaintiffs brought their suit under a law, commonly called the Alien Tort Statute, passed by the first Congress in 1789 to allow foreign nationals to bring civil suits in federal courts "for a tort only, committed in violation of the law of nations or a treaty of the United States." The Alien Tort Statute lay virtually dormant from its founding-era passage until the 1970s, when human rights groups representing victims of oppressive regimes began taking advantage of the law's broad language to haul the alleged foreign tormentors before U.S. judges.

The Supreme Court has weighed in only once on the meaning of the law, stepping into the fray in 2004 to declare that only international law offenses that are as "specific, universal and obligatory" as those that existed when the statute was written could give rise to a lawsuit under the statute. Torture and genocide triggered the Alien Tort Statute, the Court suggested; arbitrary arrest and detention did not.

The justices left unsettled what types of defendants -- individual, corporate, state -- can be sued. The text of the law is silent on that issue.

In deciding Kiobel in 2010, the majority in the U.S. Court of Appeals for the 2nd Circuit divined its answer by asking whether any international courts have held corporations liable for human rights violations. Finding no such examples, the majority threw out the case.

Three other appeals courts have since disagreed with the 2nd Circuit in methodology and result when hearing cases under the Alien Tort Statute against Firestone, Exxon and Rio Tinto. These courts found that the question of corporate liability is up to individual countries to determine and that the U.S. domestic law has long held corporations to account for the wrongs they commit.

The United States, for its part, submitted a brief to the Supreme Court supporting the Nigerian plaintiffs. "The text and history of the ATS provide no basis for distinguishing between natural and juridical persons," the brief says, referring to the distinction between human beings and "persons" created under law. 

"Corporations have been subject to suit for centuries, and the concept of corporate liability is a well-settled part of our 'legal culture.'"

The real trouble for the justices hearing Kiobel is that nothing is "well-settled" under the Alien Tort Statute. The methods used by the lower courts to come to their opposite conclusions were not much more than newly created paths custom-beaten to lead to their preferred result. Now there is a veritable parade of ideologically driven parties, from multinational corporations and human rights organizations to conservative and liberal legal academics, who have submitted friend-of-the-court briefs hoping to lure the justices toward their favored destinations.

In an ironic twist, the conservative justices, who loudly resist being influenced by foreign legal trends, can look to European interpretations of U.S. law as the best cover for now discovering corporate immunity from international human rights allegations. In briefs filed in support of Royal Dutch Petroleum, the United Kingdom and Netherlands governments wrote that they have long opposed "overly broad assertions of extraterritorial civil jurisdiction" based on foreigners' claims against foreign defendants for alleged activities in foreign countries. The German government took a similar stance. These positions arose out of all three nations' express preference for multilateral agreements to resolve such problems, rather than unilateral action by any one country's courts.

Bluntly relying on these kinds of policy preferences may be a better path for the Supreme Court than pretending to fashion a decision out of nonexistent precedents and ideologically rigged legal arguments. Doing so will not eliminate the accusations of pro-business bias, but it will deter the accusations of disingenuousness that still plague the Citizens United decision.

Tuesday's oral argument should offer some hints at which path the justices will likely choose.

Danger in the South China Sea

This is a situation I saw clearly and predicted accurately in Crossing the Rubicon (pp 529-550) eight years ago. This one of those Grand Slam predictions of my career. Peak Oil is driving the world to fight for smaller and smaller fields of gas an oil. 

There is no other place to explore and the South China Sea is becoming ever more-aggressively contested by China, Japan, The Philippines, Vietnam, Taiwan and even India which is looking to obtain leases in the region. On top of that, the South China Sea is also a choke point for every tanker taking oil to Japan, China, Korea, the Philippines and all east Asian economies.

At this point I am much more concerned about a global nuclear conflict here than I am about an attack on Iran which I believe to be off the table now. -- MCR

Insight - Conflict looms in South China Sea oil rush

the Star,

28 Febrary, 2012

PUERTO PRINCESA, Philippines (Reuters) - When Lieutenant-General Juancho Sabban received an urgent phone call from an oil company saying two Chinese vessels were threatening to ram their survey ship, the Philippine commander's message was clear: don't move, we will come to the rescue.

Within hours, a Philippine surveillance plane, patrol ships and light attack aircraft arrived in the disputed area of Reed Bank in the South China Sea. By then the Chinese boats had left after chasing away the survey ship, Veritas Voyager, hired by U.K.-based Forum Energy Plc.

But the tension had become so great Forum Energy chief Ray Apostol wanted to halt two months of work in the area.

"They were so close to finishing their work. I told them to stay and finish the job," Sabban, who heads the Western Command of the Philippine Armed Forces, told Reuters at his headquarters in Puerto Princesa on Palawan island.

Over the next few days, President Benigno Aquino would call an emergency cabinet meeting, file a formal protest with China, and send his defence secretary and armed forces chief to the Western Command in a show of strength.

The March 2011 incident is considered a turning point for the Aquino administration. The president hardened his stance on sovereignty rights, sought closer ties with Washington and has quickened efforts to modernise its military.

A year later, Forum Energy is planning to return. Top company executives told Reuters the company intends to sail to Reed Bank within months to drill the area's first well for oil and natural gas in decades, an event that could spark a military crisis for Aquino if China responds more aggressively.

The U.S. military has also signalled its return to the area, with war games scheduled in March with the Philippine navy near Reed Bank that China is bound to view as provocative.

"This will be a litmus test of where China stands on the South China Sea issue," said Ian Storey, a fellow at the Singapore Institute of Southeast Asian Studies. "They could adopt the same tactics as they did last year and harass the drilling vessels, or they might even take a stronger line against them and send in warships."

A decades-old territorial squabble over the South China Sea is entering a new and more contentious chapter, as claimant nations search deeper into disputed waters for energy supplies while building up their navies and military alliances with other nations, particularly with the United States.

Reed Bank, claimed by both China and the Philippines, is just one of several possible flashpoints in the South China Sea that could force Washington to intervene in defence of its Southeast Asian allies.

OBAMA PIVOT

U.S. President Barack Obama has sought to reassure regional allies that Washington would serve as a counterbalance to a newly assertive China, part of his campaign to "pivot" U.S. foreign policy more intensely on Asia after a decade of war in Iraq and Afghanistan.

Obama brought up the South China Sea at an Asia-Pacific summit in Bali last November, and had a surprise one-one-one with Chinese Premier Wen Jiabao on the subject, although Beijing had insisted the issue should not be on the agenda at all.

"As Southeast Asian nations run to the U.S. for assistance, Beijing increasingly fears that America aims to encircle China militarily and diplomatically," said Stephanie Kleine-Ahlbrandt, Northeast Asia Director for the International Crisis Group. "Underlying all of these concerns is the potential that discoveries of oil and natural gas beneath the disputed sections of the South China Sea could fuel conflict."

The area is thought to hold vast untapped reserves of oil and natural gas that could potentially place China, the Philippines, Vietnam and other claimant nations alongside the likes of Saudi Arabia, Russia and Qatar.

Manila is beefing up its tiny and outdated naval fleet and military bases, adding at least two Hamilton-class cutters this year and earmarking millions of dollars to expand its Ulugan Bay naval base in Palawan.

It's no match for China's fleet, the largest in Asia, which boasts 62 submarines, 13 destroyers and 65 frigates, according to the International Institute for Strategic Studies.

China last month launched the fourth of its new 071 amphibious landing ships that are designed to quickly insert troops to trouble spots, disputed islands, for example.

The U.S. Navy has announced it will deploy its own new amphibious assault vessels, the Littoral Combat Ships, to the "maritime crossroads" of the Asia-Pacific theater, stationing them in Singapore and perhaps the Philippines.

Washington's renewed presence in the Philippines, a former U.S. colony that voted to remove American naval and air bases 20 years ago, follows the U.S. announcement last year of plans to set up a Marine base in northern Australia and possibly station warships in Singapore.

Manila is talking about giving Washington more access to its ports and airfields to re-fuel and service U.S. warships and planes. The two countries will conduct war games off Palawan island in late March -- focusing on how to deal with a takeover of an oil rig in the South China Sea.

'SOUNDS OF CANNONS'

China has warned oil companies not to explore in the disputed South China Sea, over which Beijing says it has "indisputable sovereignty." Chinese ships have repeatedly harassed vessels that have tried.

After ExxonMobil discovered hydrocarbons off the coast of Danang in central Vietnam, an area also claimed by China, one of China's most popular newspapers warned in October that nations involved in territorial disputes should "mentally prepare for the sounds of cannons" if they remain at loggerheads with Beijing.

Despite the threats, the Philippines and Vietnam have continued to explore for oil and natural gas further offshore in the South China waters, driven by persistently high oil prices and more advanced deep-sea technology.

The Philippines has reported as many as 12 incidents of Chinese vessels intruding into its sovereign waters in the past year, an unusually high number, Sabban said.

In one of the most serious incidents last October, a Philippine navy ship seized Chinese fishing boats after colliding with one of them, prompting protests from China for their return.

At least 12 Chinese fishermen have been arrested over the past year. Half of them remain in detention in Palawan.

"China has no right to tell us that we should first ask for permission from them to explore the area," Sabban said. "We have explored that area back in the 1970s, so why can't we explore it now? We knew that there is a substantial deposit of natural gas even before all of these things started."

Manila says Reed Bank, about 80 nautical miles west of Palawan island at the southwestern end of the Philippine archipelago, is within the country's 200-nautical mile exclusive economic zone. Beijing, however, believes it is part of the Spratlys, a group of 250 uninhabitable islets spread over 165,000 square miles, claimed entirely by China, Taiwan and Vietnam and in part by Malaysia, Brunei and the Philippines.

While China prefers to solve the disputes one-on-one with its smaller Southeast Asian neighbour, Washington has sought to internationalize the issue, given that half the world's merchant fleet tonnage sails across the sea and around these islets each year, carrying $5 trillion (3.15 trillion pounds) worth of trade.

"If we don't develop our positions in our exclusive economic zone, then we will only be giving it away and will be at the losing end," Eugenio Bito-Onon, the mayor of Kalayaan islands in the Spratlys, told Reuters at a coffee shop in Puerto Princesa.

China's oil exploration has been limited in the South China Sea with less than 15 deep sea wells drilled so far. Chinese offshore oil and gas specialist CNOOC Ltd, along with international partners Canada's Husky Energy and U.S. company Chevron Corp., plan to step up exploration in the area but focus mainly in the north, staying away from the politically sensitive waters to the south.

Estimates for proven and undiscovered oil reserves in the South China Sea range from 28 billion to as high as 213 billion barrels of oil, the U.S. Energy Information Administration said in a March 2008 report. That would be equivalent to more than 60 years of current Chinese demand, under the most optimistic outlook, and surpass every country's proven oil reserves except Saudi Arabia and Venezuela, according to the BP Statistical Review.

OIL MANDATE

General Sabban said the necessary patrol ships and surveillance planes will be provided to protect Forum Energy's exploration vessels in Reed Bank.

"We have a mandate to protect all oil companies exploring in our territory," he said. "We don't exactly escort them, but we are in the area to deter any outside force from harassing them."

Forum Energy, whose majority shareholder is the Philippines' top miner Philex Mining Corp., plans to spend around $80 million through 2013 to explore the Sampaguita gas field in Reed Bank, covered by Service Contract 72.

The field is estimated to hold at least 3.4 trillion cubic feet of natural gas, with the potential for five times that amount. That is at least 25 percent bigger than the nearby Malampaya gas field, operated by Royal Dutch Shell, which fuels half of the power needs for the country's main island of Luzon.

The Philippines is eager to further increase its natural gas production to meet growing domestic demand for gas-fired power, which is estimated to surge to 5,000 megawatts per day in 2016, from the current 2,700 megawatts.

"There is no question that there is gas there. We already know one or two locations we would like to drill on," said Apostol, Forum Energy's president, in an interview. "If the first drill is a bonanza, there might be a need to drill back to back."

The company said it is closely coordinating its Reed Bank plans with the military and the energy department, hoping to send drill ships by the fourth quarter.

"We are aware of the implementation risks that have to be taken into account when we contract the drilling services," said Forum Energy's executive director Carlo Pablo. "We have to have plans in case of delays in operations, on mitigating cost overruns, and contractual penalties that may be imposed."

A flotilla of ships could soon follow Forum Energy in disputed waters, with Manila later this year awarding two offshore oil and gas exploration contracts in territory also claimed by China.

That could well keep the phones busy for Sabban and his sailors at Western Command for some time to come.

The Economist: 'Nothing to fear but the lack of fear itself'

You Don't Get It, Europe -- You Should Be TERRIFIED About Greece Leaving The Eurozone

Business Insider

http://www.businessinsider.com/you-dont-get-it-europe-you-should-be-terrified-about-greece-leaving-the-eurozone-2012-2

the Economist,

WHAT to read into the following?

At an event for CFOs and finance directors in London this week, I asked the audience whether Greece would end up leaving the euro zone. Every single hand went up.

Asked whether more countries than Greece would leave, roughly two-thirds of the audience agreed they would.

Coming a week after an agreement on a second international bail-out for Greece, such certainty that the country would have to exit the euro was striking. It may be that an audience in London, albeit a cosmopolitan one, is prone to misjudge the willingness of the euro-zone creditors to keep lending money to Greece even if the country's programme goes off-track again. But I still think their judgment is right, for three reasons.

First, the demands being made of Greece will be almost impossible to meet: they will eventually need more money or some kind of forbearance. Wolfgang Schuble, Germany's finance minister, and Jean-Claude Juncker, Luxembourgs prime minister, have both suggested in recent days that a third bail-out may well be needed.

Second, there is a finite amount of times that creditor nations can justify bail-outs to their taxpayers, and the poisonous manner in which the latest package was agreed suggests this point may already have been reached. There is a good chance that approving extra money is becoming politically impossible. The Greeks themselves may well give up on the whole process, too.

To be clear, a Greek default is not the worry. It is already happening, after all: a 70%-plus fall in the net present value of private-sector bonds counts as a pretty severe pasting for investors.

The worry is the unpredictable impact of a euro-zone exit, not just for Greece but for the rest of the euro zone. The Economist has argued for a Greek default for a year, but always on the presumption that default need not mean exit. But it is ever harder to envisage a situation in which official creditors take a loss on their Greek bond holdings, which is needed to put Greek debt on a sustainable footing, but also agree to keep funding the country until it starts running a primary surplus. Default and exit are becoming inseparable.

Which brings us to the third reason why exit is likely. The prospect of euro-zone departures (even multiple ones) doesnt scare people as much as it should. The overall mood of the delegates at the conference was relatively sanguine about the effects of an exit. Contingency plans were in place at their firms to deal with it; this wouldn't be another 2008.

Yet 2008 is what the current situation ominously resembles. Sticking plasters have been applied (for Greek bail-outs, read the rescues of Bear Stearns, Fannie Mae and Freddie Mac) but more rescues are needed. Politicians are reaching the point where they believe that injecting more public money into failing entities is untenable. And there is an assumption that people have had enough time to prepare for the consequences of a shock that it would be absorbable. That strongly echoes the mood when policymakers let Lehman fail.

Sometimes its good to be afraid.

Greek selective default = update

The latest update from the Guardian on Greek downgrade

Eurozone crisis live: reaction to S&P's Greek downgrade

S&P says Greece is in "selective default" hours after Germany approves Greek bailout 2.0

• ISDA to rule on whether Greek debt CDS should pay out

• ECB (temporarily) suspends Greek collateral

• IMF approves latest $4.33bn tranche to Ireland

• Italy sells €6.25bn bonds at lower yields

• Portgugal passes third bailout review

12.22pm: Angela Merkel the Germany chancellor looks like she's becoming more and more constrained on future eurozone bailouts, after the country's top court raised a hurdle to swift action in financial rescues.

The country's constitutional court has ruled that parliament may not delegate most decisions on disbursing bailout funds to a special committee meeting in secret, as Merkel had planned after a previous ruling bolstered lawmakers' oversight powers.

In a case brought by two opposition lawmakers, the court ruled that a nine-member sub-committee created to approve urgent action by the bailout fund was "in large part" unconstitutional because it infringed on the rights of other deputies.

The judges added the panel may approve price-sensitive debt purchases on the secondary market by the EFSF bailout fund, since confidentiality was essential in such operations. But they denied it the power to authorise loans or preventive credit lines to troubled states or for the recapitalisation of banks.

While not a show-stopper, the decision is likely to mean that parliamentary deliberations on future rescue operations could be slower and more cumbersome, since the full 41-member budget committee or the entire 620-member lower house will have to decide.11.46am: Nobody likes putting themselves through amedical - so no doubt Portugal finance minister Vitor Gaspar is feeling relieved today.

Portugal has passed the third review of its €78 bn bailout programme by the European Union and IMF, as it reiterated this year's fiscal goals will be met despite a worsening economic outlook.

Gaspar said:

The result was positive despite unfavourable conditions. The mission confirmed the fulfillment of the criteria demanded by the terms.

He added that the inspectors will recommend the disbursement of a new tranche of €14.6bn.

11.39am: Here's a date to strike from you diary. The leaders of the 17 eurozone countries have delayed a decision on whether to give their bailout funds more firepower.

The group was expected to meet to decide whether the currency's bailout funds would be allowed to give more than €500bn in loans on Friday afternoon - but maybe they all need to slip off for the weekend as they'll now look at this later in March.

The decision was highly anticipated as concerns mount that the safety net - which is already supporting Greece, Ireland and Portugal - is too weak to catch large other strugglers like Italy or Spain.

The European Commission, the International Monetary Fund and several euro countries want the new, permanent bailout fund, the European Stability Mechanism, to run in parallel with its predecessor, the European Financial Stability Facility.

11.09am: Italy has sold €6.25bn of five and ten year bonds - getting solid support with investors anticipating a fresh rally ahead of a fresh injection of liquidity by the ECB later this week.

The 10 year bond came in at an average yield of 5.5%, down from 6.08% last month, and raised €3.75bn. The remaining €2.5bn of five year notes will yield 4.19%, the lowest since May 2011.

Michael Leister of DZ Bank, says:

Clearly here we see the effect of domestic support and also of the ECB liquidity environment.

However, Marc Oswald of Monument Securities, counters:

The cover, as ever, was not exactly overwhelming, but they've sold the total volume that they wanted. The fact that the cover in the five-year wasn't particularly more than in January seems to nix the argument that the auction's been well-bid on the back of tomorrow's LTRO.

10.42am: It's not just Germany where sentiment is rising. Confidence in the eurozone economy has risen for a second consecutive month, which optimists hope signals only a mild recession during 2012.

European Commission economic sentiment indicator has ticked up one point to 94.4 - better than the 93.9 forecast.

Here's Howard Archer, chief european economist at IHS Global Insight:

A second successive modest increase in eurozone business and consumer confidence in February supports hopes that the eurozone economy is past the worst after GDP contracted by 0.3% in the fourth quarter of 2011. Even so, sentiment is still at a pretty low level and the eurozone is far from out of the economic woods. Indeed, we suspect that further eurozone GDP contraction is more likely than not in the first quarter of 2012.

Muted domestic economic activity, intensified fiscal tightening in many countries and still serious uncertainties and concerns over the Eurozone sovereign debt crisis continue to limit the upside for sentiment, while consumers are additionally worried over jobs. Consumers' purchasing intentions remain limited and weakened in February while businesses' employment expectations remain well below the levels seen in the early months of 2011 and were also generally softer in February.

He adds:

[the rise in confidence] reinforces belief that the ECB will remain firmly in "wait and see" mode at next week's March policy meeting and will keep interest rates unchanged at 1.00% in the near-term at least.

9.58am: A quick explanation on the ECB's (temporary) decision to suspend Greek collateral.

This is from the prolific Louise Cooper at BGC Partners:

My take is that it is just a technical response due to the fact that certain ratings agencies have lowered Greek ratings to SD [selective default] as CACs [collective-action clauses] have been introduced to some types of Greek government bonds.

The collateral will still be acceptable by the Greek central bank under 'emergency liquidity measures' and are expected to be acceptable to the ECB again once the 'collateral enhancement scheme' (EFSF buy-back scheme) is launched later this month.

Greece is seeking to swap more than €200bn in outstanding bonds for new debt in an effort to reduce its borrowing costs and reduce long-term debt. If Greece didn't get enough investors to agree to that deal, it would face default.

The CACs offer ways around that risk, by requiring all bond holders to participate in a bond exchange if a specified majority approves. However, that means the restructuring will not be voluntary and S&P has said just adding that clause retroactively to bonds, even if it isn't used, is enough to consider the terms of the bonds significantly altered and thus to place them in selective default.

9.36am: Here's one for eurozone crisis aficionados who love the detail behind how this whole thing plays out.

There's an intriguing story running on WSJ.com(£) concerning whether pay-outs on credit default swaps on Greek debt are to be honoured.

It begins:

An unidentified market participant has asked a committee of the International Swaps and Derivatives Association to rule on whether the passage of legislation approving collective-action clauses for Greek debt should trigger payouts on credit-default swaps tied to Greek sovereign bonds.

At stake are payouts from sellers of a net $3.2 billion of CDS on Greece currently outstanding, and the stigma associated with lending credence to an instrument policymakers have long reviled.

ISDA said in a statement the Determinations Committee will decide by 5 p.m. GMT on Wednesday "whether to accept the question for deliberation or reject it." Only after the committee has opted to review the case would the committee then consider whether sellers of Greek CDS should pay buyers of the protection.

8.44am: This from the European Central Bank this morning. Presumably this is all to do with the private sector involvement part of the bailout 2.0 agreement...

28 February 2012 - Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

The Governing Council of the European Central Bank (ECB) has decided to temporarily suspend the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic for use as collateral in Eurosystem monetary policy operations. This decision takes into account the rating of the Hellenic Republic as a result of the launch of the private sector involvement offer.

At the same time, the Governing Council decided that the liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central banks, in line with relevant Eurosystem arrangements (emergency liquidity assistance).

Marketable debt instruments issued or fully guaranteed by the Hellenic Republic will become in principle eligible upon activation of the collateral enhancement scheme agreed by the Heads of State or Government of the euro area on 21 July 2011, and confirmed on 26 October 2011, together with a number of other measures aimed at assisting Greece in its adjustment programme. This is expected to take place by mid-March 2012.

8.37am: It's pay day for Ireland, as the International Monetary Fund has approved a $4.33bn loan to the Celtic-tiger-turned-tigger - the latest instalment in a three-year $30.23bn programme to support the country through a period of tough financial reforms.

Ireland seems to have behaved itself well enough to receive its pocket money, according to IMF first deputy managing director David Lipton. He says:

The Irish authorities have continued strong implementation of their programme despite deteriorating external conditions.

At the same time, the challenges Ireland faces have intensified since the outset of the programme, with growth expected to ease to about 0.5% in 2012 owing to a slowing in trading partner activity.

The Irish authorities have responded by raising the fiscal consolidation effort adopted in Budget 2012, and the budget remains on track to meet an unchanged general government deficit target of 8.6% of GDP. If growth should weaken further, the automatic stabilisers should be allowed to operate to help avoid jeopardizing the fragile recovery

The IMF programme was approved in December 2010 as part of a larger $114bn financing package supported by the European Financial Stabilisation Mechanism, the European Financial Stability Facility, loans from the UK, Sweden and Denmark and Ireland's own contributions.

8.17am: Upbeat news from Germany - which is always assured to raise the spirits of everybody else in Europe.

German consumer confidence has increased again, its sixth rise on the bounce. The country's GfK index has increased to 6.0, its highest level since March 2011, as households said they felt significantly more positive about the prospect for their incomes.

ING's Carsten Brzeski reckons:

Looking at the available components shows that income expectations have increased significantly, while the German willingness to buy dropped somewhat. Today's increase bodes well for a further stabilisation of private consumption throughout 2012.

Although it is often said that the way to the German heart is through his car, the latest increase of fuel prices, approaching last year's record highs, has not undermined consumer confidence. Greek crisis, high fuel prices; it looks as if nothing can shatter German confidence. At least for the time being, the Eurozone biggest economy looks like a country full of optimists.

7.47am: Here's Michael Hewson, senior market analyst at CMC Markets UK, reacting to yesterday's events.

On S&P grading Greece "SD" (see below):

The market's reaction was one of complete indifference, such is the reality of life in this latest, but not unexpected twist in what has become the almost everyday routine of the European debt crisis.

And on the vote passing the Greek bailout in the German parliament:

Even though this bailout made it through the German parliament it is becoming very apparent that the German public is losing faith in the current bailout policy, and politicians worried about re-election could well start to reflect this mood. As such the scope for further bailout cash could well be much more difficult to attain as public opinion swings against further taxpayer cash for other European countries.

7.42am: Morning all.

It seems highly unlikely that you weren't all tuned in until past 9pm yesterday, but those who had something better to do may have missed Standard & Poor's issuing perhaps the only credit rating you'd never heard of.

Greece is now classed "selective default", or SD, which is one for the Panini sticker album. The move followed the Greek government's decision to add "collective action clauses" to its bonds, which give Athens the authority to force bondholders to take part in its debt restructuring, if they declined to take a voluntary haircut on their loans.

Standard and Poor's also put the rating of the EFSF bailout fund on a negative outlook, in line with its ratings on France and Austria.

The ratings tinkering came after a day in which the German parliament nodded through Greece bailout 2.0 - voting the plan through by 496 votes to 90, with five abstentions.

After the German vote, it is time of the Finns to debate the package today and then vote on it tomorrow.

And also today:

• The latest German inflation numbers with CPI for February expected to slip back slightly from 2.3% to 2.2%, while German Gfk consumer confidence for March is expected to pick up slightly from 5.9 to 6.

• The Irish Attorney General could introduce another curve ball into the whole save the eurozone process, with a decision expected today on whether an Irish referendum is required on the new EU fiscal compact.

• Portugal is also due to publish its latest financial health check from the troika who have been assessing the country's progress under its €78bn bailout plan.

• Meanwhile, Italy is also set to sell €6.25bn of five and 10 year new bonds with yields expected to fall again - this time below 6% - depressed by the ECB's LTRO programme.

It's Official: S&P Cuts Greece To (Selective) Default From CC

Zero Hedge, 27 February, 2012

Translation: Greece better have that PSI in the bag or else the "Selective" goes away and "Greece would face an imminent outright payment default." Our question for former Goldmanite and current ECB head Mario Dragi: does the ECB allow defaulted bonds to be pledged as collateral within the Euro System?

From S&P

Greece Ratings Lowered To 'SD’ (Selective Default)

Rating Action

On Feb. 27, 2012, Standard & Poor's Ratings Services lowered its 'CC'  long-term and 'C' short-term sovereign credit ratings on the Hellenic Republic  (Greece) to 'SD' (selective default).

Our recovery rating of '4' on Greece's foreign-currency issue ratings is  unchanged. Our country transfer and convertibility (T&C) assessment for  Greece, as for all other eurozone members, remains 'AAA'.

Rationale

We lowered our sovereign credit ratings on Greece to 'SD' following the Greek government's retroactive insertion of collective action clauses (CACs) in the documentation of certain series of its sovereign debt on Feb. 23, 2012. The effect of a CAC is to bind all bondholders of a particular series to amended bond payment terms in the event that a predefined quorum of creditors has agreed to do so. In our opinion, Greece's retroactive insertion of CACs materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring. Under our criteria, either condition is grounds for us to lower our sovereign credit rating on Greece to 'SD' and our ratings on the affected debt issues to 'D'.

As we have previously stated, we may view an issuer's unilateral change of the original terms and conditions of an obligation as a de facto restructuring and thus a default by Standard & Poor's published definition (see "Retroactive Application Of Collective Action Clauses Would Constitute A Selective Default By Greece," Feb. 10, 2012, and "Rating Implications Of Exchange Offers And Similar Restructurings, Update," May 12, 2009). Under our criteria, the definition of restructuring includes exchange offers featuring the issuance of new debt with less-favorable terms than those of the original issue without what we view to be adequate offsetting compensation. Such less-favorable terms could include a reduced principal amount, extended maturities, a lower coupon,  different payment currency, different legal characteristics that affect debt service, or effective subordination.

We do not generally view CACs (to the extent that they are included in an original issuance) as changing a government's incentive to pay its obligations in full and on time. However, we believe that the retroactive insertion of CACs will diminish bondholders' bargaining power in an upcoming debt exchange. Indeed, Greece launched such an exchange offer on Feb. 24, 2012.

If the exchange is consummated (which we understand is scheduled to occur on or about March 12, 2012), we will likely consider the selective default to be cured and raise the sovereign credit rating on Greece to the 'CCC' category, reflecting our forward-looking assessment of Greece's creditworthiness. In this context, any potential upgrade to the 'CCC' category rating would inter alia reflect our view of Greece's uncertain economic growth prospects and still large government debt, even after the debt restructuring is concluded.

If a sufficient number of bondholders do not accept the exchange offer, we believe that Greece would face an imminent outright payment default. This is because of its lack of access to market funding and the likely unavailability of additional official financing. The revised financial assistance program provided by most of the eurozone governments and the Stand-By Credit Arrangement with the International Monetary Fund are predicated on a successful exchange offer.

Our T&C assessment for Greece, as for all other eurozone members, is 'AAA'. A T&C assessment reflects our view of the likelihood of a sovereign restricting nonsovereign access to foreign exchange needed to satisfy the nonsovereign's debt-service obligations. Our T&C assessment for Greece expresses our view of the low likelihood of the European Central Bank restricting nonsovereign access to foreign currency needed for debt servicing.

If Greece were to withdraw from eurozone membership (which is not our base-case assumption) and introduce a new local currency, we would reevaluate our T&C assessment on Greece to reflect our view of the likelihood of the Greek sovereign and its central bank restricting nonsovereign access to foreign exchange needed for debt service. Contrary to the current case, in this scenario, the euro would be a foreign currency, and the Bank of Greece would no longer be part of the European System of Central Banks. As a result, under our criteria, the T&C assessment can be at most three notches above the foreign-currency sovereign credit rating.

Destruction of Occupation London

Occupy London camp destroyed by police in riot gear

RT, 28 February, 2012

The Occupy London camp outside St Paul's Cathedral was destroyed early Tuesday. Hundreds of officers converged on the camp just before midnight local time and began to dismantle what had been home to around 70 activists.

Bailiffs in high-visibility jackets dragged tents and their contents to garbage trucks and dumpsters where they were crushed. Police in riot gear formed cordons to keep protesters and their supporters out of the camp. Activists say the police were met with peaceful resistance.  However, media reports say around 20 protesters have been detained.

Several dozen protesters have been camped on the steps of St Paul's Cathedral since October last year. It was one of the longest-surviving encampments inspired by the New York “Occupy Wall Street” movement against corporate greed.

Last week a court rejected an appeal by protesters against the eviction order. The court ruled that the right to protest did not justify a semi-permanent camp on a public pathway. Local authorities also claim the camp harmed nearby businesses, caused waste and hygiene problems, and attracted crime and disorder.