Acting on the theory “what the world needs now is lies sweet liesEU’s Juncker says euro zone prepared to boost EFSF

“We will do everything that will be needed in order to defend the euro,” Juncker told newsagency Market News International, who added that that included increasing the size of the EFSF.

Juncker was also quoted as saying the euro zone would present “a proper solution in the next couple of days” to address Finland’s demand for collateral in exchange for further Greek aid.

The only realistic ways to address Finland’s concern for collateral are:

1. Talk Finland out of it
2. Get Greece to provide collateral

In regards to a bigger EFSF, even if the German parliament passes the increase (and it may not), it won’t be enough. Finland, the Netherlands, and Austria will not go for larger increases so my BS meter says Juncker is engaging in his favorite pastime, telling lies to placate the public.

The markets are not buying a word of it.

Greece Hikes Property Tax via Electricity Bills

At some point one would think that tolerance for more self-inflicted pain would run out. So far, when it comes to Greece, one would be wrong.

Please consider Greek Finance Minister Announces Fresh Property Tax as PM Uses Annual Speech as Rallying Call

Finance Minister Evangelos Venizelos heralded fresh austerity measures over the weekend, chiefly a new property tax, a day after Prime Minister George Papandreou insisted that his government would do everything necessary to plug a gaping budget deficit and secure the next installment of emergency funding on which the country’s solvency depends.

Noting that the next two months would be “hellish,” Venizelos told a press conference earlier Sunday that the government had no option but to do “everything necessary” to cover a budget shortfall, estimated at 2 billion euros, following a deeper-than-expected recession.

The new charge, the latest in a series of tax increases, will range from 50 cents to 10 euros per square meter according to the value of the property and will apply for two years, Venizelos said, noting that the tax would be added to electricity bills to thwart would-be tax evaders. There will be concessions for the disabled, the unemployed and large families.

In an apparent dig at EU leaders’ procrastination in honoring the terms of a second bailout to Greece, Papandreou said the country “would not become the scapegoat for institutional problems and populism in Europe.”

Papandreou concluded by appealing to Greeks’ sense of nationalism and responsibility, appealing to business owners to pay taxes and to young Greeks not to leave. “Greece can become a different county. But this cannot happen without you,” he said.

Papandreou Clearly Delusional

Papandreou effectively said “I am pleased to announce we are going to raise your electric bills so we can bail out French and German banks.”

Papandreou is delusional. There is no conceivable way hiking property taxes can help Greece.

European Banks Sink; Downgrades Coming

Please consider European Banks Valued at Post-Lehman Lows Show Sovereign Risks Are Growing

Investors are valuing European banks at levels not seen since the depths of the credit crunch that followed the collapse of Lehman Brothers Holdings Inc. as concern over a Greek default and debt contagion escalates.

A Bloomberg index shows 46 lenders trading at 0.56 times book value, the cheapest since the post-Lehman lows of March 2009, signaling investors estimate their net assets are worth less than the companies claim and are demanding discounts for perceived risks. Valuations reflect the impact of a potential sovereign default for some banks, according to Barclays Capital analysts led by Jeremy Sigee.

BNP Paribas (BNP), Societe Generale and Credit Agricole tumbled in Paris trading on a possible ratings cut by Moody’s Investors Service, extending their more than 40 percent slide in the last three months. France’s three largest banks by market value may have their credit ratings cut as early as this week because of their Greek holdings, two people with knowledge of the matter said.

Societe Generale said today it plans to sell 4 billion euros ($5.4 billion) in assets by 2013 to reassure investors about its finances. The lender said it holds about 900 million euros of Greek bonds and has “no significant” Irish or Portuguese debt.

The 90 banks that underwent European stress tests would face an estimated capital shortfall of 350 billion euros if Greek, Portuguese, Irish, Italian and Spanish government bonds were written down to market values, according to Nomura analysts led by Jon Peace. No “practical” amount of capital can prepare them for a large sovereign debt impairment or default, Nomura said in a note on Sept. 7.

Downgrade Coming Up

Via Google Translate, RTL reports Rating of three French banks may be degraded

French banks threatened by a bad blow.

The Perfect Storm market: Crédit Agricole, BNP Paribas and Societe Generale should undergo degradation of their notes in the coming days by the rating agency Moody’s, due to their exposure in the Greek crisis. Since 1 January, the Societe Generale saw its market value fall by 56%.

The CAC 40 in the above image is the French stock market index, a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on the Paris Bourse.

French banks are likely reacting to market forces, not a downgrade by Moody’s.

Mike “Mish” Shedlock
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