Thread: Brazil Refuses To Buy EU Bonds, Dashing Hopes For A BRIC-bas

Brazil Refuses To Buy European Bonds, Dashing Hopes For A BRIC-based European Rescue

Submitted by Tyler Durden on 10/25/2011 21:47 -0400
Comments: 146 / Reads: 10,776

About a year ago, we speculated that as part of the ongoing currency warfare between Brazil and the "developed" world, its finance minister Guido Mantega would keep his trade surplus trump card until the moment of biggest impact. That moment has come, after the financial head (with the Playboy-posing daughter) just told Europe to take a hike. "I believe that European countries do not need funds from Brazil to buy bonds. Brazil is not considering it," Mantega told reporters in Brasilia. "They have to find solutions to the European problems within Europe." And with Brazil out, it is certain that China will not step up over fears of appearing weak and needing to provide vendor financing to its biggest export partner. Unfortunately for Europe this means that at least one component of the revised SPIV: that which foresees public investment from third parties into the EFSF (a new twist proposed only last week), can now be safely forgotten, bringing us back to page one and the entire 5x levered CDO structure which as has been explained numerous times, is Dead on Arrival. http://www.zerohedge.com/news/why-doing ... ka-pea-sho There is, however, one loophole. "Mantega said Brazil would be willing to provide financial help via the International Monetary Fund." Which is rather laughable considering that by IMF, one typically refers to, at least in polite society, Uncle Sam. Then again, with a French woman (and one who until recently was solely reponsible for the grave French financial condition) in charge, it is easy to lose sight and to be, there is that phrase again, baffled by irrelevant bullshit even as following the bailout money always lead to the same old source.

Reuters reports: http://uk.reuters.com/article/2011/10/2 ... 3G20111026

Brazil on Tuesday rejected the idea of buying European bonds to help ease the euro zone's debt crisis, casting doubt on a plan for major emerging market economies to offer fresh funds for the continent's rescue.

European leaders had floated the idea that developing nations including Brazil and China could provide funding to buy Euro zone bonds, which would help lower yields and ease pressure on countries such as Spain and Italy.

But Brazilian Finance Minister Guido Mantega echoed calls for Europe to solve its own burgeoning fiscal problems, saying Brazil had no intention of making such purchases.

Brazilian officials earlier this year floated a plan to buy European debt along with members of the BRICS group of nations, which includes Russia, China, India and South Africa, but backed away after tepid response from the group.

It's not just Brazil:

India and Russia are not interested in offering more funds to help Europe while there was not evidence China planned to chip in, a high ranking official from an emerging market country told Reuters. The official said major emerging powers believe Europe is not doing enough to find a solution to the crisis amid internal bickering.

That said, as we reported yesterday, http://www.zerohedge.com/news/hope-efsf ... -uncle-sam the IMF is already preparing to activate desperate measures to bail out the world, once Europe, inevitably, fails in pulling itself out of the quicksand by its bootstraps. Needless to say that with the countries who can actually afford to participate in the rescue backing out, the onus of bailing out the world, once again falls squarely on the shoulders of the American middle class. And with the political climate already "challenged" as is, it will be quite interesting to observe as the GOP incorporates the topic of the hundreds of billions of taxpayer capital that will be exposed to first loss in order to make sure that Europeans do not experience the kind of dire austerity that will see Italians retiring at 67 instead of 65, in the hourly presidential debates.

http://www.zerohedge.com/news/brazil-re ... ean-rescue

The Beginning Of The European Endgame

Submitted by Tyler Durden on 10/25/2011 20:51 -0400
Comments: 107 / Reads: 15,868

From Peter Tchir of TF Market Advisors

ECB Bond-Buying Should End With New EFSF, German Motion Says

I think this is one of the most important bits of news on the day. This and the fact that the Dutch finally said something - and it wasn't positive.

I have been arguing that the solutions create contagion rather than prevent it. I've also argued that the ECB and EFSF and to some extent the IMF are all the same pools of money.

Now that Europe has actually tried to do some calculations, which it is apparent that up until last week, they hadn't done, they are coming to the same conclusion.

On Friday the "haircuts" on Greece get serious. No more bogus high coupon principal protected notes - but real notional reductions of 50 per cent or more.

I believe the ECB has a portfolio of 55 billion of Greek debt. If average price was 80 then that is a 16.5 billion actual loss.

ECB, unlike our beloved FED, doesn't want to just print money so they make a capital call on their members. Yes, the same members that back the EFSF.

How many of those members even remembered the ECB can call for additional capital (it's why they are so happy to employ the double down don't frown trading strategy).

The terms of ECB capital calls are worse than EFSF because they are joint and several. If countries don't meet their obligations they don't go away, they get passed to another country.

So as ECB loads up on PIIGS debt and losses or haircuts would be paid for by the non problem countries - in addition to their EFSF obligations.

Germany maybe has learned not to overextend and is scared to pile this (previously ignored) liability on top of it's EFSF guarantees. At least EFSF is something they have control over.

France I think was planning on loading up the ECB with so much debt they would just capitulate and print money.

Other people have more knowledge of the ECB but the ECB has things in common with the FED but also has similarities to the EFSF. I think this is an important turning point for the politicians in Germany and other prudent countries and they are trying to limit how much they can lose in this last ditch attempt to avoid making countries and banks and investors pay for their mistakes.

From Bloomberg: http://www.bloomberg.com/news/2011-10-2 ... -says.html

ECB’s Need for Bond-Buying Should End With New EFSF, Bundestag Motion Says

German lawmakers are set to vote on a non-binding call for the European Central Bank to end its secondary-market bond-buying program once the enhanced European rescue fund is enacted,

The joint motion, agreed on by the government parties and the main opposition in Berlin today, sets out terms for the lower house, the Bundestag, supporting the European Financial Stability Facility in a vote tomorrow. It “notes that the needâ€