Saturday, 4 February 2017

Weekend Update 04/02/2017 – Europe Trumped.

“One of the key problems today is that politics is such a disgrace. Good people don’t go into government.”

Donald J. Trump.

They came to Valletta, Malta. They saw the shadow of US President Donald J. Trump.  The five EU Presidents and the gaggle of assembled European leaders scattered in confusion and awe. Trump trumped. For Europe at least, tomorrow, will not be like today, which was like yesterday. The arrival of President Trump has already seen to that. For one thing, Europe’s NATO deadbeats are going to have to contribute more and start pulling their weight. Shock and awe at actually having to pay for their defence.

Below, the EUSSR on the verge of a nervous breakdown, and “the Donald” was at least 4,000 miles away! Imagine the 5 Presidents panic if had invited himself to their cabal in Malta.

Trump Ghost Looms Over EU Summit as Leaders Push Back

by Patrick Donahue and John Follain
3 February 2017, 11:13 GMT 3 February 2017, 12:39 GMT
U.S. President Donald Trump loomed over a Mediterranean gathering of European leaders, who used the meeting Friday to hit back at the new administration that has upended trans-Atlantic relations by dismissing the European Union’s validity.

“It is unacceptable that there be, through a certain number of statements by the president of the United States, a pressure on what Europe must be or what it must not be,” French President Francois Hollande told reporters Friday at the EU summit in Valletta, Malta.

As the EU grapples with the region’s biggest migration crisis since World War II, Britain’s impending exit and how to hold the group together in an increasingly uncertain world, several leaders showed themselves annoyed by the new U.S. president’s biting remarks about the viability of the EU project, which celebrates its 60th anniversary this year.

Laying bare the tensions, Ted Malloch, who says he’s been interviewed for the role of U.S. ambassador to the EU, lashed out at the 28-member bloc in an interview with Bloomberg TV on Friday. Following Trump’s lead, he encouraged other member states to hold referendums similar to the U.K., which voted last year to leave the bloc.

The EU “is an overly complex fairly bloated bureaucratic organization,” Malloch said. “Its ambitions have basically overstepped its capabilities, so the question really is what the European member states want to see for that European Union.”

As the presidents and prime ministers filed into the Grand Master’s Palace in the capital Valletta for their first meeting, German Chancellor Angela Merkel struck a calmer tone, urging the leaders to more forcefully tackle the EU’s problems in defining any new relationship with the U.S.

“Europe has its own destiny in its hands,” Merkel told reporters. “The clearer we are, how we define our role in the world, the better we can maintain our trans-Atlantic relationship.”

May Urges EU Heads to Be ‘Patient’ With Twitter-Happy Trump

by Thomas Penny
U.K. Prime Minister Theresa May told fellow European leaders they must be patient and constructive with Donald Trump after they said they don’t need her as a go-between in their relations with the U.S. President.
May briefed her counterparts a week after she held hands with Trump in the White House and told them the new president expects them to pay their share for defense in return for his “100 percent” commitment to NATO.

“She urged other EU leaders to work patiently and constructively with a friend and ally, an ally who has helped guarantee the longest period of peace this continent has ever known,” May’s office said in a statement after the meeting in Valletta, Malta. “The alternative -- division and confrontation -- would only embolden those who would do us harm.”

May had Trump’s ear for an afternoon on Jan. 27 and shared her impressions of a man many of her counterparts view with suspicion. Any hopes she had of bridging the gap between the EU and Trump, as the U.K. prepares to leave the bloc, were dashed with leaders making it clear they would deal with Washington themselves.

“A country cannot be delegated -- the U.K. for example -- for European relations with the U.S.,” French President Francois Hollande told reporters. “It is Europe which does that.”

With Trump showing no qualms about defying America’s closest friends, confidence in the “special relationship” between Britain and the U.S. may be misplaced, in spite of efforts to paint the May-Trump rapport as a version of the 1980s power couple, Margaret Thatcher and Ronald Reagan.

Trump Twitter Bursts Throw Decades-Old Alliances Into Chaos

by David Tweed and Jason Scott
For the first time in decades, America’s oldest allies are questioning where Washington’s heart is.

This week, President Donald Trump and his deputies hit out at some of America’s closest friends, blasting a “dumb” refugee resettlement deal with Australia and accusing Japan and Germany of manipulating their currencies. Ties with Mexico have deteriorated to the point its government had to deny reports that Trump told President Enrique Pena Nieto he might send U.S. troops across the southern border.

“When you hear about the tough phone calls I have, don’t worry about it,” Trump said to an audience of religious and political leaders at the National Prayer Breakfast, a yearly event in Washington. “The world is in trouble -- but we’re going to straighten it out, OK? That’s what I do.”

The dilemma for officials globally is figuring out if Trump’s blunt style is simply a tactic to keep them off balance or the start of a move to tear up the rule book that has guided relations with the U.S. since World War II. In the mean time, allies have little choice but to prepare for the worst.

The latest attacks came against Australia and Japan, even with Trump’s new Pentagon chief in the region to offer assurances about the U.S.’s commitment to security ties. The White House described Trump’s hour-long conversation with Mexico’s leader as “lighthearted.”

“For those of us like Australia, Japan or Korea, who have been dependent on that continuity, we have got to start thinking about a situation where the U.S. is much more self interested, and more capricious on what it might do,” said Nick Bisley, a professor of international relations at La Trobe University in Melbourne. “Countries in the region have got to sit down and say those old arrangements can’t last forever.”

Meanwhile Italy gets closer to going “boom.” Forget about Greece, Italy looks set to take down the whole EUSSR.

UniCredit writedowns ring alarm bells for Italian banks

Fri Feb 3, 2017 | 11:56am EST
UniCredit has heavily written down the value of its 700 million euro ($756 million) investment in Italy's bank rescue fund and other investors are likely to follow suit, sources told Reuters, complicating efforts to stabilize the nation's banking sector.

Italy biggest bank has cut the value of its investment in the Atlante fund by significantly more than a third on its books, according to two sources familiar with the matter.

The move is part of its plan to clean up its balance sheet before it taps the market for 13 billion euros in a share issue next week.

By writing down the stake, UniCredit is indicating that it does not believe it will make money on the investment it made into the state-managed fund created to recapitalize a number of failing Italian banks and help the industry offload bad loans. 

A source at another bank estimated UniCredit's writedown could be closer to 70 percent.

Atlante declined to comment.

Intesa Sanpaolo, which together with UniCredit is Atlante's biggest investor, on Friday said it had written down the value of its stake in the fund by 33 percent.

A group of about half a dozen other banks that have invested in Atlante have held a series of meetings in recent days to discuss the scale of their own possible writedowns, said another source with direct knowledge of the talks. They are also likely to write down their investments by 30 percent, according to the source, who did not name the lenders.

Atlante executives have acknowledged that the value of investments has fallen but have said the fund created last April has an investment horizon of five years and aims to create value for its backers over that period.

The losses, just 10 months into a government-orchestrated campaign to shore up the industry, suggest that mending the sector has become a far more painful task than expected by many industry and government officials. 

UniCredit's move is also likely to discourage the private sector from pumping any more money into Atlante to bail out weaker banks.

That in turn could put more pressure on Rome, increasing doubts over whether 20 billion euros set aside by the government to stabilize the euro zone's fourth-biggest banking system will be enough, say analysts. It has already earmarked about a third of that to rescue just one lender, Monte dei Paschi di Siena.

"The 20 billion euros the government has set aside is starting to look like small beer," said Milan-based banking analyst Vincenzo Longo of brokerage IG..

----- The fund writedowns are not the only new problem facing the banking sector.

UniCredit has separately sold 18 billion euros of its bad loans at an average price of just 13 cents to the euro, said the first two sources, who declined to be named because the investment writedown and loan pricing are confidential.

That price - little more than a tenth of the loans' gross nominal value - sets a tough market precedent for other banks looking to offload their own piles of non-performing loans without incurring losses that could dangerously deplete their capital. These include banks being helped by Atlante.

“My fingers are long and beautiful, as, it has been well documented, are various other parts of my body.”

Donald J. Trump.

Finally some thoughts from Jason in snowy California.

Report Finds that Renewable Energy-especially solar-could contribute to global Oil Demand Peaking by 2020- 20 Years  Earlier than Generally Forecast

N. Jason Jencka  February 4th, 2017 3:30 am ET

It has long been accepted as economic fact that as the world population grows its needs for energy will do the same, with “business as usual” forecasts seeing China and India driving fossil fuel demand for decades to come. Typifying traditional forecasts, the International Energy Agency predicted in its 2016 forecast that global oil demand would not peak before 2040 with coal demand remaining stable. A new report though published by Imperial College London casts doubt on these assumptions and finds that a blend of  renewable energy and electric cars could cause the demand for oil and coal to peak as early as 2020. With the help of various subsidy programs globally and the aura of publicity that surrounds firms such as Tesla, electric cars  have withstood withstood a prolonged period of low oil prices and associated relatively low fuel prices. This comes at a time when wind & solar electricity production has  seen continued growth even in regions with an entrenched oil industry presence. The American state of Texas leads the country in wind power production despite being the home of politicians such as Senator Ted Cruz that are vocal opponents of the regulations that impede fossil fuel development. It will be of particular interest to follow the response of the now very oil-friendly U.S. government as up to 2 million barrels per day of oil demand could evaporate. This would be expected to be of particular interest to the newly confirmed Secretary of State Rex Tillerson whose previous post was at the head of ExxonMobil

While the report is intended to explore what could happen to the global energy market in coming decades under a scenario of persistent innovation, it behooves observers of the global energy market to be open to the distinct possibility that the demand for oil and coal may peak and begin to decline decades before the assumptions of traditional forecasts. After all, a hypothetical commentator in 2010 venturing to predict the 85% decline in solar panel costs over the past 7 years of the 73% drop in the cost of battery storage would have been chided for being wildly optimistic right up until the point they were proven correct by a rapidly evolving marketplace.


Reuters / Fortune Magazine November 16th, 2016:

N. Jason Jencka is presently studying Finance and Economics at Sierra Nevada College, located near the shores of Lake Tahoe on the border of California and Nevada. His interests include the interplay between world markets and the global political sphere, with a focus on developments of both sides of the Atlantic in North America and Europe. In his leisure time he enjoys connecting with those people that have an interesting story to tell and a genuine desire to make an impact in the world.

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