It's been a busy day, but lets put things in context

First you already know (and I think we all already knew) what happened to this week's LTRO money, it went straight in to the ECB's deposit facility costing banks 25 basis points to keep it out of the financial system.  One bank that may be worth a look is Barclay's, they did take LTRO money this go around. In any case, 800 banks, that's a lot more then the first go around and they all probably knew what happened to the banks who took LTRO 1 money, they were sold. So apparently there's a bit of a liquidity crisis which is also nothing we didn't already know.

I told you yesterday about the Greek dilemma in the banking system and with the LTRO as Greek bonds are not acceptable collateral, along with the bank runs, the planned bailout doesn't include enough money to recap the banks if it ever did. I also told you how the Greek economy has gone down the tubes, so the funding for the bailout which was based on fundamentals back in October, is woefully insufficient as Greece has slid since then and the "Top Secret" Greek Sustainability paper leaked, proved that Greece needs about 3x more money to get to the 120% of GDP by 2020.

I also told you about the Germans being upset with the ECB and Draghi for taking junk collateral in the LTRO and how the Germans want Draghi to change this immediately as the German's are starting to really understand that it is Germany who will be stuck with the bill at the end of the day.

Overnight:

As for German economic data, German retail sales unexpectedly declined in January as rising oil prices fueled inflation, at least that's what we are told, but who knows, they may have declined without rising oil prices.


The German finance minister Schaeuble said final decision on the second Greek bailout will be made during a teleconference on March 9th. (Sources) He added that the Greek bailout package now depends on the participation of the private sector.

They are certainly cutting it close aren't they, it also depends on the IMF and the IMF  depends on the PSI and the PSI depends on the bailout, I'm not trying to be facetious, this is the circular logic among all of the individual players that must all meet at the same point to make the Greek bailout happen.

As suspected yesterday by USO's price action,  A Saudi official has said there were no acts of sabotage on pipelines in the country, following reports from Iranian state press yesterday claiming an explosion on a key pipeline. Ironically it was Iranian TV that was broadcasting pictures of the fire, not the pipeline on fire. This kind of event plays in to the Iranians hands so of course they would be eager to exploit it.

In Spain: Speaking at a news conference, Deputy Prime Minister Soraya Saenz de Santamaria said that Spain's economy will contract by 1.7 percent this year as the government carries out drastic austerity measures. Earlier, Spain also defied the European Union, setting a 2012 deficit target at 5.8 percent of gross domestic product, a far softer goal than the 4.4 percent agreed with Brussels. More importantly, the country now anticipates that its unemployment rate will hit 24.3%, worse even than in Greece; the youth unemployment rate is well into the 50%s. It will only get worse as Spain's unemployment soared from 21.5% to 23.3% in Q4 alone! 25% unemployment is what was seen during the US Great Depression to give you some context.

The Latest:

A spat between Germany and Greece or an exit from the bailout plan? We heard yesterday that Greece has implemented all of the changes the Troika asked for before deciding on a verdict on the bailout. I pointed out yesterday that austerity measures just means the Greek economy will be that much worse. The Troika was to confirm the changes made on the ground in Greece this week. NOT SO FAST!!!


Bloomberg acquired this report from Germany's Economy Minister Roseler 

Greece Is Reneging on Programs to Spur Economy, Germany Says

Greece is reneging on programs to spur its economic competitiveness that it signed with Germany since July, calling into question its willingness and capacity to revitalize its economy, the Economy Ministry in Berlin said.


Economy Minister Philipp Roesler and other German officials started bilateral projects with Greece from creating a development bank to advising on the construction of the Trans Adriatic Pipeline and on improving tax collection, the ministry said in a report, a copy of which was obtained by Bloomberg News. Greece has failed to fulfill its pledges in most cases, it said.


Greece’s implementation of project targets “remains insufficient,” the ministry said in the report. Revamping Greece’s economy at the same time as cutting its debt “is decisive -- that’s why Germany agreed to its support for the programs.”


For the Greek government, the programs “obviously have no priority,” the ministry said. “This is unacceptable from the German standpoint.”


So......, about that bailout?