July 14,2011
Source: Yahoo News
With the euro staggering from one crisis to the next, the 17 euro-zone nations are facing some tough questions, but the most pressing one this week seemed to be about scheduling: is it serious enough to warrant an emergency summit meeting? Plans for a Friday gathering in Brussels were hastily rolled out on Tuesday, but when German Chancellor Angela Merkel nixed them the next day, they were just as sharply postponed. If the euro zone's leaders can't even agree when to meet, what hope is there for the euro itself?
With every passing day bringing ever-worse news, the leaders will doubtless be wondering how bad it can get. You could say that crisis management is the euro zone's current default mode - if the word "default" was not such a loaded term when it comes to the debts of certain embattled members of Europe's single currency. (Read how the Greek economic crisis is threatening the euro.)
Just two weeks ago, Greece narrowly passed an austerity law aimed at securing key funding and buying precious time for the embattled euro zone, which is still struggling to put together a second Greek bailout package. Yet the respite lasted only a brief moment before the euro once again tumbled into a downward spiral that shows no sign of recovering.
On Wednesday, credit-ratings agency Moody's downgraded Irish government debt to junk status, following similar downgrades for Portugal last week and Greece last year. Thanks to the growth-choking austerity demands of their bailouts, none of the three countries are expected to see a quick turnaround in their fortunes. According to analysis by Citigroup banking group, Greece's ratio of gross debt to output will have risen to 180% by 2014, while Ireland's will grow to 145% and Portugal's 135%. (See photos of the protests in Athens.)
And as much as it dominates the debate, leaving the euro zone is not an easy option. Daniel Gros, director of the Centre for European Policy Studies, a Brussels-based think tank, says that Athens might ultimately require more than €400 billion ($565 billion) in official support - almost 200% of its GDP today. But if Greece were forced to abandon the euro after a messy default, its nominal GDP would likely be halved. "In that case, the Greek government's debt to its euro-zone partners would be equivalent to 400% of its GDP, very little of which would be repaid," he says. On July 11, euro zone finance ministers all but conceded that Greece is likely to default as they tried to agree a scheme to encourage private and public sector bond-holders to swap existing Greek bonds for new, longer-maturing bonds, thereby giving the country more time to pay them back.
But the Greek default they are hoping to head off is just part of the crisis that is threatening to contaminate other euro-zone members. Borrowing costs have soared for Italy and Spain - respectively the third and fourth largest economies in the euro zone - despite hasty pledges from their finance ministers to take further debt-cutting measures. (See the Top 10 Things You Didn't Know About Money.)
Italy and Spain insist that they are secure, but their economies are increasingly seen by markets as the next in a line of dominos: yields on both of their 10-year bonds are now hovering around 6%, meaning the interest rates on their debts are twice as high as those on Germany's. They are nearing the unaffordable levels that could trigger talk of default. Despite this, Spain's Finance Minister Elena Salgado insisted on Monday that Italy and Spain have "strong economies" and that there is no logic to them being affected by market instability.
The case of Italy is particularly worrisome for the euro zone: the country is a founding member of the European Union, a member of the G-8 and, by most accounts, the world's eighth biggest economy. Italian officials point to their large, diversified economy and their high savings rate as reasons to dismiss the market jitters. But not only does the country have a debt-to-GDP ratio of 120%, economic growth is anemic: In the first quarter of this year it was just 0.1%, well below the euro zone average of 0.8%. That helps explain why the odds are shortening on Italy being the next European economy to receive a bailout - literally: Irish bookmaker Paddy Power says Italy is now odds-on to be bailed out by the end of this year, along with Spain. (See five destructive myths about the economic recovery.)
The concerns are echoed by heavyweight financial institutions like the Royal Bank of Scotland (RBS), which is also critical of vacillation by Europe's politicians. "We expect the crisis to continue deteriorating and threaten the entire euro area as European policy makers still misunderstand market dynamics," RBS said in a July 13 briefing note. The bank is urging leaders to almost triple the €750 billion ($1.06 trillion) euro-zone bailout fund to some €2 trillion ($2.8 trillion). "A euro-wide policy response is required to address powerful contagion channels which are threatening the stability of the whole region," it says.
Such a response could mean the euro zone shifting towards fiscal unity. The bailout fund, set up in May 2010, is run under unanimity rules but is paralyzed by political interference, according to Paul De Grauwe, professor of international economics at Leuven University in Belgium. "Each euro-zone member has a veto on the fund," De Grauwe says. "Can you imagine individual IMF members having veto power on its decisions? To act decisively, the euro zone needs to accept some transfer of sovereignty, like the IMF."
But De Grauwe has doubts about whether the euro zone is ready for that step. "Our leaders have not been able to cope with this crisis," he says. Until now, Europe's leaders have navigated a tricky passage through a succession escalating crises. If they fail to take decisive action, they risk bringing the euro to its breaking point, De Grauwe warn: "This is a dangerous moment. One should be afraid for survival of the euro zone."
Showing posts with label Greece. Show all posts
Showing posts with label Greece. Show all posts
Saturday, July 16, 2011
Friday, July 15, 2011
It's ever more obvious, Greece must leave the euro
16 July 2011
By Jeremy Warner, Assistant Editor
Source: The Telegraph
I've hardly been alone, but that's no excuse. For more than a year now, I've been regularly predicting the euro crisis's final denouement, yet still it hasn't arrived.
So I've been forced to reach a different conclusion; perhaps it never will. Instead, the eurozone has entered a seeming state of permanent crisis. In desperation, European policymakers have adopted a very British characteristic – the hope that they can somehow just muddle through.
But though no one can know the exact timing of the endgame – that's ultimately for the politicians to decide, so no time soon might be a reasonable bet – it's now fairly clear what that endgame must be.
What's presently being played out among the GIPS (Greece, Ireland, Portugal and Spain) is final proof that you cannot have a monetary union of such size among sovereign nations without compensating fiscal union. That simple underlying truth leaves the euro facing a choice between two equally unappetising outcomes.
Either the richer countries carry on bailing out the poorer ones more or less indefinitely, rather in the manner that Germany subsidises its formerly communist East, or membership of the euro has to be reconstituted on a smaller and more sustainable basis. There's really nothing in between. The longer European policymakers remain in denial about this choice, the worse the situation will become.
So it's with a sense of weary familiarity we approach the latest impasse. The European Central Bank is implacably opposed to debt restructuring, but the eurozone's solvent Northern states have reached the limit of their appetite for further bail-outs. This leaves Greece in an impossible position; it can neither reduce its debt burden through restructuring, nor will anyone lend it more money.
By Jeremy Warner, Assistant Editor
Source: The Telegraph
I've hardly been alone, but that's no excuse. For more than a year now, I've been regularly predicting the euro crisis's final denouement, yet still it hasn't arrived.
So I've been forced to reach a different conclusion; perhaps it never will. Instead, the eurozone has entered a seeming state of permanent crisis. In desperation, European policymakers have adopted a very British characteristic – the hope that they can somehow just muddle through.
But though no one can know the exact timing of the endgame – that's ultimately for the politicians to decide, so no time soon might be a reasonable bet – it's now fairly clear what that endgame must be.
What's presently being played out among the GIPS (Greece, Ireland, Portugal and Spain) is final proof that you cannot have a monetary union of such size among sovereign nations without compensating fiscal union. That simple underlying truth leaves the euro facing a choice between two equally unappetising outcomes.
Either the richer countries carry on bailing out the poorer ones more or less indefinitely, rather in the manner that Germany subsidises its formerly communist East, or membership of the euro has to be reconstituted on a smaller and more sustainable basis. There's really nothing in between. The longer European policymakers remain in denial about this choice, the worse the situation will become.
So it's with a sense of weary familiarity we approach the latest impasse. The European Central Bank is implacably opposed to debt restructuring, but the eurozone's solvent Northern states have reached the limit of their appetite for further bail-outs. This leaves Greece in an impossible position; it can neither reduce its debt burden through restructuring, nor will anyone lend it more money.
UK banks abandon eurozone over Greek default fears
15 July 2011
By Harry Wilson
Source; The Telegraph
Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.
Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.
Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.
In its interim management statement, published in April, Barclays reported a wholesale exposure to Spain of £6.4bn, compared with £7.2bn last June, while its exposure to Italy has fallen by more than £100m.
One source said it was “inevitable” that British banks would look to minimise their potential losses in the event the eurozone crisis were to get worse. “Everyone wants to ensure that they are not badly affected by the crisis,” said one bank executive.
Moves by stronger banks to cut back their lending to weaker banks is reminiscent of the build-up to the financial crisis in 2008, when the refusal of banks to lend to one another led to a
seizing-up of the markets that eventually led to the collapse of several major banks and taxpayer bail-outs of many more.
While the funding position of UK banks is far stronger now than it was back in 2008, the banking systems of several other major European countries, including Spain, Germany and Italy, are showing increasing signs of weakness.
Analysts at UBS have warned that eurozone banks are “particularly exposed” having not done enough since the crisis to cut their reliance on the wholesale funding markets and remain acutely sensitive to the withdrawal of liquidity from the inter-bank market.
Simon Adamson, a banks analyst at CreditSights, said it was clear many eurozone banks had been having trouble funding themselves for several months.
“Clearly there are some banks that are finding it difficult to access markets. I think this is a long term sign of the way the markets are going,” he said.
Spanish banks have become the main focus of market concerns with the latest European Central Bank (ECB) figures showing that Spanish banks have been forced to increase their use of ECB lending facilities and borrowed a total of €58bn (£51bn) in May, up from €44bn in April.
“We have been amazed at the ability of Spanish banks to find ways to fund themselves, but it is clear they are running out of options,” said one senior analyst at a major investment bank.
By Harry Wilson
Source; The Telegraph
Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.
Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.
Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.
In its interim management statement, published in April, Barclays reported a wholesale exposure to Spain of £6.4bn, compared with £7.2bn last June, while its exposure to Italy has fallen by more than £100m.
One source said it was “inevitable” that British banks would look to minimise their potential losses in the event the eurozone crisis were to get worse. “Everyone wants to ensure that they are not badly affected by the crisis,” said one bank executive.
Moves by stronger banks to cut back their lending to weaker banks is reminiscent of the build-up to the financial crisis in 2008, when the refusal of banks to lend to one another led to a
seizing-up of the markets that eventually led to the collapse of several major banks and taxpayer bail-outs of many more.
While the funding position of UK banks is far stronger now than it was back in 2008, the banking systems of several other major European countries, including Spain, Germany and Italy, are showing increasing signs of weakness.
Analysts at UBS have warned that eurozone banks are “particularly exposed” having not done enough since the crisis to cut their reliance on the wholesale funding markets and remain acutely sensitive to the withdrawal of liquidity from the inter-bank market.
Simon Adamson, a banks analyst at CreditSights, said it was clear many eurozone banks had been having trouble funding themselves for several months.
“Clearly there are some banks that are finding it difficult to access markets. I think this is a long term sign of the way the markets are going,” he said.
Spanish banks have become the main focus of market concerns with the latest European Central Bank (ECB) figures showing that Spanish banks have been forced to increase their use of ECB lending facilities and borrowed a total of €58bn (£51bn) in May, up from €44bn in April.
“We have been amazed at the ability of Spanish banks to find ways to fund themselves, but it is clear they are running out of options,” said one senior analyst at a major investment bank.
Greece Mulls Plans to Exit Eurozone, Start New Currency
May 7, 2011
Christian Reiermann
Spiegel Online
Source: Activist Post
The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.
Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.
Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Château de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.
Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany's behalf.
'Considerable Devaluation'
Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.
"It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.
It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.
What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy.
"The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states. In addition, the country would also be cut off from capital markets for years to come.
In addition, the withdrawal of a country from the common currency union would "seriously damage faith in the functioning of the euro zone," the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. "That would lead to contagion in the euro zone," the paper continues.
Banks at Risk
Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency "would consume the entire capital base of the banking system and the country's banks would be abruptly insolvent." Banks outside of Greece would suffer as well. "Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts," the paper reads.
The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads.
In short, a Greek withdrawal from the euro zone and an ensuing national default would be expensive for euro-zone countries and their taxpayers. Together with the International Monetary Fund, the EU member states have already pledged €110 billion ($159.5 billion) in aid to Athens -- half of which has already been paid out.
"Should the country become insolvent," the paper reads, "euro-zone countries would have to renounce a portion of their claims."
Christian Reiermann
Spiegel Online
Source: Activist Post
The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.
Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.
Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Château de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.
Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany's behalf.
'Considerable Devaluation'
Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.
"It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.
It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.
What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy.
"The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states. In addition, the country would also be cut off from capital markets for years to come.
In addition, the withdrawal of a country from the common currency union would "seriously damage faith in the functioning of the euro zone," the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. "That would lead to contagion in the euro zone," the paper continues.
Banks at Risk
Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency "would consume the entire capital base of the banking system and the country's banks would be abruptly insolvent." Banks outside of Greece would suffer as well. "Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts," the paper reads.
The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads.
In short, a Greek withdrawal from the euro zone and an ensuing national default would be expensive for euro-zone countries and their taxpayers. Together with the International Monetary Fund, the EU member states have already pledged €110 billion ($159.5 billion) in aid to Athens -- half of which has already been paid out.
"Should the country become insolvent," the paper reads, "euro-zone countries would have to renounce a portion of their claims."
Monday, July 4, 2011
Greece Should Default
Source: The Real news
Bio
David Harvey, a leading theorist in the field of urban studies whom Library Journal called "one of the most influential geographers of the later twentieth century," earned his Ph.D. from Cambridge University, was formerly professor of geography at Johns Hopkins , a Miliband Fellow at the London School of Economics, and Halford Mackinder Professor of Geography at Oxford. His reflections on the importance of space and place (and more recently "nature") have attracted considerable attention across the humanities and social sciences. His highly influential books include The New Imperialism; Paris, Capital of Modernity; Social Justice and the City; Limits to Capital; The Urbanization of Capital; The Condition of Postmodernity; Justice, Nature, and the Geography of Difference; Spaces of Hope; and Spaces of Capital: Towards a Critical Geography. His numerous awards include the Outstanding Contributor Award of the Association of American Geographers and the 2002 Centenary Medal of the Royal Scottish Geographical Society for his "outstanding contribution to the field of geographical enquiry and to anthropology." He holds honorary degrees from the universities of Buenos Aires, Roskilde in Denmark, Uppsala in Sweden, and Ohio State University.
Transcript
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in New York. On Wednesday, June 29 in Greece, the Greek Parliament passed a series of austerity measures as thousands of people outside the Parliament buildings protested against exactly that. Wall Street Journal was rather happy, saying that investors around the globe thought this was a good short-term fix. But was there any choice for the Greek people other than accepting these austerity measures? And was defaulting as bad for the Greek people as their prime minister said it would be? Now joining us to talk about all of this is David Harvey. David is a distinguished professor at City University of New York, director of the Center for Place, Culture and Politics, and author of numerous books, including The Enigma of Capital and the Crises of Capitalism. Thanks for joining us.
DAVID HARVEY, DISTINGUISHED PROFESSOR, CUNY: Thank you.
JAY: Alright. So did the Greek people have any choices here?
HARVEY: Yeah, I think they did. I think they should have defaulted, simple as that, and they should have done it earlier rather than later.
JAY: What would have been the consequences if they had?
HARVEY: Well, the consequences are going to be awful whichever way you look at it. What they're doing right now is awful. There's going to be no economic growth in Greece for about the next 10, 15 years, the standard of living's going to decline, and at the end of that, they're still going to have to default. So the only question is when they're going to have to default.
JAY: Okay. So the contrary argument is: they don't default, they're able to get loans because they have more loans, and because the government gets out of the way there's now more capital freed up for investment, and so on and so on. So what's wrong with all that? And growth will emerge.
HARVEY: They've got more loans, but on the other hand, the standard of living is going down, the demand is going down, the jobs are disappearing, and entrepreneurial people are leaving the country in droves. So, you know, the future of Greece is very, very dismal the way things are right now, as is the same case in Ireland, where, you know, they've been through this and they haven't revived growth at all. So you're not going to get any revival of growth. And, actually, I don't think the real question is what can the Greeks do. The real question is why is it that Europe is not actually responding in a much more responsible kind of way.
JAY: When it comes to this issue of demand, which means higher wages so people can actually buy stuff, which in theory grows the economy, when you look at the document that came out of the Toronto G-20, it seemed that the leaders of the world understood that when it came to China.
HARVEY: Yes.
JAY: There they said, oh, there should be higher wages, oh, there there should be more social safety net, oh, there you should increase demand. Well, if they understand that for China, how can they not understand that, if you do this in Greece, you aren't--how are you ever going to be in a situation to really pay off debts?
HARVEY: Because what's going on both in Europe and in the United States is a political project, not an economic necessity. And the political project is about feathering the nests of the very, very rich at the expense of the very poor. The Republican Party in this country has done this--in this country has done it several times before. You run up the debt and then say, savage all the social programs. That's what Reagan did. That's what Bush has done. And what do we see? Tremendous increases in inequality. So it's a class project to actually gain more and more class power for the very ultra-rich at the expense of the mass of the people.
JAY: I can kind of understand it if I was a multibillionaire in the United States, I can kind of understand the logic, because even if there's not much demand here and the economy continues to have, you know, real rates of 18 to 20 percent unemployment, I'm still making enough money here, and boy, can I ever make money elsewhere in the world right now, so who really cares what happens here anyway. But if I'm a European banker or politician, do I really want such a--I hate to use the word, but to turn Greece into a complete basket case economically? But that seems to be what they're doing.
HARVEY: Yes. But, actually, since the euro was introduced, the amount of German trade with Greece has shot up. And, essentially, German industry has destroyed all Greek industry over the last, you know, 15 years, that sort of period.
JAY: The great German export story.
HARVEY: Yes. And, of course, Germany's doing very well right now. Partly, again, it's exporting to China, and China's doing what you're saying, it's growing. So there you have a situation where Germany's doing okay. Now, what would be a responsible thing to do on the part of the Germans would be to do what the United States did to Germany when it defaulted after World War II. I mean, basically, the United States bailed Germany out. Free.
JAY: Not with demands for massive austerity measures.
HARVEY: No, no. Not at all, not at all. Exactly the opposite, in fact. And it actually built German growth. What the Germans should do is the same as the United States did to them way back then. And, actually, a very interesting article just came out in Der Spiegel pointing this out, that actually the country that's defaulted more times in the last century than any other is Germany, and each time they got bailed out, and particularly when--with the US bailout after World War II.
JAY: Now, we interviewed, you know, a progressive Greek economist, and he was saying that there's a section of the Greek left which was not in favor of default, that even though they thought this whole thing was terrible and they didn't agree with the austerity measures as presented, that default would be so destructive to the Greek people that you couldn't default; there was just too much suffering [crosstalk] default comes.
HARVEY: Well, it's a downward spiral. Downward spiral. You know.
JAY: But they must know this.
HARVEY: Well, they do, but it's a downward spiral for the economy, but it's an upward spiral for the very rich. I don't know if you've seen the data recently. In this last recession, over the last two or three years, the rich have improved their position.
JAY: In Greece. Certainly here.
HARVEY: Well, throughout the whole world, actually. And in Greece, of course, the very rich people in Europe have got all their money out in Europe anyway. They haven't got it in Greece anymore. So they're doing fine.
JAY: So from the point of view of the Germans and the German bankers and the European politicians, what's their long-term vision of Greece? I mean, to have this kind of important country within Europe, not one of the biggest economies, but still an important country, to go into such deep recession for a decade, which seems to be the only possibility here, they seem okay with that. Is it partly just they won't let a country default and get away with it, they have to just kind of prove to everyone, you can't get away with not paying off your debts?
HARVEY: Well, the big holders of Greek debt are the French and the German banks. And so, if the Greeks did default, then those are the--those banks may well go under, and then Greek--then the German government or the French government would have to bail out their banks. So you can see the game that's being played here. You rescue the banks all of the time, and then, you know, let the people take the hit [crosstalk]
JAY: And the other big issue is the collection of taxes.
HARVEY: Yes. Yes. And there's no question that the upper classes have not been paying taxes [crosstalk]
JAY: And in the austerity measures that have been forced on Greece, how much of those measures includes you'd better collect taxes from the rich? I haven't heard too much [crosstalk]
HARVEY: No, you don't hear too much. But it's the same, you know, almost everywhere you go. You don't hear too much at all about, you know, what's going to be done for the very affluent and the very rich and those who can afford it. And, of course, in Greece it's very difficult to catch them, 'cause, like I say, most of their money is in Europe anyway, and who knows exactly where they've got it. So it's very hard to track them down. So it's just--you know, it's the civil servants and it's the pension funds and unionized employees who are going to lose all of their assets.
JAY: And then the other accusation or charge is that the Greek people, especially unionized workers, that their pensions and the age at which they retire and things like that are simply more than the country can afford.
HARVEY: Well, those are the kinds of stories that get told around in Europe. If you start to compare country by country, it varies a lot. They're not markedly, you know, better than, say, the French and so on.
JAY: The counterargument would be that France is more productive, it can afford it, and the Greeks can't.
HARVEY: Yes. But, again, the German system is quite generous, and particularly over unemployment benefits and so on it's very, very, very generous.
JAY: How much does this push by Europe on Greece have to do with the elites of Europe telling their own working classes, you are not going to defy these austerity measures, and look what happens to the Greeks, and don't think we're going to give in to you, whether it's in London, in Paris, or somewhere else?
HARVEY: Oh, absolutely I think that's, you know, very much what it's about. I mean, it's also true in the United States as well that it's disciplining labor, disciplining particularly the public sector employees that you see a strike on in London today, and we've seen what happened in Madison, Wisconsin [incompr.] right wing right [incompr.] across Europe and right across North America [crosstalk]
JAY: Yeah, we saw this at the Toronto G-20. This was ascending on the global stage, 'cause all the leaders were there. Canada gets to say, well, here's what we'll do when protesters don't like these policies.
HARVEY: Absolutely.
JAY: Well, I guess rationality is not something we're seeing anywhere in the globe when it comes to these kinds of pushes.
HARVEY: Right. No.
JAY: Thanks for joining us.
HARVEY: Okay.
JAY: Thank you for joining us on The Real News Network.
End of Transcript
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
Bio
David Harvey, a leading theorist in the field of urban studies whom Library Journal called "one of the most influential geographers of the later twentieth century," earned his Ph.D. from Cambridge University, was formerly professor of geography at Johns Hopkins , a Miliband Fellow at the London School of Economics, and Halford Mackinder Professor of Geography at Oxford. His reflections on the importance of space and place (and more recently "nature") have attracted considerable attention across the humanities and social sciences. His highly influential books include The New Imperialism; Paris, Capital of Modernity; Social Justice and the City; Limits to Capital; The Urbanization of Capital; The Condition of Postmodernity; Justice, Nature, and the Geography of Difference; Spaces of Hope; and Spaces of Capital: Towards a Critical Geography. His numerous awards include the Outstanding Contributor Award of the Association of American Geographers and the 2002 Centenary Medal of the Royal Scottish Geographical Society for his "outstanding contribution to the field of geographical enquiry and to anthropology." He holds honorary degrees from the universities of Buenos Aires, Roskilde in Denmark, Uppsala in Sweden, and Ohio State University.
Transcript
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in New York. On Wednesday, June 29 in Greece, the Greek Parliament passed a series of austerity measures as thousands of people outside the Parliament buildings protested against exactly that. Wall Street Journal was rather happy, saying that investors around the globe thought this was a good short-term fix. But was there any choice for the Greek people other than accepting these austerity measures? And was defaulting as bad for the Greek people as their prime minister said it would be? Now joining us to talk about all of this is David Harvey. David is a distinguished professor at City University of New York, director of the Center for Place, Culture and Politics, and author of numerous books, including The Enigma of Capital and the Crises of Capitalism. Thanks for joining us.
DAVID HARVEY, DISTINGUISHED PROFESSOR, CUNY: Thank you.
JAY: Alright. So did the Greek people have any choices here?
HARVEY: Yeah, I think they did. I think they should have defaulted, simple as that, and they should have done it earlier rather than later.
JAY: What would have been the consequences if they had?
HARVEY: Well, the consequences are going to be awful whichever way you look at it. What they're doing right now is awful. There's going to be no economic growth in Greece for about the next 10, 15 years, the standard of living's going to decline, and at the end of that, they're still going to have to default. So the only question is when they're going to have to default.
JAY: Okay. So the contrary argument is: they don't default, they're able to get loans because they have more loans, and because the government gets out of the way there's now more capital freed up for investment, and so on and so on. So what's wrong with all that? And growth will emerge.
HARVEY: They've got more loans, but on the other hand, the standard of living is going down, the demand is going down, the jobs are disappearing, and entrepreneurial people are leaving the country in droves. So, you know, the future of Greece is very, very dismal the way things are right now, as is the same case in Ireland, where, you know, they've been through this and they haven't revived growth at all. So you're not going to get any revival of growth. And, actually, I don't think the real question is what can the Greeks do. The real question is why is it that Europe is not actually responding in a much more responsible kind of way.
JAY: When it comes to this issue of demand, which means higher wages so people can actually buy stuff, which in theory grows the economy, when you look at the document that came out of the Toronto G-20, it seemed that the leaders of the world understood that when it came to China.
HARVEY: Yes.
JAY: There they said, oh, there should be higher wages, oh, there there should be more social safety net, oh, there you should increase demand. Well, if they understand that for China, how can they not understand that, if you do this in Greece, you aren't--how are you ever going to be in a situation to really pay off debts?
HARVEY: Because what's going on both in Europe and in the United States is a political project, not an economic necessity. And the political project is about feathering the nests of the very, very rich at the expense of the very poor. The Republican Party in this country has done this--in this country has done it several times before. You run up the debt and then say, savage all the social programs. That's what Reagan did. That's what Bush has done. And what do we see? Tremendous increases in inequality. So it's a class project to actually gain more and more class power for the very ultra-rich at the expense of the mass of the people.
JAY: I can kind of understand it if I was a multibillionaire in the United States, I can kind of understand the logic, because even if there's not much demand here and the economy continues to have, you know, real rates of 18 to 20 percent unemployment, I'm still making enough money here, and boy, can I ever make money elsewhere in the world right now, so who really cares what happens here anyway. But if I'm a European banker or politician, do I really want such a--I hate to use the word, but to turn Greece into a complete basket case economically? But that seems to be what they're doing.
HARVEY: Yes. But, actually, since the euro was introduced, the amount of German trade with Greece has shot up. And, essentially, German industry has destroyed all Greek industry over the last, you know, 15 years, that sort of period.
JAY: The great German export story.
HARVEY: Yes. And, of course, Germany's doing very well right now. Partly, again, it's exporting to China, and China's doing what you're saying, it's growing. So there you have a situation where Germany's doing okay. Now, what would be a responsible thing to do on the part of the Germans would be to do what the United States did to Germany when it defaulted after World War II. I mean, basically, the United States bailed Germany out. Free.
JAY: Not with demands for massive austerity measures.
HARVEY: No, no. Not at all, not at all. Exactly the opposite, in fact. And it actually built German growth. What the Germans should do is the same as the United States did to them way back then. And, actually, a very interesting article just came out in Der Spiegel pointing this out, that actually the country that's defaulted more times in the last century than any other is Germany, and each time they got bailed out, and particularly when--with the US bailout after World War II.
JAY: Now, we interviewed, you know, a progressive Greek economist, and he was saying that there's a section of the Greek left which was not in favor of default, that even though they thought this whole thing was terrible and they didn't agree with the austerity measures as presented, that default would be so destructive to the Greek people that you couldn't default; there was just too much suffering [crosstalk] default comes.
HARVEY: Well, it's a downward spiral. Downward spiral. You know.
JAY: But they must know this.
HARVEY: Well, they do, but it's a downward spiral for the economy, but it's an upward spiral for the very rich. I don't know if you've seen the data recently. In this last recession, over the last two or three years, the rich have improved their position.
JAY: In Greece. Certainly here.
HARVEY: Well, throughout the whole world, actually. And in Greece, of course, the very rich people in Europe have got all their money out in Europe anyway. They haven't got it in Greece anymore. So they're doing fine.
JAY: So from the point of view of the Germans and the German bankers and the European politicians, what's their long-term vision of Greece? I mean, to have this kind of important country within Europe, not one of the biggest economies, but still an important country, to go into such deep recession for a decade, which seems to be the only possibility here, they seem okay with that. Is it partly just they won't let a country default and get away with it, they have to just kind of prove to everyone, you can't get away with not paying off your debts?
HARVEY: Well, the big holders of Greek debt are the French and the German banks. And so, if the Greeks did default, then those are the--those banks may well go under, and then Greek--then the German government or the French government would have to bail out their banks. So you can see the game that's being played here. You rescue the banks all of the time, and then, you know, let the people take the hit [crosstalk]
JAY: And the other big issue is the collection of taxes.
HARVEY: Yes. Yes. And there's no question that the upper classes have not been paying taxes [crosstalk]
JAY: And in the austerity measures that have been forced on Greece, how much of those measures includes you'd better collect taxes from the rich? I haven't heard too much [crosstalk]
HARVEY: No, you don't hear too much. But it's the same, you know, almost everywhere you go. You don't hear too much at all about, you know, what's going to be done for the very affluent and the very rich and those who can afford it. And, of course, in Greece it's very difficult to catch them, 'cause, like I say, most of their money is in Europe anyway, and who knows exactly where they've got it. So it's very hard to track them down. So it's just--you know, it's the civil servants and it's the pension funds and unionized employees who are going to lose all of their assets.
JAY: And then the other accusation or charge is that the Greek people, especially unionized workers, that their pensions and the age at which they retire and things like that are simply more than the country can afford.
HARVEY: Well, those are the kinds of stories that get told around in Europe. If you start to compare country by country, it varies a lot. They're not markedly, you know, better than, say, the French and so on.
JAY: The counterargument would be that France is more productive, it can afford it, and the Greeks can't.
HARVEY: Yes. But, again, the German system is quite generous, and particularly over unemployment benefits and so on it's very, very, very generous.
JAY: How much does this push by Europe on Greece have to do with the elites of Europe telling their own working classes, you are not going to defy these austerity measures, and look what happens to the Greeks, and don't think we're going to give in to you, whether it's in London, in Paris, or somewhere else?
HARVEY: Oh, absolutely I think that's, you know, very much what it's about. I mean, it's also true in the United States as well that it's disciplining labor, disciplining particularly the public sector employees that you see a strike on in London today, and we've seen what happened in Madison, Wisconsin [incompr.] right wing right [incompr.] across Europe and right across North America [crosstalk]
JAY: Yeah, we saw this at the Toronto G-20. This was ascending on the global stage, 'cause all the leaders were there. Canada gets to say, well, here's what we'll do when protesters don't like these policies.
HARVEY: Absolutely.
JAY: Well, I guess rationality is not something we're seeing anywhere in the globe when it comes to these kinds of pushes.
HARVEY: Right. No.
JAY: Thanks for joining us.
HARVEY: Okay.
JAY: Thank you for joining us on The Real News Network.
End of Transcript
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
Friday, July 1, 2011
U.S. flotilla boat stopped by Greek Coast Guard after setting sail for Gaza
Jul 2, 2011
Joseph Dana
+972 Blog
Source: Institute for Middle East Understanding
The Greek Coast Guard intercepted the Gaza flotilla’s American ship this afternoon, less than one hour after it had set sail from the Athens port. The Greek authorities demanded the boat return to the port, resulting in a protracted standoff at sea, with the captain of the U.S. boat in talks with the authorities over their demands. After a couple hours, and under the threat of an armed takeover by the Greek authorities, the boat agreed to be escorted back to land. It arrived at the Athens coast guard port at roughly 8.:30 PM local time. As the time of writing, most reporters have left the boat, but the passengers remained on it.
It emerged that just before the boat had set sail, Greece issued a blanket ban on ships sailing to Gaza from its ports. According to the decision, approved by Minister for Citizen Protection Christos Papoutsis, the “broader maritime area of eastern Mediterranean will be continuously monitored by electronic means for tracking, where applicable, the movements of the ships allegedly participating in such campaign” [to sail to Gaza].
The boat, named the Audacity of Hope, left the Athens port at 4:30 PM en route to the Gaza Strip, carrying 35 passengers, five crew members and 11 journalists. It departed without permission from the Greek authorities to sail.
Former U.S. Army colonel Anne Wright, leader of mission, told +972 soon after the ship set sail that it is “defiant in going to Gaza. Israeli and Greek won’t pressure won’t stop us.” Along with its 51 passengers, the ship is carrying letters for the people of Gaza. Israel’s Channel 1 TV looked though the entire boat before its departure.
Around the time the American boat was stopped by the Greek Coast Guard, the organizers of the Canadian ship said in a Twitter message that they are being held at port by the Greek authorities:
ALERT: Greek authorities preventing Canadian Boat and #Flotilla2 from sailing. Israeli blockade of Gaza reaches shores of Greece.
On Friday evening, Haaretz reported that Greece had promised Prime Minister Benjamin Netanyahu on Thursday that it would stop the flotilla. Israel, the report said, used its influence in recent months to help the Greeks in their negotiations with the European Union regarding the country’s financial crisis. The two governments had also tightened their military cooperation. “The flotilla organizers’ didn’t understand that this year’s Greece is not last year’s, and they paid a price for it,” an Israeli source told Haaretz. Also on Thursday, Netanyahu, speaking at an Israel Air Force academy ceremony, singled out the Greek prime minister in thanking world leaders assisting Israel in working to stop the flotilla.
Earlier this week, organizers said that they have complied with all requests to inspect their vessel and its "seaworthiness," claiming the boat is seaworthy and that the pressure from the Greeks is politically motivated. In order to prove this, they have decided to sail and test the Greeks authorities’ reaction. The captain told me in an interview from the wheelhouse that he expects to be arrested and personally fined for his actions, despite the fact that he claims to have done nothing wrong legally.
For more live updates please check out my twitter feed: @ibnezra.
Joseph Dana is in Greece reporting for The Nation from the American ship to Gaza.
Joseph Dana
+972 Blog
Source: Institute for Middle East Understanding
The Greek Coast Guard intercepted the Gaza flotilla’s American ship this afternoon, less than one hour after it had set sail from the Athens port. The Greek authorities demanded the boat return to the port, resulting in a protracted standoff at sea, with the captain of the U.S. boat in talks with the authorities over their demands. After a couple hours, and under the threat of an armed takeover by the Greek authorities, the boat agreed to be escorted back to land. It arrived at the Athens coast guard port at roughly 8.:30 PM local time. As the time of writing, most reporters have left the boat, but the passengers remained on it.
It emerged that just before the boat had set sail, Greece issued a blanket ban on ships sailing to Gaza from its ports. According to the decision, approved by Minister for Citizen Protection Christos Papoutsis, the “broader maritime area of eastern Mediterranean will be continuously monitored by electronic means for tracking, where applicable, the movements of the ships allegedly participating in such campaign” [to sail to Gaza].
The boat, named the Audacity of Hope, left the Athens port at 4:30 PM en route to the Gaza Strip, carrying 35 passengers, five crew members and 11 journalists. It departed without permission from the Greek authorities to sail.
Former U.S. Army colonel Anne Wright, leader of mission, told +972 soon after the ship set sail that it is “defiant in going to Gaza. Israeli and Greek won’t pressure won’t stop us.” Along with its 51 passengers, the ship is carrying letters for the people of Gaza. Israel’s Channel 1 TV looked though the entire boat before its departure.
Around the time the American boat was stopped by the Greek Coast Guard, the organizers of the Canadian ship said in a Twitter message that they are being held at port by the Greek authorities:
ALERT: Greek authorities preventing Canadian Boat and #Flotilla2 from sailing. Israeli blockade of Gaza reaches shores of Greece.
On Friday evening, Haaretz reported that Greece had promised Prime Minister Benjamin Netanyahu on Thursday that it would stop the flotilla. Israel, the report said, used its influence in recent months to help the Greeks in their negotiations with the European Union regarding the country’s financial crisis. The two governments had also tightened their military cooperation. “The flotilla organizers’ didn’t understand that this year’s Greece is not last year’s, and they paid a price for it,” an Israeli source told Haaretz. Also on Thursday, Netanyahu, speaking at an Israel Air Force academy ceremony, singled out the Greek prime minister in thanking world leaders assisting Israel in working to stop the flotilla.
Earlier this week, organizers said that they have complied with all requests to inspect their vessel and its "seaworthiness," claiming the boat is seaworthy and that the pressure from the Greeks is politically motivated. In order to prove this, they have decided to sail and test the Greeks authorities’ reaction. The captain told me in an interview from the wheelhouse that he expects to be arrested and personally fined for his actions, despite the fact that he claims to have done nothing wrong legally.
For more live updates please check out my twitter feed: @ibnezra.
Joseph Dana is in Greece reporting for The Nation from the American ship to Gaza.
Wednesday, June 29, 2011
Banker Occupation of Greece
2011/06/28
by Stephen Lendman
From: Mathaba
Economist Michael Hudson calls it "Replacing Economic Democracy with Financial Oligarchy" in a June 5 article by that title, saying:
After being debt entrapped, or perhaps acquiescing to entrapment, the Papandreou government needs bailout help to pay bankers that entrapped them. Doing so, however, requires "initiat(ing) a class war by raising its taxes (harming working households most), lowering its standard of living - and even private-sector pensions - and sell off public land, tourist sites, islands, ports, water and sewer facilities" - in fact, all the country's crown jewels, lock, stock and barrel, strip-mining it of everything of worth at fire sale prices.
Why? Because the US-dominated IMF, EU and European Central Bank (ECB), the so-called "Troika," demand it as the price for bailout help that wouldn't be needed if Greece wasn't trapped in the euro straightjacket. Membership means foregoing the right to devalue its currency to make exports more competitive, maintain sovereignty over its money to monetize its debt freely, and be able to legislate fiscal policies to stimulate growth.
Instead they're entrapped by foreign banker diktats demanding tribute. They call it a "rescue." In May 2010, the Papandreou government agreed to earlier austerity in return for loans. Now they're at it again, demanding more or they'll collapse the entire economy, or so they say. And the same scheme is replicated in Ireland and Portugal. Moreover, it's heading for Spain, and potentially most of Europe and America as representative governments head closer to "financial oligarchy."
In other words, it amounts to financial coup d'etat authority over sovereign governments unless popular anger prevents it, involving more than street protests or short-term strikes accomplishing nothing.
Former Wall Street broker, financial analyst, radio/TV host, and consummate critic Max Keiser calls it "banker occupation" for good reason. They:
-- make the rules;
-- set the terms;
-- issue diktats;
-- pressure, bribe or otherwise cajole or force governments to acquiesce; and
-- burden working households with higher unemployment, wage and benefit cuts, higher taxes, and other austerity measures to assure financial predators profit - always at their expense, forcing once prosperous nations to surrender sovereignty to financial oligarchs, ruling world economies like fiefdoms.
Hudson said European central planning concentrated financial power in "non-democratic hands" from inception under European Central Bank (ECB) dominance. Operating like a financial czar over its 17 Eurozone members, it:
-- "has no elected government (to) levy taxes;
-- (t)he EU constitution prevents (it) from bailing out governments," unlike the Fed able to monetize US debt in limitless amounts; and
-- "the IMF Articles of Agreement also block it from giving domestic fiscal support for budget deficits," saying:
"A member state may obtain IMF credits only on the condition that it has 'a need to make the purchase because of its balance of payments or its reserve position or developments in its reserves.' "
However, despite ample foreign exchange reserves, IMF loans are offered "because of budgetary problems," precisely what it's not allowed to do. As a result, "when it comes to bailing out bankers," said Hudson, "rules are ignored" to save them and their counterparties from incurring losses. And it works the same way in America under the Fed, dispensing open-checkbook amounts to Wall Street on demand.
No wonder Hudson calls finance "a form of warfare," operating like pillaging armies, taking over land, infrastructure, other tangible assets, and all material wealth, devastating nations in the process, causing unemployment, poverty, neoserfdom, "demographic shrinkage, shortened life spans, emigration and capital flight."
Greece's business-friendly fiscal legacy, in fact, caused today's crisis, squeezing public spending in favor of the rich, especially with sweetheart tax policies letting much of their income go undeclared.
Financial deception followed. On February 8, 2010, Der Spiegel writer Beat Balzli headlined, "How Goldman Sachs Helped Greece to Mask its True Debt," saying:
In 2002, Goldman helped them borrow billions by circumventing Eurozone rules in return for mortgaging assets. Using creative accounting, debt was then hidden through off-balance sheet shenanigans, employing derivatives called "cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period - to be exchanged back into the original currencies at a later date."
Debt entrapment followed, nations like Greece held hostage to repay it, the usual price being structural adjustment harshness, making a bad situation worse. In 2010, in return for a $150 billion loan, Papandreou imposed:
-- large public worker layoffs (around 10% overall);
-- public sector 10% wage cuts, including a 30% reduction in salary entitlements;
-- cutting civil service bonuses 20%;
-- freezing pensions;
-- raising the average retirement age two years; and
-- higher fuel, alcohol, tobacco, and luxury goods taxes, knowing much more lay ahead given Greece's worsening debt problem.
More bailout help is now needed in return for greater austerity, as well as selling off Greece's crown jewels as explained above. On June 24, New York Times writer Stephen Castle headlined, "Europeans Agree to a New Bailout for Greece with Conditions," saying:
The deal "came a day after Greece agreed with international creditors to more austerity measures (requiring parliamentary approval) as part of revised plans for 2011-15 aimed at" assuring bankers are first in line to get paid, popular and national interests be damned.
An agreement in principle expects half the funds offered to come from new loans, a fourth from state asset sales, and the remainder from private sector contributions.
An unspecified larger amount (of around 110 billion euros in total) will follow an initial 12 billion euro emergency loan with strings. They include:
-- laying off another 20% of public workers;
-- privatizing public enterprises and assets on the cheap;
-- a one-time personal income levy from 1 - 5%, depending on income;
-- lowering the tax-free income threshold to 8,000 euros annually from 12,000;
-- setting the lowest tax rate at 10%, with exemptions for people up to age 30, over-65 pensioners, and disabled people; and
-- annually taxing the self-employed an additional 300 euros.
Up to $120 billion in cuts are expected though final figures haven't been announced, depending on amounts raised from asset sales and private contributions.
In response, public anger is visceral through daily protests. The ruling PASOK party's approval rating is 27%. Over 90% of the public are dissatisfied with Greece's governance. Another 90% say the country is "on the wrong path." About 80% are unhappy with their lives, and 70% are concerned that conditions will keep deteriorating.
Nonetheless, on June 22, Papandreou won a parliamentary vote of confidence ahead of two more steps the IMF and Eurozone leaders require before releasing more funds - agreeing on their demanded austerity plan and enacting measures to implement it.
In fact, acting IMF managing director John Lipsky (a former JP Morgan Investment Bank vice chairman) said no opposition will be tolerated. In other words, Eurozone nations have no option but to obey IMF diktats, Lipsky acting more like a commissar than banker.
At the same time, austerity, privatizations, and greater debt amounts are self-defeating. Workers, of course, are hardest hit unless mobilized mass action stops it. Ideally they can do it by general strike, shutting down the country, setting non-negotiable demands, staying out until predatory banker diktats are rejected, and prevailing by letting nations regain their sovereignty and people their rights.
That's how labor battles are won. It works the same everywhere when rank and file determination stays the course to victory.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening. #
by Stephen Lendman
From: Mathaba
Economist Michael Hudson calls it "Replacing Economic Democracy with Financial Oligarchy" in a June 5 article by that title, saying:
After being debt entrapped, or perhaps acquiescing to entrapment, the Papandreou government needs bailout help to pay bankers that entrapped them. Doing so, however, requires "initiat(ing) a class war by raising its taxes (harming working households most), lowering its standard of living - and even private-sector pensions - and sell off public land, tourist sites, islands, ports, water and sewer facilities" - in fact, all the country's crown jewels, lock, stock and barrel, strip-mining it of everything of worth at fire sale prices.
Why? Because the US-dominated IMF, EU and European Central Bank (ECB), the so-called "Troika," demand it as the price for bailout help that wouldn't be needed if Greece wasn't trapped in the euro straightjacket. Membership means foregoing the right to devalue its currency to make exports more competitive, maintain sovereignty over its money to monetize its debt freely, and be able to legislate fiscal policies to stimulate growth.
Instead they're entrapped by foreign banker diktats demanding tribute. They call it a "rescue." In May 2010, the Papandreou government agreed to earlier austerity in return for loans. Now they're at it again, demanding more or they'll collapse the entire economy, or so they say. And the same scheme is replicated in Ireland and Portugal. Moreover, it's heading for Spain, and potentially most of Europe and America as representative governments head closer to "financial oligarchy."
In other words, it amounts to financial coup d'etat authority over sovereign governments unless popular anger prevents it, involving more than street protests or short-term strikes accomplishing nothing.
Former Wall Street broker, financial analyst, radio/TV host, and consummate critic Max Keiser calls it "banker occupation" for good reason. They:
-- make the rules;
-- set the terms;
-- issue diktats;
-- pressure, bribe or otherwise cajole or force governments to acquiesce; and
-- burden working households with higher unemployment, wage and benefit cuts, higher taxes, and other austerity measures to assure financial predators profit - always at their expense, forcing once prosperous nations to surrender sovereignty to financial oligarchs, ruling world economies like fiefdoms.
Hudson said European central planning concentrated financial power in "non-democratic hands" from inception under European Central Bank (ECB) dominance. Operating like a financial czar over its 17 Eurozone members, it:
-- "has no elected government (to) levy taxes;
-- (t)he EU constitution prevents (it) from bailing out governments," unlike the Fed able to monetize US debt in limitless amounts; and
-- "the IMF Articles of Agreement also block it from giving domestic fiscal support for budget deficits," saying:
"A member state may obtain IMF credits only on the condition that it has 'a need to make the purchase because of its balance of payments or its reserve position or developments in its reserves.' "
However, despite ample foreign exchange reserves, IMF loans are offered "because of budgetary problems," precisely what it's not allowed to do. As a result, "when it comes to bailing out bankers," said Hudson, "rules are ignored" to save them and their counterparties from incurring losses. And it works the same way in America under the Fed, dispensing open-checkbook amounts to Wall Street on demand.
No wonder Hudson calls finance "a form of warfare," operating like pillaging armies, taking over land, infrastructure, other tangible assets, and all material wealth, devastating nations in the process, causing unemployment, poverty, neoserfdom, "demographic shrinkage, shortened life spans, emigration and capital flight."
Greece's business-friendly fiscal legacy, in fact, caused today's crisis, squeezing public spending in favor of the rich, especially with sweetheart tax policies letting much of their income go undeclared.
Financial deception followed. On February 8, 2010, Der Spiegel writer Beat Balzli headlined, "How Goldman Sachs Helped Greece to Mask its True Debt," saying:
In 2002, Goldman helped them borrow billions by circumventing Eurozone rules in return for mortgaging assets. Using creative accounting, debt was then hidden through off-balance sheet shenanigans, employing derivatives called "cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period - to be exchanged back into the original currencies at a later date."
Debt entrapment followed, nations like Greece held hostage to repay it, the usual price being structural adjustment harshness, making a bad situation worse. In 2010, in return for a $150 billion loan, Papandreou imposed:
-- large public worker layoffs (around 10% overall);
-- public sector 10% wage cuts, including a 30% reduction in salary entitlements;
-- cutting civil service bonuses 20%;
-- freezing pensions;
-- raising the average retirement age two years; and
-- higher fuel, alcohol, tobacco, and luxury goods taxes, knowing much more lay ahead given Greece's worsening debt problem.
More bailout help is now needed in return for greater austerity, as well as selling off Greece's crown jewels as explained above. On June 24, New York Times writer Stephen Castle headlined, "Europeans Agree to a New Bailout for Greece with Conditions," saying:
The deal "came a day after Greece agreed with international creditors to more austerity measures (requiring parliamentary approval) as part of revised plans for 2011-15 aimed at" assuring bankers are first in line to get paid, popular and national interests be damned.
An agreement in principle expects half the funds offered to come from new loans, a fourth from state asset sales, and the remainder from private sector contributions.
An unspecified larger amount (of around 110 billion euros in total) will follow an initial 12 billion euro emergency loan with strings. They include:
-- laying off another 20% of public workers;
-- privatizing public enterprises and assets on the cheap;
-- a one-time personal income levy from 1 - 5%, depending on income;
-- lowering the tax-free income threshold to 8,000 euros annually from 12,000;
-- setting the lowest tax rate at 10%, with exemptions for people up to age 30, over-65 pensioners, and disabled people; and
-- annually taxing the self-employed an additional 300 euros.
Up to $120 billion in cuts are expected though final figures haven't been announced, depending on amounts raised from asset sales and private contributions.
In response, public anger is visceral through daily protests. The ruling PASOK party's approval rating is 27%. Over 90% of the public are dissatisfied with Greece's governance. Another 90% say the country is "on the wrong path." About 80% are unhappy with their lives, and 70% are concerned that conditions will keep deteriorating.
Nonetheless, on June 22, Papandreou won a parliamentary vote of confidence ahead of two more steps the IMF and Eurozone leaders require before releasing more funds - agreeing on their demanded austerity plan and enacting measures to implement it.
In fact, acting IMF managing director John Lipsky (a former JP Morgan Investment Bank vice chairman) said no opposition will be tolerated. In other words, Eurozone nations have no option but to obey IMF diktats, Lipsky acting more like a commissar than banker.
At the same time, austerity, privatizations, and greater debt amounts are self-defeating. Workers, of course, are hardest hit unless mobilized mass action stops it. Ideally they can do it by general strike, shutting down the country, setting non-negotiable demands, staying out until predatory banker diktats are rejected, and prevailing by letting nations regain their sovereignty and people their rights.
That's how labor battles are won. It works the same everywhere when rank and file determination stays the course to victory.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening. #
Tuesday, June 28, 2011
Greek PM: Austerity is Patriotic Duty
June 28, 2011
Kurt Nimmo
Infowars.com
Greek Prime Minister George Papandreou has told his fellow countrymen it is their patriotic duty to accept the austerity plan cooked up by the IMF and the EU. If not accepted, Greece will not get the fifth installment of an international bailout, he warned.
“I’m not asking you to listen to outside pressures, I ask that you listen to your soul and your internal patriotic conscience,” Papandreou said.
Greek opposition parties have rejected demands by EU leaders for national unity on the prospect of unemployment, a lower standard of living, and a massive giveaway of national resources.
“You cannot terrorize your MPs by referring to patriotism because if there is something we should be proud of today it’s that Greeks have risen up from their indifference and are defending, as is their duty, patriotism by the presence in the streets,” said Alexis Tsipras, leader of the leftist party SYRIZA.
Opinion polls indicate three quarters of Greeks oppose tax rises, spending cuts, globalist privatization, and the selling off of national treasures.
On Tuesday, Greek unions shut down government services, brought public transport to a standstill and grounded flights. Unions began their fourth general strike of the year at midnight.
Greece’s biggest union, the General Confederation of Greek Workers, has characterized the austerity measures as a “mafia-style rescue.”
“This proposed austerity package will only make things worse. It will mean we are pushed deeper into recession and will never pay back our debts,” Zoe Lanara, the union’s international relations secretary, told The Independent.
As former Wall Street economist Michael Hudson notes, the so-called bailout will not help the Greek people, it will enrich the banks at the expense of the people.
“The Greek economy will not end up with the proceeds of any ECB ’bailout.’ The banks will get the money. They would like to turn around and lend it out afresh to the buyers of the land, monopolies and other properties that Greece is being told to privatize,” he writes. “Is this not like military tribute? … The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.”
Papandreou and the political elite expect the Greek people to acquiesce to what amount to a military attack on the country by the financial elite. Instead, unions and thousands of protesters will close down the country and continue to resist eurozone enslavement and the theft of their heritage by international finance.On Tuesday, Greek unions shut down government services, brought public transport to a standstill and grounded flights. Unions began their fourth general strike of the year at midnight.
Greece’s biggest union, the General Confederation of Greek Workers, has characterized the austerity measures as a “mafia-style rescue.”
“This proposed austerity package will only make things worse. It will mean we are pushed deeper into recession and will never pay back our debts,” Zoe Lanara, the union’s international relations secretary, told The Independent.
As former Wall Street economist Michael Hudson notes, the so-called bailout will not help the Greek people, it will enrich the banks at the expense of the people.
“The Greek economy will not end up with the proceeds of any ECB ’bailout.’ The banks will get the money. They would like to turn around and lend it out afresh to the buyers of the land, monopolies and other properties that Greece is being told to privatize,” he writes. “Is this not like military tribute? … The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.”
Papandreou and the political elite expect the Greek people to acquiesce to what amount to a military attack on the country by the financial elite. Instead, unions and thousands of protesters will close down the country and continue to resist eurozone enslavement and the theft of their heritage by international finance.
Kurt Nimmo
Infowars.com
Greek Prime Minister George Papandreou has told his fellow countrymen it is their patriotic duty to accept the austerity plan cooked up by the IMF and the EU. If not accepted, Greece will not get the fifth installment of an international bailout, he warned.
“I’m not asking you to listen to outside pressures, I ask that you listen to your soul and your internal patriotic conscience,” Papandreou said.
Greek opposition parties have rejected demands by EU leaders for national unity on the prospect of unemployment, a lower standard of living, and a massive giveaway of national resources.
“You cannot terrorize your MPs by referring to patriotism because if there is something we should be proud of today it’s that Greeks have risen up from their indifference and are defending, as is their duty, patriotism by the presence in the streets,” said Alexis Tsipras, leader of the leftist party SYRIZA.
Opinion polls indicate three quarters of Greeks oppose tax rises, spending cuts, globalist privatization, and the selling off of national treasures.
On Tuesday, Greek unions shut down government services, brought public transport to a standstill and grounded flights. Unions began their fourth general strike of the year at midnight.
Greece’s biggest union, the General Confederation of Greek Workers, has characterized the austerity measures as a “mafia-style rescue.”
“This proposed austerity package will only make things worse. It will mean we are pushed deeper into recession and will never pay back our debts,” Zoe Lanara, the union’s international relations secretary, told The Independent.
As former Wall Street economist Michael Hudson notes, the so-called bailout will not help the Greek people, it will enrich the banks at the expense of the people.
“The Greek economy will not end up with the proceeds of any ECB ’bailout.’ The banks will get the money. They would like to turn around and lend it out afresh to the buyers of the land, monopolies and other properties that Greece is being told to privatize,” he writes. “Is this not like military tribute? … The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.”
Papandreou and the political elite expect the Greek people to acquiesce to what amount to a military attack on the country by the financial elite. Instead, unions and thousands of protesters will close down the country and continue to resist eurozone enslavement and the theft of their heritage by international finance.On Tuesday, Greek unions shut down government services, brought public transport to a standstill and grounded flights. Unions began their fourth general strike of the year at midnight.
Greece’s biggest union, the General Confederation of Greek Workers, has characterized the austerity measures as a “mafia-style rescue.”
“This proposed austerity package will only make things worse. It will mean we are pushed deeper into recession and will never pay back our debts,” Zoe Lanara, the union’s international relations secretary, told The Independent.
As former Wall Street economist Michael Hudson notes, the so-called bailout will not help the Greek people, it will enrich the banks at the expense of the people.
“The Greek economy will not end up with the proceeds of any ECB ’bailout.’ The banks will get the money. They would like to turn around and lend it out afresh to the buyers of the land, monopolies and other properties that Greece is being told to privatize,” he writes. “Is this not like military tribute? … The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.”
Papandreou and the political elite expect the Greek people to acquiesce to what amount to a military attack on the country by the financial elite. Instead, unions and thousands of protesters will close down the country and continue to resist eurozone enslavement and the theft of their heritage by international finance.
Monday, June 27, 2011
EU leaders to renew battle over Greek crisis at summit
Jun 22, 2011
By Luke Baker and Ingrid Melander
Reuters
Source: Yahoo News
BRUSSELS/ATHENS (Reuters) - European leaders will try to convince Greeks and financial markets when they meet on Thursday and Friday that they have a workable plan to help Athens avoid a debt default and return to financial stability.
Using a mixture of arm-twisting and moral support, the leaders will tell Greek Prime Minister George Papandreou that they will release the latest 12 billion euros of an emergency aid package, helping Athens to avoid a potential mid-July default, as long as it commits itself to economic reform.
Greece is not formally on the agenda of the two-day summit -- the fourth this year as the leaders try to get to grips with the crisis consuming Greece, Portugal and Ireland -- but the issue will not escape discussion, diplomats said.
German Chancellor Angela Merkel has underlined that no formal decisions on Greece will be taken at the meeting, but the gathering will be monitored intensely by financial markets for any messages it sends on whether the EU plan can work.
Federal Reserve Chairman Ben Bernanke stressed on Wednesday that much more than the future of Greece was at stake.
"If there were a failure to resolve that situation, it would pose threats to the European financial system, the global financial system, and to European political unity, I would conjecture, as well," he said.
The summit agenda also involves agreeing to increase the size of the euro zone's current bailout fund, completing the creation of a permanent crisis fund from June 2013, and discussions on Libya, Syria and EU enlargement to Croatia.
"I know that many people in Greece are living through a period of great hardship and uncertainty," European Commission President Jose Manuel Barroso said on Wednesday, adding that he hoped the summit would discuss the issue.
"My message to the Greek people is that, if the government acts, Europe will deliver. If Greece can demonstrate that it is genuinely committed to the reform package agreed with the European Union and the IMF, we will accompany Greece on its journey back to growth."
Papandreou's reshuffled government won a confidence vote in parliament early on Wednesday, clearing one of several hurdles on the path to avoiding a default.
On June 28, parliament will vote on a package of spending cuts, tax increases and privatization measures that Athens has agreed with the EU and IMF. If the steps are approved, euro zone finance ministers will agree to release the 12 billion euros at a meeting on July 3, helping Greece avoid bankruptcy.
Despite calls for all Greeks to show unity in backing the measures, all opposition politicians voted against the government in the confidence vote, and 20,000 protesters chanted insults outside parliament.
"Within the parliament there is no problem at all, the real problem is in society," said Costas Panagopoulos of the polling group ALCO. "There's a lot of disappointment in Greek society, there's a lot of anger -- and there's no hope at all."
Even if Greece manages to persuade the EU and IMF that it is fully committed to making the budget adjustments demanded, this will buy the government only a few months' respite. Discussions are already under way about a possible second package of emergency financial support.
SECOND PACKAGE
Greece agreed a package of 110 billion euros of EU/IMF loans in May 2010, the fifth tranche of which is the pending 12 billion disbursement.
However, it may now need a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to be able to return to financial markets for funding.
Euro zone member states, led by Germany, want any second aid package to include the involvement of the private sector. Specifically, they want Greece's private creditors to agree to roll over their holdings of Greek debt when the bonds mature, keeping Greece solvent while maintaining their exposure.
However, any such move has to be carried out voluntarily. It is unclear how much willingness there is among private sector banks, insurance companies and pension funds to roll over their holdings, which are already deeply discounted.
Credit ratings agencies have said that even a voluntary rollover could be classified as a default, which would have a profound impact on European and global financial markets.
Reflecting the level of concern around the world about Greece's situation, finance officials from the G7 held conference calls on Sunday and Monday to assess progress.
The European Commission made it clear that if Athens could not deliver on promised economic reforms and avoid the threat of default, there was no contingency.
"We have a plan, now it's time to act on it, it's time to implement it. There is no alternative. There is no Plan B," spokeswoman Pia Ahrenkilde-Hansen said.
TALKS ON PRIVATE SECTOR INVOLVEMENT
The medium-term economic reform program agreed between Athens and a team from the EU, IMF and European Central Bank envisages raising 50 billion euros by selling off state firms and includes 6.5 billion in spending cuts and tax rises in 2011.
Even if Greece achieves its targets -- and it has already missed many objectives set by its international lenders -- it will still not be in a position to manage its debts, which already account for 150 percent of gross domestic product.
The long-term solution is restoring economic growth, while dramatically improving productivity, freeing up labor mobility and keeping wages in check, all of which could take years.
Mohamed El-Erian, head of Pimco, the world's biggest bond fund, said he expected Greece to end up defaulting on its debt.
"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," he said.
(Additional reporting by Renee Maltezou, George Georgiopoulos and Lefteris Papadimas in Athens; editing by David Stamp)
By Luke Baker and Ingrid Melander
Reuters
Source: Yahoo News
BRUSSELS/ATHENS (Reuters) - European leaders will try to convince Greeks and financial markets when they meet on Thursday and Friday that they have a workable plan to help Athens avoid a debt default and return to financial stability.
Using a mixture of arm-twisting and moral support, the leaders will tell Greek Prime Minister George Papandreou that they will release the latest 12 billion euros of an emergency aid package, helping Athens to avoid a potential mid-July default, as long as it commits itself to economic reform.
Greece is not formally on the agenda of the two-day summit -- the fourth this year as the leaders try to get to grips with the crisis consuming Greece, Portugal and Ireland -- but the issue will not escape discussion, diplomats said.
German Chancellor Angela Merkel has underlined that no formal decisions on Greece will be taken at the meeting, but the gathering will be monitored intensely by financial markets for any messages it sends on whether the EU plan can work.
Federal Reserve Chairman Ben Bernanke stressed on Wednesday that much more than the future of Greece was at stake.
"If there were a failure to resolve that situation, it would pose threats to the European financial system, the global financial system, and to European political unity, I would conjecture, as well," he said.
The summit agenda also involves agreeing to increase the size of the euro zone's current bailout fund, completing the creation of a permanent crisis fund from June 2013, and discussions on Libya, Syria and EU enlargement to Croatia.
"I know that many people in Greece are living through a period of great hardship and uncertainty," European Commission President Jose Manuel Barroso said on Wednesday, adding that he hoped the summit would discuss the issue.
"My message to the Greek people is that, if the government acts, Europe will deliver. If Greece can demonstrate that it is genuinely committed to the reform package agreed with the European Union and the IMF, we will accompany Greece on its journey back to growth."
Papandreou's reshuffled government won a confidence vote in parliament early on Wednesday, clearing one of several hurdles on the path to avoiding a default.
On June 28, parliament will vote on a package of spending cuts, tax increases and privatization measures that Athens has agreed with the EU and IMF. If the steps are approved, euro zone finance ministers will agree to release the 12 billion euros at a meeting on July 3, helping Greece avoid bankruptcy.
Despite calls for all Greeks to show unity in backing the measures, all opposition politicians voted against the government in the confidence vote, and 20,000 protesters chanted insults outside parliament.
"Within the parliament there is no problem at all, the real problem is in society," said Costas Panagopoulos of the polling group ALCO. "There's a lot of disappointment in Greek society, there's a lot of anger -- and there's no hope at all."
Even if Greece manages to persuade the EU and IMF that it is fully committed to making the budget adjustments demanded, this will buy the government only a few months' respite. Discussions are already under way about a possible second package of emergency financial support.
SECOND PACKAGE
Greece agreed a package of 110 billion euros of EU/IMF loans in May 2010, the fifth tranche of which is the pending 12 billion disbursement.
However, it may now need a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to be able to return to financial markets for funding.
Euro zone member states, led by Germany, want any second aid package to include the involvement of the private sector. Specifically, they want Greece's private creditors to agree to roll over their holdings of Greek debt when the bonds mature, keeping Greece solvent while maintaining their exposure.
However, any such move has to be carried out voluntarily. It is unclear how much willingness there is among private sector banks, insurance companies and pension funds to roll over their holdings, which are already deeply discounted.
Credit ratings agencies have said that even a voluntary rollover could be classified as a default, which would have a profound impact on European and global financial markets.
Reflecting the level of concern around the world about Greece's situation, finance officials from the G7 held conference calls on Sunday and Monday to assess progress.
The European Commission made it clear that if Athens could not deliver on promised economic reforms and avoid the threat of default, there was no contingency.
"We have a plan, now it's time to act on it, it's time to implement it. There is no alternative. There is no Plan B," spokeswoman Pia Ahrenkilde-Hansen said.
TALKS ON PRIVATE SECTOR INVOLVEMENT
The medium-term economic reform program agreed between Athens and a team from the EU, IMF and European Central Bank envisages raising 50 billion euros by selling off state firms and includes 6.5 billion in spending cuts and tax rises in 2011.
Even if Greece achieves its targets -- and it has already missed many objectives set by its international lenders -- it will still not be in a position to manage its debts, which already account for 150 percent of gross domestic product.
The long-term solution is restoring economic growth, while dramatically improving productivity, freeing up labor mobility and keeping wages in check, all of which could take years.
Mohamed El-Erian, head of Pimco, the world's biggest bond fund, said he expected Greece to end up defaulting on its debt.
"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," he said.
(Additional reporting by Renee Maltezou, George Georgiopoulos and Lefteris Papadimas in Athens; editing by David Stamp)
Europe pushes banks to share Greek bail-out pain
Jun 22, 2011
By Gernot Heller and Lionel Laurent
Reuters
Source: Yahoo News
BERLIN/PARIS (Reuters) - European governments summoned banks and insurers to urgent meetings on Wednesday, pressing them to share the cost of a second Greek bailout with taxpayers and avoid a market meltdown.
Germany invited private creditors to a meeting, a letter seen by Reuters showed, to discuss their voluntary support for the debt-struck country. Other euro zone countries, including France and the Netherlands, held similar discussions.
"Bondholders should play a substantial role in averting a Greek insolvency ... we're inviting you to a meeting to discuss all options of a concrete contribution," the letter sent from the German Finance Ministry said.
The rollover of a bond at the time it matures is one possibility banks could agree to, the letter said.
And France also began talks with representatives from the financial industry about the plan, a source familiar with the situation said, adding that efforts were being coordinated on a pan-European level.
Euro zone governments are discussing a second bailout package for Greece that would run from 2011 to 2014 and could amount to 120 billion euros ($172 billion), including up to 30 billion euros from the private sector.
There is rising pressure in countries like Germany, Finland and the Netherlands for aggressive steps to force banks to share the burden of a new aid package, after taxpayers coughed up all of the money in the previous round.
"The process will be voluntary, but it is clear that all the financial institutions have an interest in the stability of the euro zone and Greece," a French government source said, speaking on the condition of anonymity.
The Dutch Ministry of Finance was talking on Wednesday with the country's banks, insurers and pension funds about the extension of debt to Greece, a source familiar with the matter said. The source declined to give further details.
But any suggestion that governments are forcing the banks to pay could be viewed by credit rating agencies as effectively a Greek default or restructuring. That could trigger further catastrophic debt downgrades.
German chancellor Angela Merkel last week softened her tough position on the banks in a meeting with French President Nicolas Sarkozy, and the two agreed that any private sector support should be purely voluntary.
SHADES OF VOLUNTARY
In exchange for their support, German lenders have now demanded "additional incentives" in the form of state guarantees, and the talks will in all likelihood focus on the details of how to make this work.
"It's a matter of semantics. What the EU finance ministers want to avoid is a mandatory rollover because of the implications that might have for Greece's ratings," said Simon Adamson, a senior analyst at Creditsights.
"It has to be voluntary, but there are different shades of voluntary," he said, adding that banks in many countries were in a weak position to negotiate after receiving billions of euros in state support at the peak of the credit crisis.
Private investors are estimated to hold some two-thirds of Greece's approximately 270 billion euros of sovereign bonds. Roughly 90 billion euros of that is held by insurance companies, pension funds and investors such as hedge funds.
Banks in Germany themselves have quantified their exposure at between 10 and 20 billion euros, while insurers estimate their holdings at 6 billion euros, just a fraction of their total invested assets.
Even if Greece defaulted, the impairment charges for banks might not be devastating, some analysts say. However, a Greek default would send markets into a tailspin and spark fears countries such as Spain and Italy are next in line.
Companies including the Gulf's Dubai World, which rescheduled its $25 billion debt pile last year, forced outliers to comply through a deal that applied to all if a certain threshold of creditors agreed to it.
But such tactics to coerce bondholders into agreeing a deal normally used in a debt restructuring cannot now be used. Under the current plans, bondholders will be asked to agree to renew any paper they hold when it expires.
And the terms have yet to be decided.
"There is still no proposal. It's a very tough evaluation to make," Corrado Passera, chief executive of Italy's biggest retail bank, Intesa Sanpaolo, told reporters.
($1=.6971 Euro)
(Additional reporting by Douwe Miedema and Sarah White in London, Gilbert Kreijger in Amsterdam, Ian Simpson in Milan and Jean-Baptiste Vey and Emmanuel Jarry in Paris; Writing by Douwe Miedema; Editing by Louise Heavens, Alexander Smith and Jon Loades-Carter)
By Gernot Heller and Lionel Laurent
Reuters
Source: Yahoo News
BERLIN/PARIS (Reuters) - European governments summoned banks and insurers to urgent meetings on Wednesday, pressing them to share the cost of a second Greek bailout with taxpayers and avoid a market meltdown.
Germany invited private creditors to a meeting, a letter seen by Reuters showed, to discuss their voluntary support for the debt-struck country. Other euro zone countries, including France and the Netherlands, held similar discussions.
"Bondholders should play a substantial role in averting a Greek insolvency ... we're inviting you to a meeting to discuss all options of a concrete contribution," the letter sent from the German Finance Ministry said.
The rollover of a bond at the time it matures is one possibility banks could agree to, the letter said.
And France also began talks with representatives from the financial industry about the plan, a source familiar with the situation said, adding that efforts were being coordinated on a pan-European level.
Euro zone governments are discussing a second bailout package for Greece that would run from 2011 to 2014 and could amount to 120 billion euros ($172 billion), including up to 30 billion euros from the private sector.
There is rising pressure in countries like Germany, Finland and the Netherlands for aggressive steps to force banks to share the burden of a new aid package, after taxpayers coughed up all of the money in the previous round.
"The process will be voluntary, but it is clear that all the financial institutions have an interest in the stability of the euro zone and Greece," a French government source said, speaking on the condition of anonymity.
The Dutch Ministry of Finance was talking on Wednesday with the country's banks, insurers and pension funds about the extension of debt to Greece, a source familiar with the matter said. The source declined to give further details.
But any suggestion that governments are forcing the banks to pay could be viewed by credit rating agencies as effectively a Greek default or restructuring. That could trigger further catastrophic debt downgrades.
German chancellor Angela Merkel last week softened her tough position on the banks in a meeting with French President Nicolas Sarkozy, and the two agreed that any private sector support should be purely voluntary.
SHADES OF VOLUNTARY
In exchange for their support, German lenders have now demanded "additional incentives" in the form of state guarantees, and the talks will in all likelihood focus on the details of how to make this work.
"It's a matter of semantics. What the EU finance ministers want to avoid is a mandatory rollover because of the implications that might have for Greece's ratings," said Simon Adamson, a senior analyst at Creditsights.
"It has to be voluntary, but there are different shades of voluntary," he said, adding that banks in many countries were in a weak position to negotiate after receiving billions of euros in state support at the peak of the credit crisis.
Private investors are estimated to hold some two-thirds of Greece's approximately 270 billion euros of sovereign bonds. Roughly 90 billion euros of that is held by insurance companies, pension funds and investors such as hedge funds.
Banks in Germany themselves have quantified their exposure at between 10 and 20 billion euros, while insurers estimate their holdings at 6 billion euros, just a fraction of their total invested assets.
Even if Greece defaulted, the impairment charges for banks might not be devastating, some analysts say. However, a Greek default would send markets into a tailspin and spark fears countries such as Spain and Italy are next in line.
Companies including the Gulf's Dubai World, which rescheduled its $25 billion debt pile last year, forced outliers to comply through a deal that applied to all if a certain threshold of creditors agreed to it.
But such tactics to coerce bondholders into agreeing a deal normally used in a debt restructuring cannot now be used. Under the current plans, bondholders will be asked to agree to renew any paper they hold when it expires.
And the terms have yet to be decided.
"There is still no proposal. It's a very tough evaluation to make," Corrado Passera, chief executive of Italy's biggest retail bank, Intesa Sanpaolo, told reporters.
($1=.6971 Euro)
(Additional reporting by Douwe Miedema and Sarah White in London, Gilbert Kreijger in Amsterdam, Ian Simpson in Milan and Jean-Baptiste Vey and Emmanuel Jarry in Paris; Writing by Douwe Miedema; Editing by Louise Heavens, Alexander Smith and Jon Loades-Carter)
Subscribe to:
Posts (Atom)