Remind anyone else of Bear Stearns, Lehman and AIG?

Riots in the streets in Greece, 3 Dead so far....

The people are fed up with the theft of thier money..

No links yet as it

Sounds like it's gonna be a long, hot summer all over the world.

Three dead as Greek strike grows violentBy the CNN Wire Staff

Athens, Greece (CNN) -- Police sirens and the smell of tear gas filled the streets around Greece's parliament building Wednesday after protests against government spending cuts turned violent, then deadly.

Three people died and at least four others were missing after a fire bomb hit a bank in central Athens, the Greek fire brigade told CNN. The victims, two women and a man, were bank employees, they said.

Another 20 people were trapped on the floor above the MARFIN bank and were being rescued by firefighters, the fire brigade said.

The three dead were removed from the premises along with five survivors, the fire brigade said. They would not say whether the five survivors included any of those missing inside the bank.

Protesters were throwing bottles at police guarding the burned-out bank, shouting "torturers" and "liars" because they don't believe people were killed inside. Riot police were moving in to push the crowd away, CNN's Diana Magnay reported from the scene.

Bins and cars were set on fire around the city. Two public buildings were on fire and a fire truck was ablaze near the Temple of Zeus, the fire brigade said.

Riot police in helmets and shields ket back protesters who threw bottles, sticks, and rocks. Booms pierced the air every time the police fired canisters of tear gas at the crowds.

A mass of protesters made it onto the steps in front of the Greek parliament building early in the afternoon before riot police pushed them back.

Members of the parliamentary economic committee are inside the building reviewing a package of austerity measures to contain Greece's spiraling debt. The measures are highly unpopular in Greece and the protesters on the steps demanded that the lawmakers come outside and face them.

Merkel defends bailout

The protests happened amid a general strike by thousands of public sector workers unhappy with the austerity measures, which largely target them. Private sector workers joined them on the picket lines Wednesday, along with thousands of transport workers -- which brought transportation services to a halt.

Police estimated there were 15,000 workers were on the streets of Athens, but unions said there were many more. Among them were teachers, bank employees and doctors.

Throughout the capital, about 1,700 officers stood guard to maintain order.

The workers are protesting cuts in spending that the government says are needed to pull the country out of debt.

What are the protests about?

The Greek Parliament is expected to vote on the austerity measures -- which include wage freezes and higher taxes -- by the end of Thursday.

The Finance Ministry said the austerity bill goes before a parliamentary committee Wednesday and will be up for debate by the whole body the following day.

Tuesday, about 2,000 protesters representing teachers from the public sector marched past the Finance Ministry and Parliament.

In central Athens, protesters threw plastic bottles and sticks at riot police. At another demonstration, members of the Communist Party of Greece (KKE) erected large banners near the Parthenon. "People of Europe Rise Up," said one.

The European Union announced a €110 billion ($145 billion) aid package for Greece on Sunday. Soon after, Greek Finance Minister George Papaconstantinou announced the tough cost-cutting measures to meet European Union and International Monetary Fund conditions for the deal.

The package includes a promise by Greece to cut its budget deficit to 3 percent of the country's gross domestic product, as required by European Union rules, by 2014, according to Papaconstantinou.

The measures, he said, were needed for Greece to secure its financial lifeline.

Greece has a choice between "destruction" and survival, and "we have chosen, of course, to save the country," Papaconstantinou said.

http://www.cnn.com/2010/WORLD/europe/05/05/greece.strikes/index.html?hpt=T2

It’s Not About Greece Anymore
By PETER BOONE AND SIMON JOHNSON

The Greek “rescue” package announced last weekend is dramatic, unprecedented and far from enough to stabilize the euro zone.

The Greek government and the European Union leadership, prodded by the International Monetary Fund, are finally becoming realistic about the dire economic situation in Greece. They have abandoned previous rounds of optimistic forecasts and have now admitted to a profoundly worse situation. This new program calls for “fiscal adjustments” — cuts to the fiscal deficit, mostly through spending cuts — totaling 11 percent of gross domestic product in 2010, 4.3 percent in 2011, and 2 percent in 2012 and 2013. The total debt-to-G.D.P. ratio peaks at 149 percent in 2012-13 before starting a gentle glide path back down to sanity.

This new program is honest enough to show why it is unlikely to succeed.

Daniel Gros, an eminent economist on euro zone issues who is based in Brussels, has argued that for each 1 percent of G.D.P. decline in Greek government spending, total demand in the country falls by 2.5 percent of G.D.P. If the government reduces spending by 15 percent of G.D.P. — the initial shock to demand could be well over 30 percent of G.D.P.

Obviously this simple rule does not work with such large numbers, but it illustrates that Greece is likely to experience a very sharp recession — and there is substantial uncertainty around how bad the economy will get. The program announced last weekend assumes the Greek G.D.P. falls by 4 percent this year, then by another 2.6 percent in 2011, before recovering to positive growth in 2012 and beyond.

Such figures seem extremely optimistic, particularly in the face of the civil unrest now sweeping Greece and the deep hostility expressed toward the country in some northern European policy circles.

The pattern of growth is critical because, under this program, Greece needs to grow out of its debt problem soon. Greece’s debt-to-G.D.P. ratio will be a debilitating 145 percent at the end of 2011.

Now consider putting more realistic growth figures into the I.M.F. forecast for Greece’s economy — e.g., with G.D.P. declining 12 percent in 2011, then the debt-to-G.D.P. ratio may reach 155 percent. At these levels, with a 5 percent real interest rate and no growth, the country needs a primary surplus at 8 percent of G.D.P. to keep the debt-to-G.D.P. ratio stable. It will be nowhere near that level. The I.M.F. program has Greece running a primary budget deficit of around 1 percent of G.D.P. in that year, and that assumes a path for Greek growth that can be regarded only as an “upside scenario.”

The politics of these implied budget surpluses remains brutal. Since most Greek debt is held abroad, roughly 80 percent of the budget savings the Greek government makes go straight to Germans, the French and other foreign debt holders (mostly banks). If growth turns out poorly, will the Greeks be prepared for ever-tougher austerity to pay the Germans? Even if everything goes well, Greek citizens seem unlikely to welcome this version of their “new normal.”

Last week the European leadership panicked — very late in the day — when it realized that the euro zone itself was at risk of a meltdown. If the euro zone proves unwilling to protect a member like Greece from default, then bond investors will run from Portugal and Spain also — if you doubt this, study carefully the interlocking debt picture published recently in The New York Times. Higher yields on government debt would have caused concerns about potential bank runs in these nations, and then spread to more nations in Europe.

When there is such a “run,” it is not clear where it stops. In the hazy distance, Belgium, France, Austria and many others were potentially at risk. Even the Germans cannot afford to bail out those nations.

Slapped in the face by this ugly scenario, the Europeans decided to throw everything they and the I.M.F. had at bailing out Greece. The program as announced has only a small chance of preventing eventual Greek bankruptcy, but it may still slow or avert a dangerous spiral downward — and enormous collateral damage — in the rest of Europe.

The I.M.F. floated in some fashion an alternative scenario with a debt restructuring, but this was rejected by both the European Union and the Greek authorities. This is not a surprise; leading European policy makers are completely unprepared for broader problems that would follow a Greek “restructuring,” because markets would immediately mark down the debt (i.e., increase the yields) for Portugal, Spain, Ireland and even Italy.

The fear and panic in the face of this would be unparalleled in modern times: When the Greeks pay only 50 percent on the face value of their debt, what should investors expect from the Portuguese and Spanish? It all becomes arbitrary, including which countries are dragged down.

Someone has to decide who should be defended and at what cost, and the European structures are completely unsuited to this kind of tough decision-making under pressure.

In the extreme downside scenario, Germany is the only obvious safe haven within the euro zone, so its government bond yields would collapse while other governments face sharply rising yields. The euro zone would likely not hold together.

There is still a narrow escape path, without immediate debt default and the chaos that that would produce:

Talk down the euro — moving toward parity with the American dollar would help lift growth across the euro zone.

As the euro falls, bond yields will rise on the euro zone periphery. This will create episodes of panic. Enough short-term financing must be in place to support the rollover of government debt.

Once the euro has fallen a great deal, announce the European Central Bank will support the euro at those levels (i.e., prevent appreciation, with G-20 tacit agreement), and also support the peripheral euro zone nations viewed as solvent by buying their bonds whenever markets are chaotic.

At that stage, but not before, the euro zone leadership needs to push weaker governments to restructure. That will include Greece and perhaps also Portugal. Hopefully, in this scenario Spain can muddle through.

European banks should be recapitalized as necessary and have most of their management replaced. This is a massive failure of euro groupthink — including most notably at the political level — but there is no question that bank executives have not behaved responsibly in a long while and should be replaced en masse.

To the extent possible, some of the ensuing losses should be shared with bank creditors. But be careful what you wish for. The bankers are powerful for a reason; they have built vital yet fragile structures at the heart of our economies. Dismantle with care.

http://economix.blogs.nytimes.com/2010/05/06/its-not-about-greece-anymore/

In Greek Crisis, Some See Parallels to U.S. Debt Woes
By DAVID LEONHARDT

It’s easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.

Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.

We, the people, are.

We have not figured out the kind of government we want. We’re in favor of Medicare, Social Security, good schools, wide highways, a strong military — and low taxes. Dealing with this disconnect will be the central economic issue of the next decade, in Europe, Japan and this country.

Many people, including some who claim to be outraged by the deficit, still haven’t acknowledged the disconnect. Just last weekend, Tea Party members helped deny Senator Robert Bennett, the Utah Republican, his party’s nomination for his re-election campaign, in part because he had co-sponsored a health reform plan with a Democratic senator. Economists generally think the plan would have done more to reduce Medicare spending than the bill that passed. So, whatever its intentions, the Tea Party effectively punished Mr. Bennett for not being a big enough fan of big government.

Or consider the different fates of two parts of President Obama’s agenda. Mr. Obama has unrealistically said that taxes do not need to rise on households making less than $250,000, and this position has come to be seen as an ironclad vow. He has also called for billions of dollars in sensible cuts to agribusiness subsidies, tax loopholes and the like. The news media and Congress have largely ignored these proposals.

The message seems clear: woe unto the politician — in Washington, Athens or London — who tries to go beyond platitudes and show some actual fiscal restraint.

This situation obviously can’t continue, as Robert Greenstein, perhaps the leading liberal budget expert, points out. Mr. Greenstein’s politics make him sympathetic to the worry that all the deficit talk will become an excuse to pull back on stimulus spending while unemployment remains high or to gut social programs. But he also knows the numbers well enough to understand that our Greece moment, whether it takes the form of a crisis or not, is coming.

“Most of the public thinks, ‘If only the darn politicians could get their act together to cut waste, fraud and abuse, and to make tax avoidance go away and so on,’ ” Mr. Greenstein, head of the Center on Budget and Policy Priorities, says. “But the bottom line is, there really is no avoiding the hard choices.”

•

For Greece and possibly other European countries, change will come from the outside. The countries lending the money for the Greek bailout — chiefly Germany — are demanding big cuts to the welfare state. Greek citizens will soon have a harder time retiring in their 40s.

Here in the United States, we’re likely to have the chance to solve our problems before our lenders demand it. Those lenders continue see the American economy as a safe haven, thanks to our history of strong economic growth and political flexibility.

It is even possible that future growth will make the current deficit projections look too pessimistic. That sometimes happens when the economy is weak. In the wake of the early 1990s recession, for example, almost no one imagined that the budget would show a surplus by the end of the decade.

But the main issue isn’t the near-term deficit — the one created by the recession, the wars in Iraq and Afghanistan, the Bush tax cuts and the Obama stimulus. The main issue is the long-term deficit.

As societies become richer, citizens tend to want better schools, better medical care and other government services. This country is following that pattern, but without paying the necessary taxes. That combination has us on a course to Greece-like debt.

As a rough estimate, the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs).

Seven percent of G.D.P. is about $1 trillion today. In concrete terms, Medicare’s entire budget is about $450 billion. The combined budgets of the Education, Energy, Homeland Security, Justice, Labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.

This is why fixing the budget through spending cuts alone, as Congressional Republicans say they favor, would be so hard. Representative Paul Ryan of Wisconsin has a plan for doing so, and it includes big cuts to Social Security and the end of Medicare for anyone now under 55 years old. Other Republicans have generally refused to endorse the Ryan plan. Until that changes or until the party becomes open to new taxes, its deficit strategy will remain unclear.

Democrats have more of a strategy — raising taxes on the rich and using health reform to reduce the growth of Medicare spending — but it is not nearly sufficient.

What would be? A plan that included a little bit of everything, and then some: say, raising the retirement age; reducing the huge deductions for mortgage interest and health insurance; closing corporate tax loopholes; cutting pensions of some public workers, as Republican governors favor; scrapping wasteful military and space projects; doing more to hold down Medicare spending growth.

Much of this may be unpleasant. But by no means will it doom us to reduced living standards or even slow economic growth. We can still afford to spend more on Medicare — even more per person — than we do today, and more on education, the military and other areas, too. We just can’t afford the unrealistic promises that the government has made. We need to make choices.

“It’s not a matter of whether we have the resources to solve our problems,” as Alan Krueger, the chief economist at the Treasury Department, says. “It’s a matter of political will.”

For now at least, our elected officials are hardly the only ones who lack that will.

http://www.nytimes.com/2010/05/12/business/economy/12leonhardt.html?hp

Sovereign debt 'vigilantes' put Europe on notice
Bond market's big movers are skeptical of Greece, other weak governments
By Jonathan Burton, MarketWatch

SAN FRANCISCO (MarketWatch) -- The bond vigilantes are on the attack, and Greece may be only their first victim.

The world's most powerful bond investors have lost patience with governments that threw a public-sector party with money borrowed on the cheap and now are scrambling to pay debts and provide for their citizens.

Greece, with its cooked books and spendthrift ways, was an easy target for the vigilantes' guns, but Spain and Portugal also are under fire, and the bond-market masters are keeping a close eye on how the U.K. handles its finances. In fact, no government appears safe, not even the U.S.

The global debt crisis is in its second stage as governments deal with the debt absorbed from the private sector, and record gold prices have been reflecting these worries, according to SCM Advisors strategist Max Bublitz. Laura Mandaro reports.

"There's a tremendous clash between the bond vigilantes on one side and reckless governments on the other," said Ed Yardeni, president of Yardeni Research, an independent global-markets strategy firm. "The bond vigilantes are trying to establish some fiscal and monetary law and order."

Who, or what, are "bond vigilantes?" They are the bond market's heavy hitters, taking fiscal policy matters into their own hands. Yardeni coined the term in the summer of 1983, when Treasury holders smacked the U.S. over high deficits. Yardeni recognized these hedge funds, mutual funds, pension funds and other institutional investors as a fearsome mob, ready to pillory profligate politicians and lax central bankers.

"If the fiscal and monetary authorities won't regulate the economy, the bond investor will. The economy will be run by vigilantes in the credit markets," Yardeni noted then.

'Intimidate everybody'
Bond vigilante justice had its greatest reach in the early 1990s, when the Clinton Administration bowed to pressure over federal spending. Clinton adviser James Carville famously quipped at the time that he'd like to be reincarnated as the bond market, because "you can intimidate everybody."

Today, a new breed of bond vigilantes has saddled up. Using leverage and rapid, electronic trading, these buyers and sellers shoot first, ride on and don't look back. Their blunt message to governments: Clean your fiscal house or pay bondholders more for the money you need -- that is, if you can get it.

In addition to slipshod governments, vigilantes vilify the credit-rating agencies, which grade bonds' quality and risk, for failing to do their job properly.

Bill Gross, the co-chief investment officer of U.S. bond powerhouse Pimco and manager of the world's largest bond mutual-fund, Pimco Total Return (NASDAQ:PTTAX) blasted the rating services earlier this month, mocking Standard & Poor's Inc. for downgrading Spanish government debt one notch to AA and warning Spain of another possible downgrade.

"Oooh -- so tough!" Gross wrote with undisguised sarcasm in his May monthly commentary. "And believe it or not, [rating agencies] Moody's and Fitch still have [Spain's debt] as AAAs. Here's a country with 20% unemployment, a recent current account deficit of 10%, that has defaulted 13 times in the past two centuries, whose bonds are already trading at Baa levels, and whose fate is increasingly dependent on the kindness of the [European Union] and the [International Monetary Fund] to bail them out. Some AAA!"

European leaders tried to downplay these bond-market assaults. After snubs from the European Central Bank and the EU, the vigilantes cracked their whip, savaging Greek, Spanish and Portuguese government debt and raking the euro, which is still under strain.

European politicians and policymakers, fearing the vigilantes could spark a continent-wide meltdown in credit and stocks, hastily cobbled a $1 trillion rescue package with IMF help that's being called "Euro-TARP," in reference to the Treasury rescue hatched in late 2008 to contain the U.S. financial system's meltdown.

Bridging the gap
Does Euro-Tarp placate the vigilantes? For the moment, perhaps, but not for long.

"Markets stop panicking when policymakers start panicking," wrote Michael Hartnett, chief global equity strategist at Bank of America Merrill Lynch, in a recent report on Europe's market turmoil.

"Bond-market vigilantes are glad that something was done, but clearly everything hasn't been resolved," added Zane Brown, a fixed income strategist at investment manager Lord Abbett. "If the EU thinks it's all one big, happy family, the vigilantes are telling them there are clear differences among EU members."

Those differences seem to resonate louder with European officials. Bridging the gap between the richer and poorer economies of the euro zone is a key to stabilizing the common currency, and a concern that German Chancellor Angela Merkel addressed this weekend.

"We've done no more than buy time for ourselves to clear up the differences in competitiveness and in budget deficits of individual euro zone countries," Merkel was quoted as saying on Saturday. "If we simply ignore this problem we won't be able to calm down this situation."

Indeed, while the Euro-TARP may be more stop-gap than solution, the EU is betting it will keep Greece from defaulting on its debt and act as a firewall against contagion.

Spain and Portugal, for instance, aren't waiting around; their governments are cutting public-sector wages and raising consumption and corporate taxes, with further and sharper austerity measures expected.

"Spain and Portugal saw what would happen, and they started acting," said Roger Aliaga-Diaz, a senior economist at mutual-fund giant Vanguard Group.

Added Yardeni, the market strategist: "Portugal and Spain have been given a stay of execution."

The bond market, meanwhile, is, in a word, vigilant. Pimco executives stated in April that the firm is investing in countries with stable debt, including Australia, Brazil, Canada and Germany, and have shunned Greece, Spain, Portugal and other countries on the euro zone's periphery -- known as "Club Med" or, more derisively, "PIIGS."

Moreover, there's growing apprehension that Europe's massive bailout will stoke inflation, crush the euro, and threaten the region's stalwarts. The feverish rush to own gold is directly related to investors' anxiety that the cost of rescuing Greece and other Mediterranean countries from default, coupled with stimulus spending in the U.S. and other developed nations, will wash the world with money and lead to inflation and higher interest rates.

"Policymakers are now forcefully using the balance sheets of the EU (ultimately Germany) and ECB to compensate for the debt excesses in the periphery (particularly Greece) and the related overexposure of European banks, Mohamed El-Erian, Pimco's chief executive, wrote in a mid-May commentary.

"An even larger use of central bank balance sheets, if it were to materialize, would provide only a temporary respite," added El-Erian, who shares the firm's chief investment officer title with Gross, "and the collateral damage and unintended consequences would be serious, including the impact on inflationary expectations."

Muscles flexed, bond vigilantes are also turning their sights on the U.K. and the newest resident of 10 Downing Street. "The bond vigilantes are going to see whether this new government, without a majority in Parliament, is going to be able to cut spending and the deficit," Yardeni said. "The U.K. may be next in line for some discipline by the bond vigilantes if the policymakers can't get their act together soon enough."

In some ways, though, Europe's sovereign debt crisis is a problem of the bond-market's own making. Consider that in March 2005, 30-year Greek bonds commanded a yield just 0.26 percentage points over considerably higher-quality German debt of similar maturity, where in a pre-euro world, the spread was expressed in double-digits. It's no stretch to say that bond buyers wrote a blank check to Greece and other questionable sovereign borrowers, which spent that money with a "play now, pay later" attitude.

But while there may be blame enough to go around, the situation is well past the tipping point.

"The vigilantes are going to keep all of this on a very short leash," said Marilyn Cohen, president of Envision Capital Management, a Los Angeles-based bond-investment manager. "They're emboldened and they juiced up rates on Greek debt until it was excruciating. They've slammed the euro until everybody is questioning its viability. This is going to be a market thriller, and I don't mean that in a good way."

http://www.marketwatch.com/story/sovereign-debt-vigilantes-put-europe-on-notice-2010-05-17