Big ole Hat Tip to Run at GLP for pointing the way! Gulp!

Funds flee Greece as Germany warns of "fatal" eurozone crisis
Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.

By Ambrose Evans-Pritchard
Published: 8:14PM GMT 28 Jan 2010

The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a "attack on the eurozone" by speculators and political foes. "We are being targeted, particularly by those with an ulterior motive."

Marc Ostwald, from Monument Securities, said the botched bond issue of €8bn (£6.9bn) of Greek debt earlier this week has made matters worse. Many of the investors were "hot money" funds that bought on rumours that China was emerging as a buyer, offering them a chance for quick profit. When the China story was denied by Beijing and Athens, these funds rushed for the exit.

However, a key trigger yesterday was testimony in Germany's parliament by economy minister Rainer Brüderle, who said there would be "no bail-outs" for struggling debtors and no move to a "European economic government".

"A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone," he said. Despite the warning, he said each country must solve its own problems.

"Germany is not in a mood to be the deep pocket for what they consider profligate, southern neighbours," said hedge fund doyen George Soros.

Mr Brüderle's hard line contradicts a report in Le Monde that Franco-German officials are discussing a rescue for Greece in order to keep the International Monetary Fund at bay.

The paper cited a source saying that EMU partners were ready to "help" Greece. "It is a question of credibility for the eurozone. The IMF might want to impose monetary conditions."

Le Monde's story was shot down by Berlin and Paris, but there is little doubt that certain officials have been trying to build momentum for a rescue. It is clear that the EU family is split on the issue. Jean-Claude Juncker, head of the Eurogroup of finance ministers, backs "assistance", with support of EU integrationists hoping to nudge the EU towards full fiscal union.

This is fiercely opposed by Berlin, and the German-led bloc at the European Central Bank. There are reports that Berlin is deliberately bringing the crisis to a head, hoping to lance the boil early and force the Club Med states to reform before it is too late. If so, this is a risky strategy. German banks have huge exposure to Greek, Spanish, and Portuguese debt.

Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7pc rates for long. Athens must raise €53bn this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

Tim Congdon, from International Monetary Research, said the danger is that wealthy Greeks may shift money to bank accounts abroad if they lose confidence (akin to Mexico's Tequila Crisis in 1994-1995). This would set off a banking crisis and become self-fulfilling.

Greece has been financing current account deficits – 15pc of GDP in 2008 – through its banks, which have built up €110bn foreign liabilities. "If foreign creditors want their money back, defaults and/or a macroeconomic catastrophe appear inevitable," Mr Congdon said.

Adding to worries, Moody's has issued an alert on Portugal's "adverse debt dynamics", saying Lisbon needs a "credible plan" to reduce a structural deficit stuck at 7pc of GDP rather than "one-off measures".

The deeper concern is Spain, where youth unemployment has reached 44pc and the housing bust has a long way to run. Nouriel Roubini – the economist known as 'Dr Doom' – said Spain is too big to contain. "If Greece goes under that's a problem for the eurozone. If Spain goes under it's a disaster," he said.

Jose Luis Zapatero, Spain's premier, replied wearily: "Spanish public debt (52pc of GDP) is 20pc lower than Europe's average; our treasury spends 5pc of revenues on debt costs, less than France and Germany. Nobody is going to leave the euro," he said.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7095818/Funds-flee-Greece-as-Germany-warns-of-fatal-eurozone-crisis.html

If we cannot control the BANKING & CORPORATE greed of this world we are all doomed PERIOD...

The smartest thing I saw in the above report was that Each Country should be responsible for its own....

Too bad that it does NOT mention the IMF and the World Bank into their factor.
Can you say HEIL HITLER when they comply??

What really pises me off is that our Countries fought TWO World Wars for Europes freedom yet we get more dictatorship?

Who knew that our soldiers died for corporate greed?

Hat tip to The Patriot Mind at GLP for the follow up! Gulp!

Crisis in Spain and Greece: Plan A and Plan B

Credit default swaps and rising interest rates suggest Greece is in serious trouble in spite of the ECB's futile attempts to downplay the situation. Please consider Greek Bonds Show Waning Faith It Can Avoid Bailout.

Greece is losing the confidence of bondholders that it will reduce the largest budget deficit in the European Union amid increased speculation that the country won’t be able to meet its debt obligations.

The nation’s government bonds are the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent, Bloomberg/EFFAS indexes show. Credit-default swaps tied to Greece trade at about the same levels as Dubai when it got a $10 billion bailout from Abu Dhabi in December. Greek 10-year bonds rebounded today after EU Monetary Affairs Commissioner Joaquin Almunia said the country won’t default.

Investor concern that Greece can’t tackle its budget deficit is hurting the debt of national utility companies and banks, said Philip Gisdakis, head of credit strategy at UniCredit SpA in Munich.

“If you fear a Greek crisis then you should not only avoid government bonds but corporates as well,” Gisdakis said. “And if you fear Greece, you should also fear Portugal and Spain.”

EU policy makers have no “plan B” to help Greece, Almunia said today.

“There is no bailout problem,” the bloc’s top economic official said in an interview with Bloomberg Television at the World Economic Forum’s annual meeting in Davos, Switzerland. “Greece will not default. In the euro area, default does not exist.”

What's Plan A?

Pardon me for asking but precisely what is "Plan A" if interest rates in Greece soar out of control?

Can there be a "Plan C" even if there is no "Plan B"? Are there any plans at all?

While pondering those questions, please consider Deteriorating Greece Situation Could Force EU's Hand.

European Union officials insist there won't be a bailout for Greece, but if the country's borrowing costs continue to climb, the bloc will have to do something to stave off default.

Such a bailout would be unprecedented for a euro-zone country, but would nonetheless be feasible. When Greece's borrowing costs soared last spring, the German finance minister at the time, Peer Steinbrueck, said Germany would have to offer financial help if another euro-zone state faced serious trouble.

European Commissioner for Economic and Monetary Affairs Joaquin Almunia, around the same time, said "there is a plan" for such situations, but never provided details.

EU officials in Brussels stress that any bailout might encourage "moral hazard," allowing yet another Greek government to skirt much-needed reforms.

The bloc's finance ministers and bureaucrats justifiably feel duped. Greece is a serial budget offender and revisions to a decade's worth of data suggest the country shouldn't have been allowed to enter the euro zone in 2001.

"I think the Greeks are very much aware of how serious the situation is and I think they are aware that they need to solve their problems themselves," Dutch Finance Minister Wouter Bos told journalists before a meeting of euro-zone finance ministers on Jan. 18.

There are questions about whether Greece will ask the International Monetary Fund for help. Two EU diplomats say the European Commission wants to avoid such a situation, which might be seen as an embarrassing sign of weakness for the bloc's institutions, including the Eurosystem, the grouping of the European Central Bank and the central banks of all the euro-zone nations.

The Greek government repeatedly has denied it is in bailout talks with the IMF, the commission or individual EU countries. France and Germany on Thursday rejected a report that they are discussing contingency plans for Greece.

Plan Facts

Almunia: "There is a plan" but there are no details.
Almunia: There is no "Plan B"
Almunia: “There is no bailout problem. In the euro area, default does not exist.”
Greece: IMF bailout plans denied
France and Germany: Reject reports of contingency plans

Contagion Fears

Now that we fully understand the plan, please consider Greece, others, move to quash rumors about bailout.

Greek and European officials moved Friday to quash market buzz that Athens could find itself in too deep a financial hole to save itself, potentially saddling European governments with a costly bailout.

Prime Minister George Papandreou and the EU denied reports that European governments had engaged in bailout discussions, stressing that Greece itself must carry through on its plans to cut an alarming deficit.

"Any discussion of a 'Plan B' is simply not in our vocabulary," said Greek Finance Minister George Papaconstantinou at the World Economic Forum in Davos, Switzerland, where he and Papandreou have been giving assurances of their determination to carry through on a difficult plan to get spending under control in the next several years.

European Union officials in public are offering only tough love, stressing that Greece must fix its problems, although economists tend to think that if a bailout were needed it would be forthcoming.

"There's no bailout. There's no way out," French Finance Minister Christine Lagarde said, after a closed-door meeting with European Commissioner Joaquin Almunia and European Central Bank President Jean-Claude Trichet.

Almunia said that Greece had presented a program to rectify the imbalances and called it a "very ambitious" program.

"We are preparing recommendations to help the Greek authorities to implement 100 percent of this program," he said, adding the country would have EU support and faced no risk of being booted from the euro zone.

Dominique Strauss-Kahn, chief of the International Monetary Fund, said Greece has much to do but that institution was ready to intervene, if asked.

"The country is in a difficult situation. The European authorities, including those in Brussels and at the European Central Bank, are working on it," he said. "We at the IMF are ready to intervene if asked, but that is not a forgone conclusion and I think that inside the euro zone, there will be enough solidarity to deal with it."

Though, talk of a bailout has been dismissed, the idea continues to gain increasing traction in the markets.

"I believe Greece will be bailed out if necessary because the implications of not doing so are hard to imagine," said Kit Juckes, chief economist at ECU Group.

It's not just Greece facing the skeptical eye of the markets.

"If fears of contagion become widespread, risk-averse investors could start to gun for even the larger or 'stronger' euro zone economies and their debt," said Geoffrey Yu, a currency strategist at UBS.

"Spain, Italy, Austria and Belgium -- together accounting for more than 35 percent of the euro zone economy versus just over 6 percent for Greece, Portugal and Ireland combined -- may then be next in the firing line," he added.

Spain Has A Plan

Inquiring minds are please to hear Spain to Announce Deficit Cut Plan, Seeking to Avoid Greek Fate.

Spanish Finance Minister Elena Salgado presents her plan for slashing the budget deficit by two thirds today, seeking to avoid the punishment investors have meted out to Greece. The Cabinet will discuss spending cuts of as much as 50 billion euros ($70 billion) by 2013 today in Madrid as well as a proposal to tighten pension rules, said an official at the prime minister’s office who declined to be named in line with policy.

To shore up public finances and convince investors it was serious about its deficit pledges, the government raised taxes on income from savings and announced an increase in value-added tax to take effect July 2010.

Spain, heading for a second year of economic contraction, is under scrutiny amid investor concern that it will struggle to pay its debts, like Greece, which has a deficit of 12.7 percent of gross domestic product. Though Spain’s debt is about half of Greece’s, New York University Professor Nouriel Roubini said on Jan. 26 that in some ways the country has “even bigger problems” and poses a larger threat to European monetary union.

The euro has declined to a six-month low, sliding yesterday to $1.3939. The extra interest investors demand to hold Spanish debt rather than German equivalents stood at 99 basis points yesterday, five times the level at the start of 2008. The extra yield that investors demand to hold Greek 10-year securities widened to 395 basis points, the most in more than a decade.

Spain’s budget deficit probably amounted to 11.2 percent of GDP last year, according to the European Commission, which has set a 2013 deadline to cut the shortfall to 3 percent. Its debt is set to double from before the financial crisis.

Portugal Disappoints

Portugal disappointed investors and credit-rating companies with the budget it presented to parliament on Jan. 26. Moody’s Investors Service said the “limited deficit reduction this year means that more ambitious cuts will be needed in 2011-2013” and that its current Aa2 credit rating could be at risk.

“With the discussion on the desolate state of Greece’s public finances, public awareness of these problems has at last risen,” Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt, wrote in a note. “Along with Italy and Portugal, Spain is now regarded as another candidate for a serious crisis.”

Unlike Greece, Portugal, and Italy, Spain appears to have some semblance of a plan. However, that does not mean Spain will actually carry it out. As for Greece, I smell an IMF bailout or an emergency "Plan B" meeting coming soon given the credit markets do not seem to have much faith in "Plan A", whatever it is.

http://globaleconomicanalysis.blogspot.com/2010/01/crisis-in-spain-and-greece-plan-and.html

Portugal stocks slide amid debt worries
By BARRY HATTON

Shares prices on the Lisbon Stock Exchange sank by almost 5 percent Thursday, driven down by concerns about the national debt and political resistance to the government's efforts to get its large budget deficit under control.

The benchmark PSI-20 index had dropped 5.75 percent by mid-afternoon but rallied to close down 4.98 percent, its steepest drop in more than a year.

The dip came after the cost of insuring against losses on Portuguese government debt surged to an all-time high, underlining market concerns that the country will have trouble financing its ballooning deficit. The drop follows news that a government bond issue had to be reduced to euro300 million ($415 million) from a planned euro500 million ($693 million) Wednesday in light of the rising cost of borrowing.

Investors fear Portugal, western Europe's poorest country, might follow the path of Greece where a budget crisis has rattled the European Union and undermined the 16-country euro currency, of which Portugal is a member.

Ben May, a European economist at Capital Economics in London, said that while markets watch how Greece fares after European authorities signed off on its debt-reduction plan Wednesday, attention has turned to the credibility of Portugal's policies.

"People are starting to get a little more concerned that there may not be the support or political will to get the deficit down quickly," he said.

Finance Minister Fernando Teixeira dos Santos said in a written statement that he would set out specific steps to cut the national debt later this month. He has already said he intends to cut government jobs, freeze civil servants' pay and contain spending as part of the center-left government's efforts to curb the rising debt. He has refused to hike taxes.

The policy has fueled political tension in Portugal, where unions on Friday were due to hold their first protest against planned spending cuts.

All opposition parties are pushing for an increase in the amount provided to poorer regions of the country, and together they can outvote the government in Friday's parliamentary session.

Minister for the Cabinet Pedro Silva Pereira called the proposal "irresponsible" and "incompatible" with the government's budget policy.

The minister for parliamentary affairs, Jorge Lacao, warned of "serious political consequences" if Parliament passes the opposition proposal. He declined to be more specific.

"This obviously raises a problem of governability at a time when it is absolutely indispensable for the state to show it is committed to imposing discipline on public finances," Lacao said.

Portugal's budget deficit is expected to have reached a record 9.3 percent of gross domestic product last year -- way above the 3 percent allowed for countries using the euro, according to government figures.

Teixeira dos Santos says his cuts will bring the deficit down to 8.3 percent this year. Public debt is expected to climb to 85.4 percent of GDP this year, up from 76.6 per cent in 2009, as the government invests in the economy and increases welfare payouts amid rising unemployment.

Teixeira dos Santos insisted that Portugal's problems "are nothing like those of Greece," adding that markets were "looking for their next prey."

Silva Pereira, minister for the cabinet, criticized EU economy commissioner Joaquin Almunia for linking Portugal's problems with those of Greece. He called the comments "unfortunate" and "misleading."

Portugal accounted for just 1.8 percent of the eurozone's gross domestic product in 2008. That compared with Greece's 2.6 percent and Spain's 11.7 percent. Germany represented 27 percent.

http://www.businessweek.com/ap/financialnews/D9DLG0KG0.htm

All the MSM coverage of 600 folks at a "Tea Party Convention," Palin reading notes off her hand during Q&A, the Super Bowl, the Olympics, etc. is just background/cover up noise compared to THIS.

Folks, I'm very afraid that it is gonna get real serious from now on.

Europe Risks Another Global Depression
with 28 comments

The entirely pointless G7 meeting this weekend only served to underline the fact that Europe is again entering a serious economic crisis.

At the end of the meeting yesterday, Treasury Secretary Tim Geithner told reporters, “I just want to underscore they made it clear to us, they the European authorities, that they will manage this [the Greek debt crisis] with great care.”

But the Europeans are not being careful – and it’s not just about Greece any more. Worries about government debt and associated public sector liabilities (e.g., because banking systems are in deep trouble) have spread through the eurozone to Spain and Portugal. Ireland and Italy are next up for hostile reconsideration by the markets, and the UK may not be far behind.

What are the stronger European countries, specifically Germany and France, doing to contain the self-fulfilling fear that weaker eurozone countries may not be able to pay their debt – this panic that pushes up interest rates and makes it harder for beleaguered governments to actually pay?

The Europeans with deep-pockets are doing nothing – except insist that all countries under pressure cut their budgets quickly and in ways that are probably politically infeasible. This kind of precipitate fiscal austerity contributed directly to the onset of the Great Depression in the 1930s.

The International Monetary Fund was created after World War II specifically to prevent such a situation from recurring. The Fund is supposed to lend to countries in trouble, to cushion the blow of crisis. The idea is not to prevent necessary adjustments – for example, in the form of budget deficit reduction – but to spread those out over time, to restore confidence, and to serve as an external seal of approval on a government’s credibility.

Dominique Strauss-Khan, the Managing Director of the IMF, said Thursday on French radio that the Fund stands ready to help Greece. But he knows this is wishful thinking.

•“Going to the IMF” brings with it a great deal of stigma. European governments are unwilling to take such a step as it could well be their last.
•The IMF is supposed to provide only “balance of payments” lending. That doesn’t fit well when a country is in a currency union such as the euro, which floats freely and does not have a current account issue, and the main problem is just the budget.
•Greece and the other weak eurozone countries need euro loans, not any other currency. If the IMF lent euros, that would be distinctly awkward – as this is what the European Central Bank (ECB) is supposed to control.
•Sending Greece to the IMF would result in some international “burden sharing,” as it would be IMF resources – from all its member countries around the world – on the line, rather than just European Union funds. But is the US really willing to burden share through the IMF? After all, Europe has long refused to confront the trouble in its weaker countries, now known as PIIGS (Portugal, Ireland, Italy, Greece, and Spain)? How would the Chinese react if such a proposition came to the IMF?
•Would the Europeans really want the IMF and its somewhat cumbersome rules to get involved – this would be a huge loss of prestige. It could also lead to some perverse outcomes – you never know what the IMF and the US Treasury (and Larry Summers) will come up with in terms of needed policies (ask Korea about 1997-98; not a good experience). The European Union (EU) has handled IMF recent engagement well in eastern Europe (from the EU perspective), but that was seen as the EU’s backyard. If the eurozone is in trouble, everyone will be paying much more attention – no more sweetheart deals.
•The IMF gave eastern Europe amazingly good deals over the past 2 years (by IMF standards). Would this fly with financial markets in the sense of restoring confidence in the PIIGS and their medium-term fiscal futures?
•Does the IMF really have enough resources to backstop all the PIIGS? The IMF’s notional capital was increased substantially last year, but just based on what we see now, the Fund would need even more ready money to tackle the eurozone – all the weaker countries would need at least preventive lending programs and these would need to be large. If that is where this goes, the EU looks simply awful and has failed at a deep level.
•The IMF could play a constructive “technical assistance role” alongside the European Commission, but everyone would want to keep this pretty low profile. Anything that goes to the IMF executive board would result in a lot of cheering and jeering from emerging markets. This would break the power of Europe on the international stage – perhaps a good thing, but not at all what the European policy elite is looking for.

The IMF cannot help in any meaningful way. And the stronger EU countries are not willing to help – in part because they want to be tough, but also because they do not have effective mechanisms for providing assistance-with-strings. Unconditional bailouts are simple – just send a check. Structuring a rescue package that will garner support among the German electorate – whose current and future taxes will be on the line – is considerably more complicated.

The financial markets know all this and last week sharpened their swords. As we move into this week, expect more selling pressure across a wide range of European assets.

As this pressure mounts, we’ll see cracks appear also in the private sector. Significant banks and large hedge funds have been selling insurance against default by European sovereigns. As countries lose creditworthiness – and, under sufficient pressure, very few government credit ratings will hold up – these financial institutions will need to come up with cash to post increasing amounts of collateral against their derivative obligations (yes, the same credit default swaps that triggered the collapse last time).

Remember that none of the opaqueness of the credit default swap market has been addressed since the crisis of September 2008. And generalized counter-party risk – the fear that your insurer will fail and this will bring down all connected banks – raises its ugly head again.

In such a situation, investors scramble for the safest assets available – “cash”, which actually (and ironically, given our budget woes) means short-term US government securities. It’s not that the US is in good shape or even has anything approaching a credible medium-term fiscal framework, it’s just that everyone else is in much worse shape.

Another Lehman/AIG-type situation lurks somewhere on the European continent, and again our purported G7 (or even G20) leaders are slow to see the risk. And this time, given that they already used almost all their fiscal bullets, it will be considerably more difficult for governments to respond effectively when they do wake up.

http://baselinescenario.com/2010/02/07/europe-risks-another-global-depression/

Greece hikes pension age, calls for bonus cuts
By John Hadoulis (AFP) – 3 hours ago

ATHENS — Greece's government on Tuesday unveiled a hike in the average retirement age and called on striking civil servants to accept bonus cuts to pull the country out of an unprecedented financial crisis.

Labour Minister Andreas Loverdos said men and women will retire at 63 on average in a bid to save Greece's cash-strapped pensions system, as other ministers met for a second day to finalise the country's new tax policy.

"There will be a two-year increase of the limits on the average rate of retirement... namely 63 years on average for men and women by 2015," Labour Minister Andreas Loverdos told reporters after a ministry meeting.

"We are changing the pensions system in order to keep it alive," he said.

The maximum retirement rate is currently 65 for men and 60 for women, and Greece is under pressure by the European Union to bridge the gap.

The minister also pledged to bring an end to voluntary retirement schemes that have cost the cash-strapped state dearly.

The pension reform is part of a cost-cutting plan by Greece's hard-pressed Socialist government which is struggling to slash a debt mountain expected to hit over 290 billion euros (396 billion dollars) this year.

Loverdos is trying to save 4.5 billion euros (six billion euros) this year from a social budget burdened by years of mismanaged spending by social funds on medicine and hospital bills.

Greece's main private sector union GSEE is staging a nationwide strike on February 24 in opposition to the pension reform. Thousands of civil servants targeted for bonus cuts are holding another one-day strike on Wednesday.

GSEE chairman Yiannis Panagopoulos on Tuesday said the minister's statements were "vague" as they made no reference to the maximum age of retirement.

"When the government presents its full proposals in a bill, we will discuss them and fight to improve them if necessary," he told private Flash Radio.

But he welcomed the scrapping of voluntary retirement schemes, saying it was "provocative to have miners crawling into holes at the age of 65 and to see other categories retiring after 25 years of work."

The government is trying to prevent this month's industrial action from undermining efforts to jumpstart the recession-mired economy.

The cabinet is meeting for a second day Tuesday to finalise a tax overhaul aimed at netting around five billion euros this year and help plug a budget deficit that hit over 30 billion euros in 2009.

Greek Prime Minister George Papandreou late Monday asked civil servants to accept bonus cuts saying they "must be the first to set an example."

Wednesday's civil servant strike will paralyse ministries, local administration and tax offices. Air traffic controllers are also joining the protest.

Greece's 12.7-percent deficit is beyond EU limits of three percent of output for eurozone members, and it suffered a triple downgrade of its sovereign debt in December.

Despite assurances from the European Union and the European Central Bank, markets suspect that the government will not be able to enforce the painful reforms promised.

Socialist cadres are already expressing misgivings about the plan according to press reports, but a majority of Greeks appear to support the government.

The European Commission last month rubber-stamped a three-year Greek crisis plan presented by the government.

But the European Union executive arm also placed Greece under a permanent system of monitoring -- a first for the EU -- and rapped Athens over faulty budgetary data tabled by the previous conservative government ousted in October.

http://www.google.com/hostednews/afp/article/ALeqM5g5J6Mqwlo7hMEkOWkzQrUKWficmg

Greek workers strike as government tightens belt

Athens, Greece (CNN) -- Greek workers were holding a one-day strike Wednesday to protest government efforts to stave off a financial crisis.

Thousands of public-sector workers and their supporters began the 24-hour walkout at 9 a.m. (2 a.m. ET), though local media said workers at Athens' main international airport began their strike at midnight.

Government offices, courts and schools were closed, though public transportation largely continued to operate.

The umbrella civil servants trade union ADEDY, which called the strike, said most of its 500,000 workers were on strike, though that number could not be confirmed. When strikes are called in Greece, non-union members often will join those on the picket lines.

The workers are protesting government plans to raise the age at which workers can claim pensions. The age varies for different public services, but in general, women can retire at 60 and men at 65; the government wants men and women to retire at 65.

The government is also proposing cuts in workers' bonus pay, which for many is a large percentage of their income, as well as a hiring freeze.

Greece's government says the measures are the only way to cut budget deficits and get its national debt under control.

ADEDY Vice President Ilias Vrettakos said he recognizes the government's problem, but that it is not the worker who should suffer. He said the bankers created the problem for Greece, so the bankers should pay.

Vrettakos said the union is willing to compromise only if the government first attacks what the union sees as widespread corruption among top levels of society.

The strike is the first of what is expected to be several across Greece in the coming weeks. Another major strike is scheduled for this month.

Nicole Itano contributed to this report.

http://www.cnn.com/2010/WORLD/europe/02/10/greece.strikes/index.html?hpt=T2

February 14, 2010
Wall St. Helped to Mask Debt Fueling Europe’s Crisis
By LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.

Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.

Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.

The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.

A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.

While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.

“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.

Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.

“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.

Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.

Such derivatives, which are not openly documented or disclosed, add to the uncertainty over how deep the troubles go in Greece and which other governments might have used similar off-balance sheet accounting.

The tide of fear is now washing over other economically troubled countries on the periphery of Europe, making it more expensive for Italy, Spain and Portugal to borrow.

For all the benefits of uniting Europe with one currency, the birth of the euro came with an original sin: countries like Italy and Greece entered the monetary union with bigger deficits than the ones permitted under the treaty that created the currency. Rather than raise taxes or reduce spending, however, these governments artificially reduced their deficits with derivatives.

Derivatives do not have to be sinister. The 2001 transaction involved a type of derivative known as a swap. One such instrument, called an interest-rate swap, can help companies and countries cope with swings in their borrowing costs by exchanging fixed-rate payments for floating-rate ones, or vice versa. Another kind, a currency swap, can minimize the impact of volatile foreign exchange rates.

But with the help of JPMorgan, Italy was able to do more than that. Despite persistently high deficits, a 1996 derivative helped bring Italy’s budget into line by swapping currency with JPMorgan at a favorable exchange rate, effectively putting more money in the government’s hands. In return, Italy committed to future payments that were not booked as liabilities.

“Derivatives are a very useful instrument,” said Gustavo Piga, an economics professor who wrote a report for the Council on Foreign Relations on the Italian transaction. “They just become bad if they’re used to window-dress accounts.”

In Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money.

Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.

These kinds of deals have been controversial within government circles for years. As far back as 2000, European finance ministers fiercely debated whether derivative deals used for creative accounting should be disclosed.

The answer was no. But in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales.

Still, as recently as 2008, Eurostat, the European Union’s statistics agency, reported that “in a number of instances, the observed securitization operations seem to have been purportedly designed to achieve a given accounting result, irrespective of the economic merit of the operation.”

While such accounting gimmicks may be beneficial in the short run, over time they can prove disastrous.

George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005. The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.

Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.

In 2005, Goldman sold the interest rate swap to the National Bank of Greece, the country’s largest bank, according to two people briefed on the transaction.

In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.

Edward Manchester, a senior vice president at the Moody’s credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.

Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.” Suckahs! And to think we, the US taxpayer, bailed these folks out - who's the suckah?

http://www.nytimes.com/2010/02/14/business/global/14debt.html

Greece threatens more than the euro
By Gideon Rachman

Published: February 23 2010 02:00 | Last updated: February 23 2010 02:00

As Greece's financial crisis rumbles onwards, it has become commonplace to argue that the roots of the problem stretch all the way back to the design of Europe's single currency. Actually, it is worse than that. The Greek crisis is about the very basis on which European unity has been built for the last 60 years. It threatens not just the euro but the entire edifice of the European Union.

The risk for Europe now is that if the EU does not move forward politically in response to the Greek crisis, it will move backwards - and the long process of European integration could start to unravel.

The EU has always proceeded by creating economic "facts on the ground", which were intended to trigger political effects. Ever since the 1950s this has worked admirably, as a modest coal and steel community turned into a common market and finally into a Union of 27 nations, with its own parliament, supreme court and foreign policy.

Jacques Delors, the European Commission president who presided over the creation of a single market in the 1980s, said frankly: "We're not here just to make a single market - that doesn't interest me - but to make a political union." The creation of the single market involved a huge expansion of European law and therefore deep erosions of national sovereignty.

The same political thinking lay behind the design of the single European currency in the 1990s. As Tommaso Padoa-Schioppa, a former member of the board of the European Central Bank, recently wrote in these pages: "The founding fathers wanted the euro primarily as a step towards political union."

This drive for political union was intensified by the end of the cold war. France feared that a reunited Germany might once again dominate Europe. The French answer was to bind Germany into the European construction through the creation of a single currency. The German government willingly accepted this in return for the promise of a major advance towards political union in Europe, which was a longstanding national goal. (As for the German people, they were never consulted directly - an oversight that may come back to haunt the euro now.)

Gerhard Schröder, the German chancellor at the time that euro notes first emerged from Europe's cash machines, believed that monetary union required "decisive advances towards political union". Some, like Romano Prodi, Mr Delors' successor as Commission president, even looked forward to an eventual crisis in the eurozone as the event that would trigger these "decisive advances".

Now the crisis has happened - and it clearly invites the big political steps that the founding fathers anticipated. A logical political response to Greek insolvency - and the threat of similar crises in Spain, Portugal and eventually Italy - might be to create common European taxes and a mechanism for big fiscal transfers between EU states. These are features that help smooth a currency union in the US, but that do not yet exist in Europe.

But there is no sign of any such move. Europe is stuck. So what has gone wrong? The problem is that the "economics first, politics later" method is almost Marxist in its assumption that economics will inevitably dictate a particular political response. But democratic politics involves choice.

The traditional EU method could only work when the political changes prompted by earlier economic decisions did not seem deeply controversial or unfair to ordinary voters. But the kind of political integration required by the euro affects ordinary citizens at a very basic level - since it involves big choices about taxation and spending.

As a result, it exposes a truth that ardent pro-Europeans are very reluctant to acknowledge. Most citizens of the EU still feel far more attached to their own nation than to the Union. "Europeans" are much less willing to bail each other out than they are to bail out their own fellow countrymen. West Germany spent billions to turn around East Germany. But there is little sign that the Germans are willing to spend further billions to turn around Greece - with the spectre of similar crises to come in Spain and Italy. The Germans may feel very "European" in principle. But when they are asked to start writing large cheques to support a bankrupt Greek state, they start to feel strangely German again.

As for the Greeks, they too have counted among the most ardently pro-European people in the Union. But the price of any EU bail-out of Greece is likely to be savage austerity measures, overseen by officials sent in from Brussels. That is likely to feel more like colonisation than a voluntary "political union".

So what happens now? It is possible that Greece may yet muddle through this crisis. But, in a world of rapidly rising sovereign debt, the next euro-crisis might only be months away. At that point, the members of the European single currency will once again be asked how much they are willing to do (and to pay) to help each other out. If the answer is still, "not very much", the euro-area might begin to shed some of its weaker members.

But the consequences could go well beyond the single currency. The EU would have a crisis of confidence and the likely result would be that other powers it has acquired, on everything from immigration to social policy, would come into question. There is more than money at stake in the Greek crisis.

gideon.rachman@ft.com

http://www.ft.com/cms/s/900dc6f8-201a-11df-81a2-00144feab49a,dwp_uuid=ebe33f66-57aa-11dc-8c65-0000779fd2ac,print=yes.html

Ya know I may be a bit ignorant to the whole EU/EURO fiasco but I dont see a problem with individual countries breaking off if they are not making a go of it...

The less we see of the NWO type domination the better I saw

Yeppers! Nafta, anyone?

Fact of the matter is - there is NO United States of Europe or Africa or Asia or South America. Everyday, ordinary citizens don't think of themselves that way.

Bankers, again!

I think there should be an OPEN SEASON on hunting Bankers for lets say 6 months

Solidarity Forever
A Song by Ralph Chaplin

When the union's inspiration through the workers' blood shall run
There can be no power greater anywhere beneath the sun
Yet what force on earth is weaker than the feeble strength of one
For the Union makes us strong

Chorus
Solidarity forever, solidarity forever
Solidarity forever
For the Union makes us strong

Is there aught we hold in common with the greedy parasite
Who would lash us into serfdom and would crush us with his might?
Is there anything left to us but to organize and fight?
For the union makes us strong

It is we who ploughed the prairies, built the cities where they trade
Dug the mines and built the workshops, endless miles of railroad laid
Now we stand outcast and starving 'mid the wonders we have made
But the union makes us strong

All the world that's owned by idle drones is ours and ours alone
We have laid the wide foundations, built it skyward stone by stone
It is ours, not to slave in, but to master and to own
While the union makes us strong

They have taken untold millions that they never toiled to earn
But without our brain and muscle not a single wheel can turn
We can break their haughty power gain our freedom when we learn
That the Union makes us strong

In our hands is placed a power greater than their hoarded gold
Greater than the might of armies magnified a thousandfold
We can bring to birth a new world from the ashes of the old
For the Union makes us strong

Clashes as workers strike in Athens

Athens, Greece (CNN) -- Protesters clashed with police in central Athens Wednesday as thousands of transport workers went on strike against severe austerity measures the government says are needed to tackle the country's crippling budget deficit.

CNN's Jim Boulden said bottles and flares were being thrown and small fires had been started in the vicinity of Athens' Constitutional Square outside the Greek parliament building. Police responded with pepper spray and cordoned off roads around the parliament. The protests are expected to last for several more hours.

All flights to and from Greece have been cancelled and nationwide disruption is forecast on bus and rail networks with trade unions rallying widespread support for the 24-hour action by public and private sector workers.

Schools, hospitals, government offices, banks and media outlets were all expected to be affected with unions representing 2.5 million workers joining the action. Large protests were also scheduled to converge in Athens' Constitutional Square outside the parliament building.

The Greek strikes are the latest in a series of industrial disputes to erupt across Europe as the continent's business and public sectors struggle to balance economic reform with demands from their workforces.

They are also the latest to affect Greece, which has endured several stoppages since the government announced it was hiking taxes, tightening tax controls, raising the retirement age by two years and imposing public sector pay cuts.

Prime Minister George Papandreou's government imposed the measures after the previously masked results of years of unrestrained spending, cheap lending and failure to implement financial reforms were exposed late last year.

It is now struggling to bring debts of &euro300 billion ($413.6 billion) and a deficit of 12.7 percent of gross domestic product under control, restore investor confidence and comply to eurozone regulations.

Polls show that the majority of Greeks actually support the popular government plans to cut the safety net for public sector workers and attempts to get the rich to pay more taxes.

The government says Greece must modernize its tax structure as the country suffers from tax avoidance and other structural impediments to job growth. But younger workers say they already pay high taxes, have little job security and make less money than older generations.

Greece's financial troubles have caused concerns across the EU. Analysts say there are fears the problems could spread to weaker members of the economic bloc such as Portugal, the Republic of Ireland and Spain.

The EU has pledged support for Greece, but offered no concrete assistance. It has given Athens until March 16 to show it is taking necessary measures.

Wednesday's strikes come during a week of assessments by the European Commission, the European Central Bank and the International Monetary Fund.

CNN's Jim Boulden contributed to this story

http://www.cnn.com/2010/WORLD/europe/02/24/greece.strikes/index.html?hpt=T1

As I understand it, Britain's debts are set to be even worse than those of Greece.

But, if there is a pole shift coming, then debts wont matter... as there will be such devastation that we will all have to start again.

So,in the meantime, we should borrow away - as long as we can keep the payments going until pole shift (Oct 2011??) we will be OK.

Or am I seriously flawed in thinking this way?

Simon

The only flaw I see Simon is what if a pole shift does not occur

Greece wants Nazi gold returned as 50,000 strikers take to streets

Published Date: 25 February 2010

By Renee Maltezou and Ingrid Melander in Athens

GREECE has touched Germany's rawest nerve by accusing the EU powerhouse of not fully compensating it for gold stolen by the Nazis during the Second World War.

• Protesters clash with riot police on the fringes of yesterday's main protest in Athens, during a 24-hour national strike. Picture: Getty Images

The incendiary comments came as some 50,000 Greeks took to the streets of Athens to protest over austerity plans aimed at wrenching the country out of a debt crisis that has shaken the eurozone.

The 24-hour general strike grounded flights and disrupted services. "No sacrifices, the rich should pay for the crisis," demonstrators chanted as tens of thousands marched on parliament. Scuffles broke out on the fringe of the protest, with police firing tear gas to disperse groups of stone-throwing youths.

Deputy prime minister Theodoros Pangalos criticised Germany's attitude towards the Greek debt crisis and said Athens had not received adequate compensation for the impact of the Nazi invasion of Greece in 1941.

"They took away the Greek gold that was at the Bank of Greece, they took away the Greek money and they never gave it back. This is an issue that has to be faced sometime in the future," he said. "I don't say they have to give back the money necessarily but they have at least to say 'thanks'."

The German foreign ministry dismissed the remarks and said bringing up the past would not help Greece solve its problems.

"I must reject these accusations," a spokesman said. Germany had paid Greece 115 million Deutsche marks in compensation by 1960 and made further payments to forced labourers of the Nazi regime, he said.
"Finally, I'd like to mention that, parallel to this, since 1960 Germany has paid around 33 billion Deutsche marks in aid to Greece both bilaterally and in the context of the EU," he said.

Mr Pangalos also claimed Italy, France and Belgium had used the same techniques as Greece to mask their true deficits to qualify for the eurozone. "You simply put some amounts of money in the next year … it is what everybody did and Greece did it to a lesser extent than Italy, for example," he said.
The trade union organisers of yesterday's Athens march – which together represent half of Greece's workforce of five million – want the government to scrap plans to freeze public wages, hike taxes and increase the retirement age.

Yannis Panagopoulos, head of the private sector union GSEE, told protesters: "Today, Europe's eyes are turned on us.

"We ask the government not to give in to the desires of the markets, to set people's needs as a priority and adopt a mix of economic and social policies that won't lead to recession but to jobs."

Under the scrutiny of EU policymakers and markets, the government has so far refused to give in to union demands.

Yesterday's first joint walkout by the two major labour federations was the biggest test of the government's resolve since it won October elections. Opinion polls show most Greeks support government efforts to shore up deteriorating public finances that have rattled markets and worried EU partners.

Workers and employers gave vastly different participation estimates. Government officials said only about 16 per cent of public sector workers had gone on strike, but public sector union ADEDY put participation at 90 per cent.

Most shops in the capital were open, some banks were closed and others empty, while the capital's chaotic traffic was quieter than usual. The Athens stock exchange operated normally.

DEBT WORRY

THE pressure on the Greek government to deliver on its promise to rein in the country's borrowing levels rose further yesterday with the news that Standard & Poor's, one of the three big credit ratings agencies, could downgrade its rating on the country within a month.

The EU has issued a vague promise to support Greece, which has some 53 billion (£46.5bn) in debt coming due this year, but ministers want more specific guarantees to shore up market confidence.

Greece has already imposed broad spending cuts but says it is under pressure from the EU to cut salaries in the civil service.


http://news.scotsman.com/world/Greece-w ... 6102255.jp

Greece angers Germany in gold row
By Malcolm Brabant
BBC News, Athens

Greek Deputy Prime Minister Theodoros Pangalos has accused Germany of failing to compensate Greece for Nazi occupation during World War II.

Mr Pangalos made the remarks during a wide-ranging BBC interview about Greece's financial difficulties.

"They [the Nazis] took away the Greek gold that was in the Bank of Greece, they took away the Greek money and they never gave it back," he said.

Germany has rejected the allegations, describing them as "not helpful".

Germany has been one of the harshest critics of Greece since it announced that its budget deficit was four times the eurozone limits.

Icy response

Mr Pangalos told the BBC: "This is an issue that has to be faced sometime in the future.

"I don't say they have to give back the money necessarily, but they have to say thanks. And they [the German government] shouldn't complain much about stealing and not being very specific about economic dealings."

Mr Pangalos' comments elicited an icy response from German Foreign Ministry spokesman Andreas Peschke.

"I must reject these accusations," he said.

"A discussion about the past is not helpful at all to solve the problems facing us in Europe today."

In 1960, Germany paid Athens 115m German marks in compensation for the four year long occupation, in which 300,000 Greeks died.
Mr Peschke added: "I'd like to mention that parallel to this, since 1960 Germany has paid around 33bn Deutsche marks in aid to Greece both bilaterally and in the context of the EU."

Earlier this month, an article in Germany's Stern magazine outraged Greece.

The author accused Greeks of frittering away German taxpayers' savings.

Then another German magazine, Focus, further antagonised Athens with a front cover that depicted a statue of the Venus de Milo making an obscene gesture under the title "Greek cheats."

'Offensive' coverage

Following publication of the articles, the German ambassador to Athens, Wolfgang Scultheiss, was summoned to Parliament for a dressing down by the speaker, Filippos Petsalnikos.

The speaker described the German coverage as "offensive" and "surpassing all limits".

The Mayor of Athens, Nikitas Kaklamanis, has also waded into the dispute. "You [Germany] owe us 70bn euros for the ruins you left behind," he said.

The Greek Consumers' Federation has called on shoppers to boycott German goods.

A former foreign minister, Mr Pangalos has a reputation for using undiplomatic language.

His comments are the antithesis of the charm offensive mounted by the Prime Minister, George Papandreou, and his Finance Minister, George Papaconstantinou, in a bid to win European support for Greece.

But Mr Pangalos has his finger on the pulse of Greeks who blame the country's predicament on outside forces such as the financial markets and the European Union.
http://news.bbc.co.uk/2/hi/business/8536862.stm

Bernanke takes aim at Wall Street over Greece
Fed to see if banks may have contributed to a public crisis for private gain
The Associated Press
updated 11:18 a.m. CT, Thurs., Feb. 25, 2010

WASHINGTON - Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the central bank is looking into the use by Goldman Sachs and other Wall Street firms of a sophisticated investment instrument to make bets that Greece will default on its debt.

Bernanke said the Fed is looking into companies' use of credit default swaps, a form of insurance against bond defaults. Bernanke made the comments at the start of a Senate Banking Committee hearing, where the Fed chief delivered his twice-a-year economic report to Congress.

"Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive, " Bernanke said, adding that the Securities and Exchange Commission probably will be looking into this matter as well.

"We'll certainly be evaluating what we can learn from the activities of the holding companies that we supervise here in the U.S.," Bernanke said.

The panel's chairman, Sen. Christopher Dodd, D-Conn., said he is troubled that this practice could worsen Greece's debt crisis.

"We have a situation in which major financial institutions are amplifying a public crisis for what would appear to be for private gain," Dodd said.

Dodd wondered whether there ought to be limits on the use of credit default swaps to prevent "the intentional creation of runs against governments."

On another topic, Bernanke said that the snowstorms and bad weather that has recently plagued the country is likely to have a short-term — but not permanent — impact on unemployment and layoffs. He said policymakers will "have to be careful about not overinterpreting" upcoming data.

Even though the economy is growing once again, senators on both side of the aisle worried about high unemployment, now at 9.7 percent, rising home foreclosures and difficulties people and businesses have in getting loans.

"The state of our economy as a whole may be improving, but if we're talking about the situation of ordinary American families, I think I can sum up this recovery in three words: not good enough," Dodd said.

Senators pressed Bernanke for ideas about what Congress can do to help out, especially in bringing down unemployment. The Senate on Wednesday approved a package aimed at generating jobs by giving companies a tax break for hiring the unemployed.

Bernanke shied away from providing recommendations but did say that if additional stimulus measures are approved, it would be "very constructive" to pair them with a plan on how the government intends to lower record-high deficits down the road.

The Associated Press and Reuters contributed to this story.
http://www.msnbc.msn.com/id/35582624/ns/business-stocks_and_economy/

You have got to be kidding me

When will this insanity end holy smokes

Hat tip to guanosphere

Fears of a Greek bank run
March 9, 2010: 3:33 PM ET

(Fortune) -- In the middle of the 2001 debt crisis, Argentines stormed their nation's banks to get their money out. To stop the stampede, the government imposed controls that allowed them to take out only $250 at a time and limited withdrawals for overseas trips to $1,000.

Greece, in the middle of its own financial crisis, is teetering on the brink of a default. Many of its wealthier citizens are also uneasy about what lies ahead for their cash. According to estimates from private bankers in Greece and Cyprus, as much as 10 billion euros have left the country for Greek-owned bank subsidiaries in Switzerland and Cyprus in the last couple of months.

"Customers are coming...from Greece on a daily basis," says one private banker who works for a Greek bank in Cyprus. "They fly here in the morning, bring us a check and fly back to Athens in the afternoon."

One banker in Athens reports that many of his clients have sent funds out of the country in recent weeks, fearing that the government will take a bigger bite of their money. "They're afraid they'll have to pay tax on their cash," he says.

Countries in economic turmoil historically look for unpopular ways to raise revenue, according to economists. So when things start to go sour, "everyone becomes convinced that the stage is being set for higher taxes," says former IMF economist Dev Kar, the lead economist for Global Financial Integrity, an international policy research center. "People with wealth then ship their money out, so government does not come and get it when it all comes crashing down."

But growing concerns that Greece's financial crisis will spill over to its banking system appear to be driving most of the outflow. The fear isn't totally unfounded: Late last month, Fitch Ratings downgraded the country's four major private-sector banks to two notches above junk status on fears that demand for loans may plunge, denting their potential profitability .

"I'm scared," says one 40-year-old Athenian woman, who's considering taking her nest egg to Cyprus. "I want to take my money out of the country before the banks run out of cash."

Not as bad as it seems

A run on the bank, a la Argentina, is not imminent, say banking and government officials. They acknowledge that money is leaving the country, but say that reports of massive capital outflows are "grossly overstated."

"There is a trickle, but nothing like a real flight that would put the system under pressure," says Anthimos Thomopoulos, chief financial officer of the National Bank of Greece, which holds a third of Greece's 250 billion euro total deposit pool.

The situation isn't overly worrisome right now, bank and government officials say, because most of the money has flowed to those Greek-owned banks abroad and should, in theory, be easier to repatriate. What's happening, says Nikolaos Karamouzis, deputy CEO of Eurobank EFG, a private bank in Greece with 84 billion euro in assets, is "not materially significant, despite the fact that there is widespread concern among our clients."

Exactly how much cash has left the country since the crisis exploded in mid-December is hard to determine, however. According to the most recent quarterly statistics available, the national deposit pool at the end of December dropped by less than a half a percent. But analysts point out those numbers do not reflect the full impact of the crisis, which picked up momentum in January and February after the government announced its belt-tightening measures.

A pesos to drachmas comparison

Unlike Greece today, Argentina's government had an arsenal of financial tools in 2001 to deal with its crisis. It devalued the peso and imposed capital controls. But as a member of the European Union, Greece does not have those options; it can't devalue, and because the Union has rules that call for a free movement of capital within its boundaries, it can't stop citizens or businesses from moving cash from one partner country to another.

"The only way Greece could impose capital controls would be to leave the EU," says Michael Melvin, head of currency and fixed income research at global asset management firm BlackRock. "And there's close to zero probability of that."

A return to the drachma isn't likely any time soon either, but Greek citizens do have good reason to believe that taxes are going to go up. The socialist government of Prime Minister George Papandreou has already announced a slew of tax hikes, including increases in the value-added tax, new excise taxes on luxury goods, such as yachts and cars, and up to a 20% tax on cigarettes, alcohol and fuel.
0:00 /1:24Greece: Another crisis looms

In addition, a key tenet of the socialist government's plan is to go after tax cheats aggressively -- economists figure that nearly 30% of the country's gross domestic product goes unreported to authorities. For decades, Greece's shadow economy has thrived because many Greeks -- doctors, plumbers, electricians and lawyers among them -- conduct business entirely in cash. Much of that money has ended up in bank accounts in other countries, say economists -- and a lot of it is not reflected in national statistics.

"The outflow of cash from Greece is not a new phenomenon. If you could calculate the outflow of the last 50 years, you'd get an astronomical figure," says University of Maryland economics professor Theodore Kariotis. "Greeks are a very sneaky people."

The government's new rules intend to change that. Last week it announced new measures to encourage those who have transferred money out of Greece to bring it back within six months, no questions asked. They'll be taxed 5% on the total, however. Another option offered: declare the money, leave it in foreign accounts -- and be subject to an 8% tax. After that, foreign governments will cooperate with Greek tax authorities to pursue lawbreakers, says a source in the finance ministry.

Greek Finance Minister George Papaconstantinou hopes the government's new measures will produce results. "As the reform program unfolds, a lot of this lost, or quasi-lost, liquidity will come back to the system," he said in a mid-January interview. "It is an immediate concern, of course, but it is reversible."

Maybe it is, but according to economists, money that leaves a country rarely returns. "I'm not holding my breath," says Global Financial Integrity's Kar. "Once [cash] leaves, it's hard to get it back." To top of page

http://money.cnn.com/2010/03/09/news/in ... agazine%29

Hat tip to Tbar at Market Ticker:

The Biggest Greek CDS Speculator Has Been Uncovered - Culprit Is... Greek State-Controlled Hellenic Post Bank!
Submitted by Tyler Durden on 03/22/2010 22:27 -0500

We have officially moved from a Greek tragedy to a Greek surreal comedy. After nearly a month-long scapegoating campaign in which Greek PM G-Pap said he would spit in the faces and skullf#@* all those who dared to buy Greek CDS (because as we have all been lied to by everyone who doesn't know the first thing about CDS, it is CDS buying not bond selling that drives spreads), with the stupidity reaching as far and wide as the Spanish and German secret services, which said they would spy on CDS traders in London and New York, Greek daily Kathimerini has just uncovered that the biggest speculator, holding 15%, or $1.2 billion of the total $8 billion in Greek notional CDS, has been a firm that operates about 2 blocks away from the parliament building in Athens - the state-owned Hellenic Post Bank (TT)! Luckily poetic justice is about to be served, as every single media outlet tomorrow will apply the same circus monkey treatment to G-Pap and his clownshoes henchmen, not to mention the chorus of obese idiots over at the European Commission who fell for the ruse (speaking of EU idiots, has anyone heard of Jenny Craig relapse patient Joaquin Almunia in the past 2 months, with his "Greece will never demand a bailout" arrogance). While there had been speculation that Greek banks were selling Greek CDS to hedge funds, it had never crossed anyone's mind that a Greek bank could be betting on the collapse of its own sovereign host (especially one which does not own Bernanke's printing press), and that in such size! Frankly this beats even our very own AIG fiasco by orders of magnitude in stupidity.

What an unbelievable joke the intersection of global capital markets and politics has become.

Kathimerini reports that Post Bank bought $1.2 billion of Greek CDS at 135 bps in August 2009 and sold them at 235 bps in December at 235 bps, making a profit of €35 million.

More from Kathimerini:

State-controlled Hellenic Post Bank (TT) spent nearly 1 billion euros last year to secure its positions against the possible bankruptcy of the Greek government, according to documents seen by Kathimerini.

In August, the bank bought credit default swaps (CDS) – a form of insurance on financial instruments – worth 950 million euros when the spread on the Greek five-year bond over the German Bund was at 135 basis points.

CDS products allow investors to purchase protection against the default of debt issued by governments, hedging existing positions.

TT’s management, which changed after the Socialists took power in October, sold the CDS when the spread was at 235 basis points in December, earning a profit of some 35 million euros, the documents show.

Hopefully this will finally and forever force G-Pap to shut up in discussing not just the "speculative mania" whose only purpose is the destruction of Greece, but every other thing he does not understand, unless of course, he is referring to banks based in his very own country hell bent on suiciding the country...then again that would leave him with exactly zero things to discuss.

http://www.zerohedge.com/article/biggest-greek-cds-speculator-has-been-uncovered-culprit-greek-state-controlled-hellenic-post

Greek debt fears ease after EU aid request

NEW YORK (CNNMoney.com) -- Greek bonds backed off their record-high yields on Friday after the prime minister formally requested about $53 billion in financial aid from the European Union and the International Monetary Fund.

Prime Minister George Papandreou, in a letter to the European Central Bank, asked for an emergency aid package for his debt-stricken country. European finance leaders have pledged that Greece could receive nearly $40 billion at a 5% interest rate. The IMF is prepared to lend Greece more than $13 billion.

"This will allow some breathing space for the Greek authorities to tackle their awful fiscal position as liquidity worries ease, at least for the time being," said Nick Stamenkovic, fixed income strategist at RIA Capital Markets in Edinburgh, Scotland.

While investors were still plenty worried about Greece, fears eased somewhat Friday. The 10-year Greek note yielded 8.03%, a whopping 4.95 percentage points above Germany's benchmark 10-year bund. But that was down from Thursday's record-high yield of 8.8%, 5.75 percentage points above the bund.

Another bad day for Greece
Papandreou's request came a day after Eurostat, the EU's statistical authority, said Greece's 2009 budget deficit was almost $43 billion. The deficit is equal to 13.6% of the country's gross domestic product, trumping the claims of Greek officials that it was 12.7%.

The request also followed a downgrade from the credit agency Moody's, which cut the country's rating by one notch to A3, citing "significant risk."

Thursday's developments sent Athens into turmoil, with protests and worker strikes. European leaders worry that the Greek chaos through could rattle the rest of the continent.

"The market confidence had collapsed and we were at a point of market capitulation," said Stamenkovic. "The Greek government was forced into a corner by the markets."

But with aid, Greece will at least be able to meet its May 17 deadline to refinance $11.3 billion.

"The markets are still very nervous about the medium-term fiscal outlook," said Stamenkovic.

Though total chaos has now been averted, he said the Greek bond market is likely to remain volatile for some time, as Greece goes through the "long and painful process" of getting its fiscal house in order.

http://money.cnn.com/2010/04/23/news/international/greek_bonds_prime_minister/index.htm?hpt=T2

Debt Ratings Are Lowered for Portugal and Greece
By JACK EWING

FRANKFURT — Europe’s debt crisis deepened still further Tuesday after the ratings agency Standard & Poor’s downgraded Greek and Portuguese debt, investors sold off government bonds amid fears of a default, and workers in the two countries took to the streets to protest austerity measures.

S.&P. downgraded Greek government debt to junk status, saying in a statement, “Greece’s economic and fiscal prospects lead us to conclude that the sovereign’s creditworthiness is no longer compatible with an investment-grade rating.”

The ratings agency also downgraded Portuguese government bonds, but they remain well above junk status.

“This thing is getting more and more urgent and tense,” said Robert Barrie, head of European economics at Credit Suisse in London. He predicted, though, that markets could settle down once Greece manages to refinance €8.5 billion, or $11.2 billion, in bonds that mature in May. “But it’s anything but calm at the moment,” he added.

As transport workers in both Portugal and Greece went on strike against austerity measures Tuesday, the risk premium on Greece’s bonds set new records even before S.&P. announced the downgrades.

A European Central Bank official warned all euro-zone countries to cut their soaring budget deficits and suggested that Greece may need to impose even harsher austerity measures to bring its debt under control.

The central bank vice president, Lucas D. Papademos, who was governor of the Bank of Greece from 1994 to 2002, told members of the European Parliament in Brussels that the Maastricht treaty, which sets out borrowing limits for euro-zone countries, “is facing its biggest challenge since its adoption in 1997.”

Noting that market pressure on Greece has continued to increase in recent days, Mr. Papademos seemed to suggest that the turnaround plan for the deeply indebted nation needs to be more severe.

The economic program that European officials and the International Monetary Fund are negotiating with Athens in return for €45 billion in low-interest loans must “address the root causes of Greece’s fiscal imbalances and structural weaknesses, so as to ensure the sustainability of its public finances and improve the country’s international competitiveness,” he said.

Mr. Papademos’s unusually stern comments are the latest expression of concern by the E.C.B. about the risks still embedded in the European economy even though most countries have emerged from recession.

Though central bankers everywhere usually avoid politics, members of the E.C.B.’s Governing Council have been outspoken in the wake of the financial crisis on the need for better bank regulation and more fiscal prudence by governments.

At a speech in New York City late Monday, the E.C.B. president, Jean-Claude Trichet, renewed calls for changes to the global financial system to reduce the risk of future crises.

“We avoided a major depression but it was a close call,” Mr. Trichet told members of the Council on Foreign Relations, according to a text of the speech. He noted that governments in Europe and the United States invested the equivalent of a quarter of their gross domestic product to keep their banks and economies afloat.

“I am convinced that, if we do not reinforce significantly the resilience of the financial system, our democracies will not accept for a second time such a very large scale of rescue operation,” Mr. Trichet said.

Mr. Papademos’s comments in Brussels came amid more signs of widespread political tension in Europe stemming from the debt crisis.

Portuguese public transport workers went on strike against a government austerity plan intended to cut the budget deficit to 2.8 percent of G.D.P. in 2013 from 9.4 percent last year, Reuters reported.

Public employees, who face a salary freeze, complain that they are bearing most of the pain. “It cannot only be the workers who pay,” said Manuel Leal, spokesman for the Fedtrans transport union, according to Reuters.

Greek transport workers also walked off the job Tuesday to protest austerity measures, while the country’s labor unions called a national strike for next week.

Bond investors on Tuesday once again expressed pessimism that Greece will be able to repay its debt, equal to 115 percent of G.D.P., without a restructuring plan that would spread out the payments. Such a plan would effectively cut the value of Greek bond holdings.

German politicians including Frank-Walter Steinmeier, leader of the opposition Social Democrats in parliament, have fed speculation about a restructuring plan by calling for banks to share the costs of a Greek rescue. Greek and European leaders say restructuring is not on the table.

Investors demanded a premium of 6.8 percentage points for Greek 10-year bonds Tuesday compared to the equivalent German bond. The spread hit a 12-year high, according to Reuters, and implied that Greece would have to pay interest of about 10 percent if it were to issue bonds now.

The risk premium on Portuguese debt hit 2.78 percentage points compared to the German benchmark bond, the highest level since the introduction of the euro in 1999.

While singling out Ireland, Greece and Spain for their budget deficits, Mr. Papademos said all European countries needed to cut borrowing.

He said all 16 euro-zone members are expected to be in violation of the treaty which limits deficits to 3 percent of G.D.P. per year this year. And on average, euro-zone countries’ total debt will rise to 87 percent of G.D.P. in 2010 compared with 66 percent in 2007, Mr.

Papademos said.

“The persistence of sizeable fiscal imbalances in Europe and elsewhere may undermine the public’s trust in the sustainability of public finances and entail risks to economic growth and to financial stability,” he said.

Without naming specific countries, Mr. Papademos complained that some deficit-reduction plans lack specifics and are based on overly optimistic projections for economic growth.

Echoing Mr. Trichet’s comments in New York, Mr. Papademos called for tighter financial regulation, including stricter rules on how much capital banks must hold. He also said the new rules should cover “all systemically important financial institutions” — a reference to hedge funds, which are now largely unregulated.

“It is crucial that the momentum for regulatory reform does not wane,” he said.

http://www.nytimes.com/2010/04/28/business/global/28drachma.html?src=busln

First Greece, Now here goes Portugal

ATHENS (AP) -- The government debt crisis that has shaken Europe's shared currency widened and intensified Tuesday as Portugal saw its credit rating cut -- and Greece's was reduced to junk status.

Stocks slid worldwide on the news of the double blow that increased the likelihood of a continent-wide debt meltdown and more market turmoil.

Ratings agency Standard & Poor's sent shock waves around the markets after it downgraded the debt of the two countries and warned that holders of Greek debt could take large losses in any restructuring.

That's not a huge surprise -- the markets increasingly expect Greece's debt will be restructured at some stage even after a euro45 billion rescue package from its 15 partners in the eurozone and the International Monetary Fund.

The real worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone.

One bailout can be dealt with but two will be stretching it -- can Germany, Europe's effective paymaster, continue to bail out the weaker members of the eurozone?

The downgrade of Portugal brought those fears to the fore, after weeks of unsuccesful efforts by European leaders to calm markets.

The crisis threatens to undermine the euro and make it harder and more expensive for all governments to borrow money -- the euro slid over 1 percent following the downgrades to trade at $1.3240, not far off an eight month low.

It has also disrupted cooperation between euro zone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.

Nevertheless, most investors think that Greece will have enough money to avoid default in the coming weeks. The future is cloudier.

Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money in its coffers to make the euro8.5 billion bond payments due on May 19.

Even if it gets it, Greece faces years of austerity with living standards sharply reduced -- Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.

With the economy nosediving, debt repayments accumulating and the society restive and fearful, it takes a brave soul to back the Greek government, led by Prime Minister George Papandreou, to pull through without changing the terms of the debt repayments.

"The latest developments mean that the chances of Greece solving this situation without restructuring its debts are now dim," said Diego Iscaro, senior economist at IHS Global Insight.

As in the financial crisis following the collapse of Lehman Brothers in 2008, investors around the world are fearful about who holds what debt and how much.

Unsurprisingly, stocks tanked.

"We have the makings of a market crisis here," said Neil Mackinnon, global macro strategist at VTB Capital.

The FTSE 100 index of leading British shares closed down 2.6 percent, Germany's DAX slid 2.7 percent and the French CAC-40 in France ended 3.8 percent lower. On Wall Street, the Dow Jones industrial average was down over 100 points in mid-afternoon trading, while the broader Standard & Poors' 500 index fell back below 1,200.

Greek and Portuguese shares were pounded, down 6.7 percent and 5.4 percent, while their market borrowing costs went through the roof -- the interest rate for Greek two-year bonds jumped to a massive 18 percent. That's hardly surprising when one of the world's agencies does not even attach an investment-grade rating on the country's bonds. Junk status means that Greece will have to pay higher costs to borrow if it taps debt markets again.

Meanwhile the interest rate gap, or spread, between Portuguese and benchmark German 10-year bonds -- a key indicator of market skepticism -- rose 57 basis points even before the downgrade to hit 5.86 percentage points. The higher the gap, the less confidence in Portugal -- and it was the widest gap since the shared euro currency, which Portugal and 15 other nations use, came into circulation.

Both governments have imposed budget cutbacks against political resistance from unions at home. Markets have been skeptical that they can push through enough cuts, given political resistance, to put their finances in order.

Both governments responded with alarm at the downgrades.

Greek finance minister George Papaconstantinou siad the downgrade "does nor reflect the real state of our economy, nor the fiscal situation, nor the ongoing negotiations which has the very realistic propects that they will be completed successfully in the next few days."

Nevertheless, he said Greece would pull through.

"One wishes that Europe had acted a little differently. Three and four months ago we were saying that the mechnism must be ready and it must be detailed, that the markets must know what exactly is going. Unfortunately, for a series of political reasons, we are down to the wire," he said.

Meanwhile, Portugal's Finance Minister Fernando Teixeira dos Santos said the downgrade would only make things worse.

"This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Teixeira dos Santos said.

A further worry is that the crisis spreads to Spain, considered too big to be bailed out.

The crisis has also highlighted the inability of the rules set up to support the euro to keep governments from undermining the currency by running up big debts. Those rules limited deficits to 3 percent of grosse domestic product but have been widely flouted, and EU officials are talking about ways to strengthen them.

http://finance.yahoo.com/news/Europe-de ... et=&ccode=

Greece Bondholders May Lose $265 Billion in Default (Update2)

April 28 (Bloomberg) -- Holders of Greek bonds may lose as much as 200 billion euros ($265 billion) should the government default, according to Standard & Poor’s.

The ratings firm yesterday cut Greece three steps to BB+, or below investment grade, and said bondholders may recover only 30 percent to 50 percent of their investments if the nation fails to make debt payments. Europe’s most-indebted country relative to the size of its economy has about 296 billion euros of bonds outstanding, according to data compiled by Bloomberg.

The downgrade to junk status led investors to dump Greece’s bonds, driving yields on two-year notes above 25 percent today from 4.6 percent a month ago as concern deepened the nation will delay or reduce debt payments. Prime Minister George Papandreou is grappling with a budget deficit of almost 14 percent of gross domestic product.

“It’s now not just market sentiment, but a top rating agency sees Greek paper as junk,” said Padhraic Garvey, head of investment-grade strategy at ING Groep NV in Amsterdam.

The yield on Greece’s 4.3 percent security due March 2012 surged 531 basis points, or 5.31 percentage points, to 24.3 percent as of 10:50 a.m. in London, after earlier climbing to a record 25.38 percent. Before yesterday, Greece’s bonds had lost about 17 percent this year, according to Bloomberg/EFFAS indexes. Yields move inversely to bond prices.

Relative Ratings

S&P’s reduction of Greece puts the nation’s debt on par with bonds issued by Azerbaijan and Egypt. Moody’s Investors Service rates Greece A3, while Fitch Ratings puts it at BBB-.

The turmoil comes as European Union policy makers struggle to agree on measures to ease the panic over swelling budget deficits. Leaders of the 16 euro nations may hold a summit after the Greek government’s decision last week to tap a 45 billion- euro emergency aid package failed to reassure investors, a European diplomat and Spanish official said.

German Chancellor Angela Merkel said she won’t release funds for the indebted nation until its government has a “sustainable” plan to reduce the deficit.

The reduction may force investors who are prevented from owning anything but investment-grade rated bonds to sell. S&P indicated the downgrades may not be over, assigning Greece a “negative” outlook.

“The downgrade results from our updated assessment of the political, economic, and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory,” S&P London-based credit analyst Marko Mrsnik said in a statement.

Credit-Default Swaps

Traders of derivatives are adding to bets that Greece will fail to meet its debt payments.

Credit-default swaps on Greek government bonds climbed 77 basis points to a record 901, according to CMA DataVision. The level implies the highest probability of default of any country tracked by CMA, surpassing Venezuela and Argentina for the first time.

Default swaps on Portugal and Spain also advanced to all- time highs, with Portugal jumping 20 basis points to 406 and Spain rising 2 basis points to 211, according to CMA.

The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Yields Jump

Minutes before lowering Greece’s ratings, S&P cut Portugal to A- from A+. Yields on Portugal’s two-year notes climbed 96 basis points to 5.75 percent.

The yield on Italy’s two-year bonds rose 10 basis points to 1.83 percent and Spanish two-year yields increased 27 basis points to 2.31 percent.

The downgrades may force banks to boost the amount of capital they’re required to hold against bets on sovereign debt, said Brian Yelvington, head of fixed-income strategy at broker- dealer Knight Libertas LLC in Greenwich, Connecticut.

While bank capital rules give a risk weighting of zero percent for government debt rated AA- or higher, it jumps to 50 percent for debt graded BBB+ to BBB- on the S&P scale and 100 percent for BB+ to B-.

“These downgrades are going to cause people to increase their risk weightings,” Yelvington said.

http://www.bloomberg.com/apps/news?pid= ... 3ThE&pos=6