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Greek Leaders Seek Deal as Bankrupty Looms


















Tuesday, 07 Feb 2012 07:04 AM













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Under intense pressure from bailout creditors, Greek party
leaders on Tuesday will seek a long-delayed agreement on harsh cutbacks
demanded to avoid looming bankruptcy, as a general strike disrupted
public services nationwide.

Heads of the three parties backing the interim government will confer
with Prime Minister Lucas Papademos on new income cuts and job losses,
which Greece's eurozone partners and the International Monetary Fund are
demanding to keep the country's vital rescue loans flowing.

A general strike against the impending cutbacks stopped train and
ferry services nationwide, while many schools and banks were closed and
state hospitals worked on skeleton staff.

Unions were planning two separate protest marches in central Athens,
which will be closely policed as previous demonstrations over the past
two years of economic pain have turned violent. In May 2010, three
workers died in an Athens bank torched by rioters.

On Monday, Prime Minister Lucas Papademos' government caved in to
demands to cut civil service jobs, announcing 15,000 positions would go
this year, out of a total 750,000. The decision breaks a major taboo, as
state jobs had been protected for more than a century to prevent
political purges by governments seeking to appoint their supporters.

The EU and IMF are also pressing Greece to deeply cut the euro751
($979) minimum wage, which can lead to knock-on reductions in private
sector salaries and even unemployment benefits. Unions and employers'
federations alike have deplored the measure as unfair and unnecessary.

In the private sector, unemployment has hit a record high of more than 19 percent amid a fifth year of recession.

Athens must placate its creditors to clinch a euro130 billion ($170
billion) bailout deal from the eurozone and the IMF and avoid a March
default on its bond repayments.

"It is clear that there is a lot of pressure being put on the
country. A lot of pressure is being placed on the Greek people," Finance
Minister Evangelos Venizelos said during a break in talks with EU-IMF
debt inspectors late Monday.

He called on coalition parties to work more closely together.

"No one is as strong as Hercules on his own to face the Lernaean
Hydra," a swamp monster in Greek mythology, he said. "We must all,
together, fight this battle, without petty party motives and slick
moves."

A disorderly bankruptcy by Greece would likely lead to its exit from
the eurozone, a situation that European officials have insisted is
impossible because it would hurt other weak countries like Portugal.

But on Tuesday, the EU commissioner Neelie Kroes, in chage of the
bloc's digital policies, said Greece's exit wouldn't be a disaster.

Kroes told Dutch newspaper De Volkskrant that "It's always said: if
you let one nation go, or ask one to leave, the entire structure will
collapse. But that is just not true."

Greece has been kept solvent since May 2010 by payments from a
euro110 billion ($145 billion) international rescue loan package. When
it became clear the money would not be enough, a second bailout was
decided last October.

As well as the austerity measures, the bailout also depends on
separate talks with banks and other private bondholders to forgive
euro100 billion ($131.6 billion) in Greek debt. The private investors
have been locked in negotiations over swapping their current debt for a
cash payment and new bonds worth 50 percent less than the original face
value, with longer repayment terms and a lower interest rate.

Greek government officials say they expect private investors to take losses of up to 70 percent on the value of their bonds.

However, the EU-IMF bailout has to be secured for the deal with
private investors to go ahead as about euro30 billion from the bailout
will be used as the cash payment in the bond swap deal.

Greece's coalition party leaders held a first key meeting on the
austerity measures on Sunday, and postponed a second round of talks by a
day so Papademos could complete negotiations with EU-IMF debt
inspectors that ended early Tuesday.

The leaders have already agreed to cut 2012 spending by 1.5 percent
of gross domestic product — about euro3.3 billion ($4.3 billion) —
improve competitiveness by slashing wages and non-wage costs, and
re-capitalize banks without nationalizing them. But the details remain
to be worked out.

Creditors are also demanding spending cuts in defense, health and social security.

European Commission spokesman Amadeu Altafaj Tardio said Greece is already "beyond the deadline" to end the talks.

And German Chancellor Angela Merkel warned that "time is pressing," and "something has to happen quickly."



© Copyright 2012 The Associated Press. All rights reserved.
This material may not be published, broadcast, rewritten or
redistributed.

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But on Tuesday, the EU commissioner Neelie Kroes, in chage of the
bloc's digital policies, said Greece's exit wouldn't be a disaster.

Kroes told Dutch newspaper De Volkskrant that "It's always said: if
you let one nation go, or ask one to leave, the entire structure will
collapse. But that is just not true."

If this is true , why didn't they let Greece default a long time ago when their debt wasn't so high.?

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Spain, Greece protests against spending cuts














Thousands of protestors in Greece -- hundreds of
thousands in Spain -- took to the streets Sunday to protest spending
cuts they say will force ordinary people to bear the brunt of the debt
crisis.
As Greek Prime Minister Lucas Papademos flew out to
Brussels to try to clinch a new 130-billion-euro bailout for the
debt-crippled country, 3,500 joined two separate rallies in the Greek
capital.
Another 1,200 meanwhile demonstrated in the second city of Thessaloniki.
In Spain, there were protests in more than 50 towns and cities. The largest were in Madrid and [color:230d=blue !important][color:230d=blue !important]Barcelona, Spain's second city, both of which drew hundreds of thousands of demonstrators, said AFP reporters at the scene.
In
Athens, hundreds of police shadowed the latest demonstrations, held a
week after parliament passed new austerity measures as rioters torched
dozens of buildings in the Greek capital.
A group of youths on
Sunday threw stones and bottles at a cordon of riot police guarding the
parliament building, who retaliated with bursts of tear gas.
Papademos
was set for talks with officials in Brussels ahead of Monday's crucial
Eurogroup meeting of eurozone ministers, his office said. A European
source told AFP that Papademos would also attend the Eurogroup meeting.
On
the streets of Athens however, anger was growing against what many
people here resent as stringent measures imposed from abroad.
"We
Are Greeks, Merkel and Sarkozy Are Freaks," said one banner on the
streets of Athens, referring to the German and French leaders.
The
latest government measures include a 22-percent cut in the minimum
wage, while pensions of more than 1,300 euros ($1,700) a month will be
slashed by 12 percent, heaping further hardship on ordinary Greeks.
"The
measures are the worst thing that could have happened. It is
outrageous," said pensioner Christos Artemis. "All the people are
suffering. Shortly we will be asking ourselves where the bread is."
Unions
reject what they brand "unacceptable demands" set by the European Union
and the International Monetary Fund, saying they violate workers'
rights and collective agreements.
But EU Justice Commissioner Viviane Reding said Greece should focus on getting itself out of its economic mess.
"I
wish the Greeks would concentrate on rebuilding their state rather than
blaming scapegoats outside Greece for their plight," Reding, who is
also vice-president of the European Commission, told the Austrian daily
Kurier.
In the Spanish capital Madrid, protesters marched under
sunny skies in a demonstration organised by the two largest unions, the
CCOO and UGT.
At the head of the march was a large banner that
read "No to the unfair, inefficient and useless reform" and the crowd
chanted "strike! strike! strike!" as it made its way to the central
Puerta del Sol square.
"We have to take action," said 44-year-old
unemployed construction worker Victor Orgando, who wore a black hat
decorated with a red CCOO union sticker.
"They start like this and then they will continue to eliminate rights."
Among
the participants were members of the "indignant" social protest
movement that sprang up across Spain before local elections in May; and
teachers protesting education spending cuts.
"I am here because of
the labour reforms but also because of the cuts to public services,"
said Clemencia Alvarado, a 54-year-old Madrid teacher who wore a green
protest T-shirt.
Many of the protestors made a similar point,
objecting not just to the latest labour market reform measures but to
the government spending cuts aimed at reining in the public deficit.
Under
the reform approved by Prime Minister Mariano Rajoy's government on
February 11, maximum severance pay is slashed to 33 days' salary for
each year worked from 45 days, going back 24 years at most.
It also makes it easier for companies to opt out of sector-wide or country-wide union collective wage agreements.
The
government has made the labour market reform, along with steep spending
cuts and a plan to clean up the country's banks, a cornerstone of its
efforts to revive the economy.
Rajoy defended the labour reform at
a congress of his Popular Party in Seville, saying it was "fair, good
for Spain and necessary.
"This is the reform that Spain needs to
stop it from being the country in Europe that destroys the most jobs. It
puts us on the same level as the most advanced countries in Europe," he
added.
Unemployment in Spain has tripled since 2007, when it
dropped to a low of 7.95 percent a year before the property bubble
burst, laying waste to millions of jobs in the construction sector.

© 2011 AFP

[Badboy]

I WAS READING THAT IN GREECE ECOMMERCE IS BOOMING TO THE TUNE OF BILLIONS OF EUROS.

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certain hard line countries within the eurozone, particularly those which have the strongest credit ratings in the EU.

Finland, Austria, the Netherlands and Germany asked for further assurances from Athens that the savage cuts will continue to be implemented after the general election, which is likely to be held this spring.


Political leaders signed letters to that effect last week, but not
before Wednesday's meeting of the eurogroup was cancelled, suggesting
patience in Brussels was running low.


US Treasury secretary Tim Geithner said America would encourage the International Monetary Fund to support an agreement on Greek economic reform implementation.


On the weekend another piece of the jigsaw required to release the
bailout fell into place, although it still has to be signed off by the
Eurogroup.


Negotiators for private holders of Greek debt, including banks and
hedge funds, have agreed to take a massive loss on the bonds they hold
in order to reduce the country's debt mountain.


In exchange they will receive bonds of a lower value and cash
sweeteners in a restructuring deal which has now been scheduled for
between March 8 and 11.


That is just over a week before Greece has to service a bond
redemption of 14.5bn euro. At the moment, it does not have the money.











More than 40 members of the ruling Greek coalition refused to back reforms




Failure to settle its debt would be considered a so-called credit event, where insurance policies - credit default swaps - would be triggered.


That could start a chain reaction similar to that seen after the collapse of Lehman Brothers in 2008.


The fear for Mr Papademos is that some of the countries around the
table today have decided a big enough buffer zone has been built around
banks and countries exposed to Greek debt to withstand a default.


Meanwhile amid a recent upsurge in violence in Athens, further scuffles occurred on Sunday evening as protesters engaged in running battles with riot police outside parliament.


On Tuesday union members affiliated with the communist party are
expected to hold their own protest rally and march to parliament.

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19 February 2012
Last updated at 22:46











Huge Spain rallies condemn labour market reforms




















Spain protests at labour reforms







Continue reading the main story Related Stories

• Spaniards fight housing evictions
  
• Spain sets out new spending cuts
  
• What's the matter with Spain?
  

Mass protests have been held across Spain against the conservative government's labour market reforms.

The trade unions which organised the rallies said half a
million protesters marched through Madrid. Police put the turnout in the
capital at about 50,000.

Spanish media say protests took place in 57 towns and cities.

There was anger at a labour reform law that cuts severance
pay and gives employers more flexibility over jobs. The unemployment
rate has reached 23%.

The motto of the protests was "no to the labour reform that
is unfair to workers, inefficient for the economy and useless for jobs,"
Spain's El Pais news website reports.

On 10 February the government of Mariano Rajoy approved a law
reducing maximum severance pay to 33 days' salary for each year worked,
compared with the current 45 days.

Employers will also be able to lay workers off outside Spain's traditional sector-wide collective bargaining arrangements.

Spain's unemployment rate is the highest in the EU, hitting young job-seekers especially hard.

The BBC's Tom Burridge in Madrid says several of the capital's main avenues were packed with demonstrators on Sunday.

There were calls for a general strike, and our correspondent
says that is likely to be the unions' next option. But it is something
the Spanish government is desperate to avoid.

The government insists the reforms will create a more
flexible system for businesses and workers, in a country with a stagnant
economy that needs to start creating jobs.

Barcelona saw the second largest rally - about 400,000
according to the unions, while the Catalan Interior Department put the
crowd at 30,000.

• 
  
  
  
  

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A Greek who used to own a Business installing Bathrooms employing 14 men, is now finding it hard to feed his family. He believes the austerity measures
are too severe but also recognises successive Greek Goverments have done little to improve the Countrys' Income like collecting taxes. He said the Greeks
do not like paying Taxes and he was often asked to produce a second Invoice for customers showing a higher price so that the customer would not have
to pay Tax, this is a common preactice everywhere.

Indusview Analyst questions the austerity methed because these demand a cutback in defence for Greece , job creation and infrastructure.

He believes this is this is a pure technicality that it is not a default and it remains to be seen whether it is orderly or not.

If Greece leaves the Euro, the Drachma will be the local Currency and will have little value against the Euro which will still be Legal Tender .

Greece has to pass a Law to force Banks to accept the deal.

There are risks to the Euro that volatility is still going to affect the currency . The ECB can sort out the monetary side but the Sovereign side needs to
be sorted.

Today's meeting in Brussels will be attended by Christine La Garde President of the IMF and Papademos, Greek President.

A spokeswoman for Bank of America says even if the loan is agreed, and there are private Bondholders to consider, will the measures be implemented
by Greece?

[Angelina]

Sounds to me like Greece needs to get real and have a complete culture change. No-one can go on and not pay taxes...it's the proverbial can't get blood out of a stone. They're a hopeless case and need to be chucked out of the Euro.

[Panda]

Sounds to me like Greece needs to get real and have a complete culture change. No-one can go on and not pay taxes...it's the proverbial can't get blood out of a stone. They're a hopeless case and need to be chucked out of the Euro.

Morning Angelina, the EU knew from day 1 that Greece would not comply with all these austerity measures but 2 years down the line Greece has a debt it would take generations to pay while the austerity measures continue. Merkel and Sarcozy were terrified of the repercussions if Greece defaulted so
wanted Greece to stay in the Euro , as did the rest of the World. The end result is that after 2 years and Greece even more in debt, nothing is set in stone.
Will successive Greek Governments adhere to the agreement? Will the Greek population accept the austerity ad infinitem? Will the destruction and theft
of artefacts continue? You can take a horse to water but you can't make it drink.

[Angelina]

I just hope this new loan (I'm sure they will get it) is given in drips, that way if they are seen to be reneging on their promises any further funding can stop immediately.

ETA ...good morning Panda, I'm forgetting my manners (got out of bed the wrong side!)

[Panda]

I just hope this new loan (I'm sure they will get it) is given in drips, that way if they are seen to be reneging on their promises any further funding can stop immediately.

ETA ...good morning Panda, I'm forgetting my manners (got out of bed the wrong side!)

Morning Angelina, there was talk of this E130 billion being placed in a seperate account and as you suggest, being paid in dribs and drabs, which will infuriate the Greek Government and population even more.

There is currently an analysis by a HSBC Analyst who is very good. He points out that investment generally has been affected which in turn affects Pension Funds because of the EURO turmoil. He also says there is concern over the way the Greek Bonds in particular , plus other Euro Countries who are selling ,are being bought by the ECB which was never part of it's remit. If Greece defaults and the ECB is seen as Senior Holder, will this affect other Bond holders. He also believes Britain is not doing too badly, neither is Ireland, that Italy has been busy putting money into German Banks and how would the Bumd fare if Italy took it's money out. He also believes that Banks, Investment Companies, even Governments have made preparations in the event
of a Greek default.

Schauble says the EURO is better placed than it was 2 years ago to accept a Greek default .

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Feb 20, 7:57 AM EST Greece awaits bailout decision but issues remain By GABRIELE STEINHAUSER and JAMEY KEATEN Asssociated Press

AP Photo/Kostas Tsironis Business Video Advertisement Latest News Greece awaits bailout decision but issues remain Carlsberg Q4 profit triple amid focus on cost-cuts Bank of Ireland returns to net profit, deposits up Greek premier rushes to Brussels to secure bailout Buy AP Photo Reprints Interactives Greece's Debt Threatens to Spread State budget gaps map Auto industry problems trickle down, punish Tennessee county Women give old Derby hats a makeover in tough economy S.C. town deals with highest unemployment in South How mortgages were bundled and sold as securities Tracking the $700 billion financial bailout Tracking the year's job losses State-by-state foreclosures since 2007 Credit crisis explained Presidents and their economic legacies Lexicon of the financial crisis Americans' addiction to debt BRUSSELS (AP) -- Eurozone governments are due to sign off on Monday a long-awaited rescue package for Greece, saving it from a potentially calamitous bankruptcy next month, senior officials said. But finance ministers meeting in Brussels still have a few last issues to wrangle over, such as tighter controls over Greece's spending and further cuts to the country's debt load. Greece needs to secure the euro130 billion ($170 billion) bailout quickly so it can move ahead with a related euro100 billion ($130 billion) debt relief deal with private investors, which needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20. "I am of the opinion that today we have to deliver, because we don't have any more time," Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said as he arrived in Brussels. An uncontrolled bankruptcy would likely force Greece to leave the 17-country currency union and return to its old currency, the drachma, further shaking its already beaten economy and creating uncertainty across Europe. French Finance Minister Francois Baroin told Europe-1 radio that while details will have to be worked out, "the political commitments have been made" for the bailout package, Greece's second in two years. "We now have all the elements of a deal: elements of a participation that remains voluntary for banks and private creditors, and for public creditors - states, central banks," Baroin said ahead of the meeting. Apart from the finance ministers of the 17 euro countries, the get-together will also be attended by the heads of Greece's other creditors: the International Monetary Fund, the European Central Bank and representatives of private holders of Greek debt. Greece's Finance Minister Evangelos Venizelos, who arrived in Brussels Sunday night, said he was also optimistic that the new aid program could be agreed. "Greece comes into today's Eurogroup meeting having fulfilled all the requirements for the approval of the new program," he said. "For Greeks, this is a matter of national dignity and a national strategic choice and no other integrated and responsible choice can be opposed to it." The Greek parliament has faced down violent protests in Athens and nationwide strikes to approve the austerity and reform measures demanded by the eurozone. Its main political leaders have committed in writing to uphold the bailout terms even after general elections in April. Despite Athens' efforts, however, several important elements of the deal remained unsolved. To convince the rest of the eurozone that the new aid money won't be squandered, Greece is expected to be forced to set up a separate account that would ensure that it services its debt. This escrow account would give legal priority to debt and interest payments over paying for government services. The idea behind such an account is that it would maintain pressure on Greece to stick to promised austerity and reform measures, without the eurozone risking the destabilizing effects of a default. Eurozone finance ministry officials Sunday night concluded that only funds from the bailout would be funneled through the account and that Greece won't be required to pay in taxpayer money, German Finance Ministry spokeswoman Marianne Kothe said in Berlin, citing the current state of the negotiations. The escrow account nevertheless would be an unprecedented intrusion into a sovereign state's fiscal affairs and could ultimately see Greece force to pay interest on its debt rather than its teachers, doctors or other government employees. A Greek official indicated Monday that "many problematic and unenforceable" elements were taken off the table, but declined to elaborate. The official was also speaking on condition of anonymity because the talks were ongoing. The second big outstanding issue is how to make sure that the current efforts to save Greece can actually bring the country's debts down to a manageable level in the longer term. In October, eurozone leaders and the IMF said that Greece's debt should be reduced to around 120 percent of annual economic output by 2020, from above 160 percent currently. But a new report prepared by the European Commission, the ECB and the IMF concluded that the new bailout, Athens' spending cuts and a planned euro100 billion debt relief from private investors would still leave Greece's debt at almost 129 percent of economic output by the end of the decade. The eurozone is still discussing several ways to close this financing gap. The Greek official said there appeared to be agreement on further reducing the interest rate on Greece's first, euro110 billion bailout as well as having national central banks in the eurozone, which also hold some Greek bonds, participate in the debt relief. But the official said that there was still no final decision from the ECB on whether it would be willing to transfer profits from its Greek bond holdings back to Athens. In contrast to the national central banks, who purchased Greek bonds as part of their overall investment strategies, the ECB bought its Greek holdings in an effort to ease market pressure on Athens. A fourth option for closing the gap would be to demand further losses from Greece's private bondholders like banks and other investment funds. A current plan foresees private creditors to swap their old Greek bonds for new ones with half the face value, lower interest rates and much longer repayment periods. But now there is a push for bondholders to also give up on an accrued interest payment of around euro5.5 billion on their old bonds. Another issue due to be discussed Monday is how much the IMF will contribute to the new rescue. The Washington-based fund has provided one-third of the bailouts for Ireland and Portugal and chipped in euro30 billion for Greece's first euro110 billion ($145 billion) rescue. But this time around, it looks as if the IMF will put up much less than one-third. "The indication is that the figure will be rather low," a European Union official said Sunday, adding however that a final decision from the fund's board is still outstanding. IMF Managing Director Christine Lagarde will also be at the Brussels meeting Monday. The official was speaking on condition of anonymity because talks about the IMF contribution were not yet concluded. The U.S. has expressed support for the IMF to take part in an aid program for Greece. "This is a very strong and very difficult package of reforms, deserving of support of the international community and the IMF," U.S. treasury chief Timothy Geithner said in a statement Sunday. "The United States will encourage the IMF to support this agreement." The Greek government is expected to introduce in Parliament on Monday another two pieces of emergency legislation, including wage and pension cuts. There were scattered protests over the cuts in Athens on Sunday. --- Keaten reported from Paris. Juergen Baetz in Berlin and Elena Becatoros in Athens, Greece, contributed to this story. © 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

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European Ministers Are Poised to Approve Greek Rescue



Thanassis Stavrakis/Associated PressPedestrians passed a shoe shiner in Athens on Monday.
By STEPHEN CASTLE

Published: February 20, 2012







BRUSSELS — After months of fraught negotiation, euro zone finance ministers were poised to bring Greece back from the brink of default Monday by agreeing to a second giant bailout in exchange for severe austerity measures — and subject to strict conditions.


Multimedia




Interactive FeatureTracking Europe's Debt Crisis


Ahead of the crucial meeting in Brussels, the French Finance Minister Francois Baroin said that all the conditions were in place for the €130 billion, or $172 billion, bailout, a package that would also see private investors in Greek debt taking steep losses on their holdings.
The Greek Finance Minister Evangelos Venizelos said his government also believed it had met all the conditions for a second bailout to be released.
“We expect today the long period of uncertainty — which was in the interest of neither the Greek economy not the euro zone as a whole — to end,” Mr. Venizelos said in a statement issued after his arrival in Brussels. “The Greek people send to Europe the message that they have made, and will make, the necessary sacrifices for our country to regain its position of equality within the European family.”
A decision to sign off on the rescue could mark another turning point in the debt crisis, which has raised questions about the viability of the euro itself.
Stricter rules on controlling euro zone debt and budget deficits are already in place, and next week European leaders are expected to agree on a new, higher, firewall for euro countries that get into financial trouble — a step that policy makers hope will mark the beginning of the end of the saga.
Nevertheless Greece still remains an Achilles heel for the 17-nation currency because of doubts about its ability to implement the tough measures pushed through Parliament, or to manage an economy that is slipping further into recession.
The steady deterioration of the public finances in Athens have left the country’s creditors with problems in making the figures for Monday’s bailout add up.
Under the bailout terms Greece is supposed to reduce its enormous debt stock to 120 percent of gross domestic product by 2020, from about 160 percent now. However, the latest estimates suggest that figure would be closer to 129 percent, leaving a financing gap that the euro zone, the European Central Bank and the International Monetary Fund need to see plugged Monday.
Any deal is likely to be accompanied by controls that represent an unprecedented intrusion into the economic management of a sovereign nation.
The bailout cash is likely to be paid into a special “escrow” account that will prioritize debt servicing before money is released to general government coffers.
Greece will also be encouraged to accept outside help to improve its administration and, in particular, its tax collection system.
“We have all the elements for an agreement” Mr. Baroin said on Europe 1 radio ahead of the meeting, which was scheduled to start around 3.30 p.m. Brussels time.
“There are many structural reforms underway. We can’t wait because of the payment that is due in March,” he added, referring to a €14.5 billion repayment of Greek debt due on March 20.
The second bailout was first promised last October, but agreement has been delayed as international creditors pressed for more concessions from Greece and stricter controls on its government.
Critics, who suspected that Greece was banking on the euro zone’s desire to avert a default, accused the government in Athens of stalling on essential economic measures. Meanwhile, the caretaker government in Athens, led by Lucas Papademos, had to cope with mounting opposition to austerity measures
As temperatures rose last week the Greek finance minister suggested some were trying to drive his country out of the euro and the Greek President, Karolos Papoulias, accused the German finance minister, Wolfgang Schäuble, of insulting Greece.
Mr. Papademos flew to Brussels to oversee Monday’s talks, underlining the fact that, after weeks of brinkmanship and some bitter exchanges, there was political will to seal a deal.
Even politicians from the “triple A” rated countries in Europe seemed ready to give Greek politicians some credit.
In Helsinki, the Finnish Finance Minister, Jutta Urpilainen , said that Greece had done what had been asked of it. “A big issue is that we have to get Greece’s debt on a level that is sustainable and enables Greece to survive,” she added, Reuters reported.
Niki Kitsantonis contributed reporting from Athens.





A version of this article appeared in print on February 21, 2012, in The International Herald Tribune.

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Eurozone crisis

Impunity rules banana republic of Greece





20 February 2012

De Morgen
Brussels








Vlahovic






The greatest problem facing Greece is not lack of money
bit a clientelist system that is accountable to no-one, writes a Greek
journalist.



Kostas Karkagiannis



You are possibly fed up with the Greek crisis, and so are
Europe’s leading politicians. Doubtlessly you think that Greece’s
problems are of a financial nature: lack of competitiveness, gargantuan
debts and deficits, and a counterproductive public sector. You are
right, but these are just the tip of the iceberg.

The heart of the problem lies firstly in its anarchic and poorly
functioning legal system, and secondarily on the existence of a
clientelist system based on political favours, services rendered,
corruption and a monstrous bureaucratic machine that only serves its own
interests, that crushes entrepreneurship and ravages the Greek
population. It is this which holds back progress in the financial
domain.

From the very start of the crisis it was clear that the Greek
political class would fight to retain this clientelist system, whose
beneficiaries form part of the public sector, the unions and the above
all the private sector that is state-financed. In Greece, the social
contract that has been in place for 35 years (or more) assumes that the
citizen votes for a certain party in return for a public sector job
(for the small fry) or an overpriced government contract (for the big
fish).

Lawlessness rules in Greece


In the system which reigns in Greece, polticians have never been
accountable and the legal system has been powerless. The Greek
constitution (shamelessly, even eagerly, embraced by the two largest
political parties) considerably limits the possibility of instituting
legal proceedings against politicians. The result is that no Greek
politician has ever been prosecuted, not even in sensational cases such
as the Siemens and Vatopaidi affairs.

Theodoros Tsoukatos, a close associate of ex-premier Kostas Simitis
in the nineteen nineties, admitted in September 2010 to the Greek
parliament that in 1999 he received from a German company a bribe of 1
million German marks that he passed on to PASOK, his party. According
to Tsoukatos, all major Greek political parties accept bribes from
private companies. The 1 million marks was never traced and the
accounts of the party were never investigated. A number of Siemens'
managers were prosecuted in Germany, but not in Greece.

In 2008, the Vatopaidi affair erupted. The affair concerned the
exchange of high-value public land for less valuable land that was the
property of a monastery. The agreement cost the state an estimated 100
million euros. In 2010, the Greek parliament decided that the five
former ministers should stand trial, but the alleged offences had
already been dropped in 2009.

The affairs confirmed the already widely held belief that
lawlessness rules in Greece. Even for normal lawsuits you have to wait
up to five years for the first trial, then another three years for the
appeal and an additional three years for the case to be finally heard
by the Supreme Court. This is not justice, but the denial of justice.
And that is the reason why Greece does not function as a democratic
country but as a banana republic from the Balkans.

Three distinct competing parties


After the first Greek rescue package in 2010, I hoped that the
economic adjustment programme and the strict supervision of the
European Commission and our eurozone partners would put an end to the
clientelist system and the bureaucratic machine.

In Greece at the moment there are three distinct competing parties.
Firstly, there are the politicians and their allies in the public and
private sectors who are threatened by the collapse of the system and who
therefore refuse to effectively implement the required structural
reforms. Secondly, there are the people who are fed up with the
situation and who want to see change, but who have no political
representation. And finally, there are our European partners, who up to
now have not taken sides, but who, by not doing so, are giving support
to the most powerful.

The European Commission correctly emphasises that the reform
programme is the responsibility of the Greek authorities. Moreover,
there is the question of how far Europe can go in limiting national
sovereignty, a crucial question in the extension of economic governance
in the eurozone.

Only now, after two years of inertia, are our European partners
starting to insist on true reform and on a substantial reduction in
state expenditure. However, in the meantime, half a million people (all
in the private sector) have lost their jobs, while the public sector
is still precisely as large and obstructive as it was. With respect to
an effective judicial system, it is up to us, the Greeks, to demand it.




Translated from the Dutch by Stuart Buck









T

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20 February 2012
Last updated at 17:21











Eurozone Greek bailout talks begin in Brussels





















Some eurozone ministers doubts Greece's austerity pledges






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Eurozone finance ministers are holding talks in Brussels aimed at securing a second vital bailout for Greece.

They have said they are hopeful of reaching a deal, with
France's Finance Minister Francois Baroin saying all the elements are in
place.

But his Greek counterpart Evangelis Venizelos said haggling would go on "until the very last minute".

Athens needs the 130bn euros (£110bn; $170bn) in order to avoid bankruptcy next month, when loans must be repaid.



Continue reading the main story Analysis






Gavin Hewitt
BBC Europe editor, Brussels



Greek ministers and European officials vividly describe the
catastrophe if Greece defaults. "If there is a default," said the German
centre-right MEP Elmar Brok, "then there would be no pensions, no
salaries at all. It would become a failed state."

No-one pretends that default would be an easy option. There
would be a run on the banks and, at the most elemental level, there
would be the question of how soon a new drachma could be printed and
distributed.

But those who oppose the new bailout package argue that
Greece is not being saved from the fate of a failed state, but being
pushed into one - and for years to come.

• Read Gavin's thoughts in full
  

The rescue plan would also write
off 100bn euros of debt, with private lenders accepting a 70% reduction
in what Greece owes them.

In return, they would receive cash and new bonds, expected to mature in 30 years' time.

It is the second time Greece has sought a bailout from international lenders.

Jean-Claude Juncker - prime minister of Luxembourg and
chairman of the eurozone finance ministers group - said Greece had
fulfilled many of the conditions asked of it and he was hopeful the
talks would be "the final consultations".

"I am of the opinion that today we have to deliver, because we don't have any more time," he said.

German Finance Minister Wolfgang Schaeuble also said he was
"optimistic" a deal would be reached, while Mr Baroin said he would
plead for the deal.

"All the elements are in place... both with the bankers,
private sector creditors, and public sector creditors, the states and
central banks," he told Europe 1 radio.

But as the talks began, Dutch Finance Minister Jan Kees De
Jager said he would like to see "some kind of permanent presence" by the
EU, International Monetary Fund (IMF) and European Central Bank (ECB)
over Greece's revenues and public expenditure.

"When you look at the derailments in Greece which have occurred several times now, it is probably necessary," he said.

Elections ahead


Continue reading the main story How bond swaps work

• Governments borrow money by selling bonds, promising to pay a lump sum in future and interest in the meantime
  
• With a bond swap, the investors give up the original bonds in exchange for new ones with different payment terms
  
• In the case of Greece, it is expected that the final payment will be half the original amount
  
• When all the elements of the exchange are accounted for
  (including the discounting of future cash flows), the loss to investors
  is expected to be as much as 70%
  
• Final repayment will be pushed further into the future, although investors will get some of their cash almost straight away
  

After five straight years of recession, Greece now has a debt greater than 160% of its Gross Domestic Product (GDP).

Eurozone leaders and the IMF said in October that Greek debt
should be reduced to the more sustainable level of 120% of GDP by 2020.

Successive rounds of austerity measures, demanded by Greece's
international creditors have failed to restore growth and have
provoked clashes between protesters and police.

The Greek government fell last year after ex-Prime Minister
George Papandreou called for a referendum on the eurozone rescue
package.

He was replaced by Lucas Papademos, an unelected technocrat
who is expected to lead Greece until parliamentary elections in April.

Measures passed by parliament last week set out 3.3bn euros'
worth of cuts to salaries and pensions, and health and defence spending.






Several thousand people protested in Athens on Sunday against
further cuts agreed by Mr Papademos' cabinet on Saturday - but the
numbers were far reduced from the tens of thousands who protested last
week.

Mr Venizelos has said he now expects the "long period of uncertainty" to end.

"The Greek people send to Europe the message that they have
made, and will make, the necessary sacrifices for our country to regain
its position of equality within the European family," he said in a finance ministry statement issued in Brussels on Monday.

IMF chief Christine Lagarde praised the work Greece had done so far and said the IMF was ready to work with them.

US Treasury Secretary Timothy Geithner said the US was
encouraging the IMF to support the bailout, but it is not clear how much
the IMF will contribute.

Some eurozone finance ministers doubt Greece's commitment to
its spending pledges and want strong mechanisms to ensure its debts are
paid.

It is not yet clear how the eurozone intends to keep the
pressure on Greece to ensure it fulfils its commitments, says the BBC's
Europe editor, Gavin Hewitt.

And, he adds, there are doubts that even with the bailout Greece will be able to reduce its debt to a sustainable level.

Funds from elsewhere may need to be found. A first rescue fund of 110bn euros in 2010 was not enough to avert the crisis.

[Panda]

9:22pm UK, Monday February 20, 2012

Robert Nisbet, Europe correspondent

Greece's future in the eurozone is the subject of a crucial meeting under
way in Brussels - as EU finance ministers try to thrash out a second bailout
deal.


The so-called Eurogroup, made up of the 17 countries
which use the single currency, is discussing whether the Greek government has done enough to trigger another 130bn
euro rescue package.

In a sign of just how seriously the beleaguered
nation is taking the gathering, Greek leader Lucas Papademos is accompanying his finance minister Evangelos Venizelos.

Senior government sources told Sky News his presence there is in case
"decisive decisions for the country need to be taken".




GREEK ECONOMIC ADVISER: BAILOUT AGREEMENT EXPECTED






:: More videos and stories on our dedicated eurozone crisis
page

Last week, the coalition government withstood a cross-party rebellion over a
3.3bn euro austerity package, which slashes 15,000 public sector jobs this year
alone, cuts the minimum wage by 22% and trims spending from defence and health
budgets

However, even these measures were not considered to
be enough by certain hardline countries within the eurozone, particularly those
which have the strongest credit ratings in the EU.

Finland, Austria, the Netherlands and Germany asked
for further assurances from Athens that the savage cuts will continue to be
implemented after the general election, which is likely to be held this
spring.

Political leaders signed letters to that effect last
week, but not before Wednesday's meeting of the Eurogroup was cancelled,
suggesting patience in Brussels was running low.



A laser pointer shines on a policeman's face during
Sunday's protests in Athens


US Treasury secretary Tim Geithner said
America would encourage the International Monetary Fund to support an
agreement on Greek economic reform implementation.

Speaking on Jeff Randall Live, a senior adviser to the Greek Prime Minister,
Professor George Pagoulatos, said he expected a decision on the second
bailout.

"Overall I think we are bound to expect an agreement tonight - I would be
surprised if we didn't but we should always be cautious in our optimism," he
said.

"We will touch firm ground after this agreement and this will allow the
necessary preconditions for gradually restoring growth to the Greek
economy."

On the weekend, another piece of the jigsaw required to release the bailout
fell into place, although it still has to be signed off by the Eurogroup.

Negotiators for private holders of Greek debt, including banks and hedge
funds, have agreed to take a massive loss on the bonds they hold in order to
reduce the country's debt mountain.

In exchange, they will receive bonds of a lower value and cash sweeteners in
a restructuring deal which has now been scheduled for between March 8 and
11.

That is just over a week before Greece has to service a bond redemption of
14.5bn euro. At the moment, it does not have the money.



More than 40 members of the ruling Greek coalition refused
to back reforms


Failure to settle its debt would be considered a
so-called credit event, where insurance policies - credit default swaps - would be
triggered.

That could start a chain reaction similar to that
seen after the collapse of Lehman Brothers in 2008.

The fear for Mr Papademos is that some of the countries around the table
today have decided a big enough buffer zone has been built around banks and
countries exposed to Greek debt to withstand a default.

Meanwhile, amid a recent upsurge in violence in Athens, further scuffles
occurred on Sunday evening as protesters engaged in running battles with riot
police outside parliament.

On Tuesday, union members affiliated with the communist party are expected to
hold their own protest rally and march to parliament.

[Panda]

These are a few comments from the above Article, worth a read.


Posted by: muppet polotics from lancs on February 20, 2012 5:25 PM

a
simple question here but are the population of any european country
happy to be a member of the E.U. or is it just politicians that really
want this? if so when did democracy die

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Posted by: BdB on February 20, 2012 5:10 PM

What
is not being reported is that our foreign office is advising all
british residents go Greece to register at the UK consulate so that they
can be pilled out when the riots really start.

here is another example of the government doing one thing, but saying another.

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Posted by: Gj73 from Italy on February 20, 2012 3:53 PM

@Loyalist

I've been saying that for over a year now, you missed Italy in ur comment though -:)

For over the last wasted 12months they could have got a good hold on the
situation yet it got marred by politico ego's & seperate end game
plans, now it is going to happen. Make or break as it were.

Personally I don't relish the idea of using a wheel barrow of Lire to
get a loaf of bread again, yet it is the sole way forward out of this
mess.

Alas the € will continue to exist as a currency but you'll see atlast 5
reversions this year alone. Split currency trading is possible on a
domestic scale as much as it is commercially.

One day someone might just answer me this : justify the EU, MEP's &
the EU parliament & its billion € costs. I cander a guess, the
reason i'm never answered is because it is a question that cannot be
answered. It's utterly unjustified.

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Posted by: Gj73 from Italy on February 20, 2012 3:35 PM

@merc mad

That is exactly what I said in my 1st post on this today, but be warned,
Germany doesn't want just one country, they'll settle for nothing short
of 27.

Last time it was attempted on land, in air and at sea, this time they got clever & are using money for their gains.

Frau Merkel will settle for nothing but a federalist super state,
controlled by er, Brussels, better known as the branch office of
Germany. Brussels have been without a sitting government for three years
now, wonder how that happened, then all this.........

Don't be fooled, the 4th reich is on the move, Greece is it's first
pawn, watch the game pan out, preferably from the sidelines. Coming to a
country near you soon.

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Posted by: Loyalist from South of France on February 20, 2012 3:32 PM

The Greeks patently have their 'Trojan Horse Plan' and Brussels know this full well,,,,!!!
When Greece get their next, (last?), tranche of Bailout Funds - 130
Billion Euros, they are then set to pay out the Bondholders,,,,!!!
Greece will then 'Default' and then leave the Euro and the Eurozone, then return to the Drachma,,,,!!!
With the Drachma then becoming 'cheap' against the Euro, the potential
for Tourism, Business Investment, Holiday Home Purchases suddenly
becomes once more a very attractive Proposition,,,,!!!
The Greek economy will then start to right itself without the
stranglehold of Brussels dictating their [Greek] every financial
move,,,,!!!
Spain will suddenly 'sit up straight' in its chair and follow suit,,,,!!!
Portugal will have taken note and adopt the same manoeuvre shortly thereafter,,,,!!!
And,,,,,,,,,,,,,,,,,,,,Granny Merkel knows this,,,,!!!

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Posted by: JS1 on February 20, 2012 3:27 PM

This
is now nothing more then a ponzy scheme with the banks lending money
back to themselves, the Greek people will not tolerate this anymore,it's
game over.

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[Panda]

21 February 2012
Last updated at 04:29











Eurozone ministers back 130bn-euro bailout for Greece












Eurozone finance minister are now expected to issue a statement


Continue reading the main story














Global Economy

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• 
  Germany: Reasons to be cheerful
  
• 
  Q&A: Greek debt crisis
  
• 
  Timeline of crisis
  

Eurozone finance ministers have reached agreement on a vital second bailout for heavily indebted Greece.

The deal, which came after more than 13 hours of talks in
Brussels, will provide Athens with loans worth more than 130bn euros
(£110bn; $170bn).

Greece needs the funds to avoid bankruptcy next month, when maturing loans must be repaid.

In return, Greece will undertake to reduce its debts to no more than 121% of its GDP by 2020.

After five straight years of recession, Greece's debts currently amounts to more than 160% of its Gross Domestic Product.

Jean-Claude Juncker - prime minister of Luxembourg and
chairman of the eurozone finance ministers group - said the
"far-reaching" deal reached early on Tuesday would lead to "a very
significant debt reduction for Greece" and insure its future in the
eurozone.

The BBC's Stephen Evans in Brussels says the agreement will mean deeper cuts in public spending that Greece had planned to.

It also means that lenders to Athens would get less of their money back, our correspondent adds.

The euro rose to $1.3266 from $1.3185 on reports of the deal.

Elections ahead
Eurozone leaders and the IMF said in October that Greek debt
should be reduced to a more sustainable level of 120% of GDP by 2020.

Successive rounds of austerity measures, demanded by Greece's
international creditors have failed to restore growth and have provoked
clashes between protesters and police.

The Greek government fell last year after ex-Prime Minister
George Papandreou called for a referendum on the eurozone rescue
package.

He was replaced by Lucas Papademos, an unelected technocrat
who is expected to lead Greece until parliamentary elections in April.

Measures passed by parliament last week set out 3.3bn euros'
worth of cuts to salaries and pensions, and health and defence spending -
sparking a fresh series of protests.

Greek Finance Minister Evangelis Venizelos has said he now expects the "long period of uncertainty" to end.








More on This Story











Global Economy

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Europe Agrees on New Bailout to Help Greece Avoid Default



Yves Herman/ReutersGreece's Prime Minister Lucas Papademos, left, spoke with Germany's Finance Minister Wolfgang Schaeuble and Dutch Finance Minister Jan Kees de Jager, as ministers from the Euro zone met in Brussels on Monday to hammer out a bailout deal.
By STEPHEN CASTLE

Published: February 20, 2012

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BRUSSELS — Greece finally secured its second giant bailout early Tuesday after euro zone finance ministers agreed to save it from bankruptcy in exchange for severe austerity measures and strict conditions.


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After more than 13 hours of talks, the ministers approved a new bailout of 130 billion euros, or $172 billion, under which private investors in Greek debt will take even steeper losses than expected to help stave off the country’s imminent default.
“We have reached a far-reaching agreement on Greece’s new program and private-sector involvement,” Jean-Claude Juncker, the prime minister of Luxembourg, announced Tuesday morning.
The agreement could be a new turning point in the European debt crisis, which has raised questions about the viability of the euro itself.
Though the outcome had been predicted, the meeting in Brussels proved more grueling than expected as euro zone countries, the European Central Bank and the International Monetary Fund wrestled through the night over a discrepancy in the amount of Greece’s debt to be reduced.
Under the bailout terms, which were not finalized until after 5 a.m. Tuesday, Greece will reduce its debt to about 120.5 percent of its gross domestic product by 2020, from about 160 percent now. Achieving a deal with that goal proved difficult because the steady deterioration of public finances in Athens have left the country’s creditors with problems in making the figures for the new bailout add up.
After several rounds of tough talks, representatives of banks that hold Greek bonds, who had agreed in October to take a 50 percent loss on the face value of their bonds, agreed to take a 53.5 percent loss on the face value, the equivalent to an overall loss of around 75 percent, said diplomats briefed on the discussion.
Meanwhile Greece will pay lower interest rates on its bailout loans and euro zone national central banks agreed to give up profits from Greek bonds bought at a discount, and to pass those gains back to the government in Athens.
Stricter rules on euro zone debt and budget deficits are already in place, and next week European leaders are expected to agree on a new, higher firewall for euro bloc countries that get into financial trouble, a step that policy makers hope will signal the beginning of the end of the crisis.
The talks on Monday were believed to have addressed the firewall issue. A new, permanent fund of 500 billion euros, or $660 billion, called the European Stability Mechanism, is due to come into existence in July, and one way of bolstering its power would be to run it alongside the current, temporary, rescue fund, the European Financial Stability Facility.
The bailout, with a stronger firewall, could provide the euro zone with some much-needed momentum. The injection of liquidity into the banking sector by the European Central Bank late last year — with the tacit support of Germany — had started to convince critics that there was a determination to save the currency.
Yet only last week the Greek bailout appeared to hang in the balance when rumors circulated that Germany’s finance minister, Wolfgang Schäuble, was willing to contemplate a Greek default. As tempers flared, the Greek finance minister, Evangelos Venizelos, suggested that some people were trying to drive his country out of the euro zone, and the Greek president, Karolos Papoulias, accused Mr. Schäuble of insulting the country.
It remains unclear whether a default was contemplated seriously or merely floated as a means of pressuring Athens.
Nevertheless, the episode underlines the extent to which Greece remains a weak spot for the 17 European Union countries that use the euro. This would be the second major bailout for Greece in two years. In May 2010, European governments and the International Monetary Fund put together the first three-year bailout package of 110 billion euros, then worth about $146 billion, not all of which has been used.
Doubts persist about Greece’s ability to carry out the tough austerity measures pushed through Parliament or to manage the weakened economy.
Those long-term fears deepened with the leak of an official report that said that if changes were not made, Greek debt could remain at 160 percent of G.D.P. in 2020. It also suggested that more help would be needed after the period covered by the bailout being negotiated. That could amount to $66 billion more from 2015 to 2020, Reuters reported.

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Next Page »
Niki Kitsantonis contributed reporting from Athens.





A version of this article appeared in print on February 21, 2012, on page A1 of the National edition with the headline: Europe Agrees on New Bailout To Help Greece Avoid Default.

• 
  

[Panda]

Asian Stocks closed lower because Investors are not convinced this is the end of the Euro crisis, there is still Spain, Portugal and Italy needing help.

Bondholders will take a 53% cut , but this means no one will buy Greek Bonds any more.

Christine La Garde says the GDP has been cut from 129% to 120%

A Greek Economist being interviewed says tax is only paid on 10% of Real Esate, shipping Companies don't pay any tax because their Companies are registered in Tax Free Havens. The very rich dont pay Tax either so it will be the middle class and poor who will be payin Taxes.

Ollie Rehn said an "enhanced task force" will be permanently in Greece to ensure the deficit is reduced as promised. The E130 billion bailout will be used to pay off Creditors, not help the existing cash crisis.

This has been the biggest debt re-structure in modern times.

Spain, Italy and Portugal remain potential problemse although the EU says thet have built a Firewall around these Countries but Standard Chartered
says the EU needs to be careful , one bond for all European Countries.

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rom
WORLD
7:26am



Eurozone agrees second Greek bail-out





Bond holders forced to take deeper losses in €130bn rescue

• 
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  Brussels Blog
  An analysis of the leaked Greek debt report
  
  
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  Sprint to ensure Greek default avoided
  
  

Global Market Overview
from
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5:07am



Euro jumps after Greek bail-out agreement





Eurozone backing for €130bn package fails to spur Asian shares

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More news










New four-part special reports series








In depth

1. 
   
   Greece debt crisis
   
   
2. 
   
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3. 
   
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4. 
   
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5. 
   
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6. 
   
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1. 
   
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3. 
   
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4. 
   
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5. 
   
   Central bank aid sought in Greek bail-out
   
   

[Panda]

Gross and Fink .....2 respected Investment Company owners discussing World affairs to an audience said the EU must change . They cannot adopt the
3% GDP limit and this was already written into the Treaty previously , France and Germany were the first Countries to break the rule.Germany is playing a very dangerous game because it does not want a break-up of the EURO, yet the austerity measures it imposes will do just that.

Spain and Portugal are on the periphery and will be the next Countries to seek a bail out although Portugal is not so indebted.

The E130 Billion is to be paid to Greece in tranches untiul 2014.

There has been a muted reaction around the World to the Greek deal and thinks this is just a delaying tactic. The Euro has increased in value, which won't
please Germany , Stocks across Europe are down and there is a feeling this deal is just delating the Greek default.

Apparently the Financial Times received a copy of the Finance Ministers moves prior to the meeting .

One good piece of news, a Chinese Trade Official visited Ireland a couple of days ago with the intent to do Business. Ireland was out of debt but got
caught up in the Greek contagion . Ireland benefits because the working population is very adaptable, it's low Corporation tax has meant an influx of
Companies, especially IT .

[Panda]

Six Questions Today's Euro Summit Won't Answer

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Ed Conway

February 20, 2012 12:29 PM

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Of all the inadvisable quotes we’ve heard from Eurozone ministers
in recent months, this morning’s one from Greek finance minister
Evangelos Venizelos must be about the worst.
“It is obvious,” he
said, “that we anticipate to see a long period of uncertainty coming to a
close today, a period that benefited neither the Greek economy, nor the
Euro Area overall. Europe knows that what is important is to send clear
messages, with conclusive and implementable decisions and with fixed
rules that do not change every now and then.”
Now, Mr Venizelos
may well be right that the euro ministers will finally sign down to
disburse at least some of the latest €130bn bail-out for the country.
This may even prevent the country from missing a €14.5bn coupon
repayment this time next month, in turn avoiding a messy un-negotiated
default. The deal should plot a path for Greece to bring its national
debt back down towards 120% of gross domestic product. All this looks
likely tonight – though given the Eurozone ministers’ proven capacity to
snatch defeat from the jaws of victory, one won’t be entirely sure
until we see the fat lady, in this case Jean-Claude Juncker, sing.
What
isn’t at all obvious – even if the deal is agreed – is that this does
anything to remove the uncertainty hanging over the Greek economy. Yes,
it will essentially be saved from having to raise cash in the private
capital markets, for the time being. But what will be left of the Greek
economy, or indeed society? And what lessons does this provide about the
euro project? The omens are not promising. Here are six questions - or
problems - that won't be answered by today's deal.
1. First, and
perhaps most worryingly, the Greek economic collapse has now reached
almost unprecedented proportions. The country’s economy shrank by 7%
last year. Before the crisis, the country’s annual economic output was
about the same as Switzerland’s. By the end it will be barely bigger
than the Czech Republic’s. In all, economists expect it to shrink by as
much as 25-30%. That would be the biggest single recession ever – by far
worse than the US experience in the Great Depression; worse even than
the collapse of the Argentinian economy during its own default crisis.
An
economy can’t collapse by this much without causing direct erosion of
families’ incomes, particularly given the particular variety of
contraction opted for by the euro ministers is austerity. So don’t be
surprised if those riots we’re seeing so regularly in Athens continue.
The real worry, of course, is not just riots, but the prospect that the
Greek people eventually lurch towards a more extremist government, or
the military take matters into their own hands. That, after all, is
precisely how many economies reacted to austerity in the 1930s, as this recent paper from Barry Eichengreen shows [pdf].
2.
The deal will not necessarily reduce Greece’s overall debt to a
sustainable level. The target is to cut total debt – as a percentage of
national income – to 120%. But there is plenty of evidence that this
level is simply too high for an economy with the growth problems Greece
is exhibiting. Moreover, that 120% seems to be more of an aspiration
than anything else, relying on hopelessly optimistic growth and budget
projections for the coming decades.
3. Even if this deal is
successful in averting a messy default, it will not necessarily prevent a
so-called “credit event”. Private sector bondholders will take a
“haircut” on their holdings of Greek debt, which will be viewed as a
default by credit ratings agencies. It will very possibly be viewed as a
“credit event” which triggers credit default swaps – the kind of opaque
financial instruments which caused such fear after Lehman Brothers
collapsed in 2008. Now, we are told investors are prepared for this
contingency given how much time they’ve had to dwell on it, but it would
be foolhardy to expect the entire process to go smoothly.
4.
Greece is still deep in debt. It’s just that much of the debt which was
previously owed to the private sector is now owed to other euro
governments (and the ECB). Gavyn Davies runs through the numbers here.
Mr Venizelos will not have any closure until the country reduces that
debt-load. That’s not going to happen through growth, it’s not going to
happen through devaluation (unless Greece leaves the euro), so it will
have at some point to happen through default – either another, more
convincing default or high inflation across the euro area. The latter is
unpalatable for the Bundesbank-influenced ECB. But, in the end someone
will have to take the hit. It’s still unclear who that will be, except
that the structure of the current deal imposes all the pain on the Greek
people.
5. The euro project is clearly failing. It was supposed
to encourage its member states to become more closely aligned
economically. As it stands, their competitiveness has diverged. As long
as this endures, Greece and its Mediterranean neighbours will have to
keep receiving subsidies from the richer euro members. Greece may have
been an outlier in that regard, but many of its traits are shared by
Portugal, Italy and Spain. Now the Greek crisis is temporarily papered
over, expect investors’ attention to swing back to them.
6. The
ECB has bought the Eurozone nations some time by flooding the
continent’s banking system with cash through its Long Term Repo
Operations (LTRO). It is likely to pump an extra slug of money to add to
its half-a-trillion euro total at the end of this month. However, this
cash will not last forever (the loans have a term of three years), and
does not represent a permanent firewall for the single currency. At some
point investors will lose patience and realise such measures fall far
short of a meaningful solution for either Greece or the currency area's
woes.













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greece

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Posted by: Raymond Vermont on February 20, 2012 10:22 PM

@Ed

Seems very clear that the EU should now carry a health warning for all in German-banker occupied Europe...

Is the only way out going to be a European wide military coup by a organisation such as NATO?

Before its all too late... (if its not already?)

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About this blogT[size=9]his blog cuts through the statistics, jargon and hyperbole to tell you what’s really
going on in the economy. Here you’ll find the real stories behind the
biggest financial and economic crisis in living memory, and find out
how they matter to you.
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[Panda]

The general concensus around the World is that little has been achieved by the EU Finance Ministers and European stocks have declined.

An Analyst from Newedge Group says Markets will go down, Portugal, Spain and Italy are vulnerable . He also says Private Bond Holders will complain they are not being treated fairly.

Danny Blanchflower . Economist, says there is no way Greece can have any growth with this deal and will never reach the 120% GDP by 2020. He says
Greece would have been better off to default and the drachma would have been cheap , the population would have much of the strain of just trying to survive taken away, had a good Tourist Trade , sorted out their tax income with more co-operation by the Population and slowly improved their living
standards.
He said Draghi refused to give an interview after the Meeting, unlike some of the others present and Private Bond Holders representatives also refused
to be interviewed/

Germany demanded austerity but the Model failed simply because it was forced on the EU Countries while there is no growth prospect in sight.

[Panda]

Q&A: Greek debt crisis








Continue reading the main story












What went wrong in Greece?














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Global Economy

• 
  Greece debt cut: Who loses out?
  
• 
  Europe struck by growth slowdown
  
• 
  Germany: Reasons to be cheerful
  
• 
  Timeline of crisis
  

Greece
has secured a second bailout worth 130bn euros (£110bn; $173bn) and in
return its lenders have attached strict conditions to the loan.

Greece has won a 53.5% reduction in its debt burden to
private creditors, while any profits made by eurozone central banks on
their holdings of Greek debt will be channelled back to Greece.

In return, a team of monitors will be based in Athens to ensure agreed reforms are put into place.

In addition, a special account will be opened to hold three months worth of debt repayments.

Who is paying for the bailout?
In
theory, European governments are not actually paying anything for their
bail-out of Greece as the 130bn euros comes in the form of loans.

The money will be lent at a low rate of interest, but still above the cost of borrowing for countries like Germany and France.

But private sector lenders - such as European banks - will lose money.

They will have to write off 53.5% of the money they are owed by Greece.

The problem is that the Greek economy is now so bad that
these write offs may still not be enough to reduce Greece's debts to a
level it can afford over the long term.

What's in the austerity package?
In order to secure the latest bailout, Greece has had to agree to fresh round of austerity measures.

European leaders are sceptical of Greece's ability to
implement spending cuts, so they have been demanding measures that can
be implemented quickly and simply.

Greece was told to agree to further cuts in government
spending equal to 1.5% of GDP, cuts in pensions and thousands more civil
service job cuts.

But this time, the European Commission, European Central Bank
and International Monetary Fund - the so-called troika - also want
Greece to act to make its economy more competitive, principally by
cutting the cost of doing business in Greece.

The government was told to make its labour markets more
flexible, to cut dramatically the minimum wage and to scrap a habit of
paying a "holiday bonus" equal to one or two months' extra pay.

It was also told to re-capitalise its banks, while ensuring they maintain their managerial independence.

The reforms to pensions proved the most difficult to stomach, but the government now says a compromise has been reached.

Hadn't Greece already implemented austerity measures?
Greece had already agreed to far-reaching austerity measures.

Taxes will increase by 3.38bn euros in 2013, following a 2.32bn euro increase in 2011.

The increase includes a solidarity levy of between 1% and 5%,
a cut in the tax-free threshold, a rise in VAT rates, and luxury taxes
on yachts, pools and cars.

In the public sector, pay will be cut and many bonuses scrapped.

Some 30,000 public sector workers are to be suspended, wage
bargaining will be suspended, and monthly pensions of above 1,000 euros
cut by 20%.

The government also aimed to raise about 50bn euros by 2020
from privatisations by selling land, utilities, ports, airports and
mining rights, but recently this target has been revised down
substantially because of the worsening economy.

Will it work?
That is the 130bn-euro question. The aim is to cut the Greek government's debt from 160% of GDP to 120% of GDP by 2020.

Despite the austerity measures taken so far, the Greek government still spends more than it receives in taxes.

Some economists and Greek unions say the plan is doomed to
fail. They argue that by making people poorer the measures will simply
shrink the Greek economy, reducing tax revenues and increasing the
deficit.

But EU leaders argue that there is no choice, that spending needs to fall even if it hurts the economy in the short term.

Furthermore, they argue that increasing competitiveness, by
lowering wages for example, will attract business to Greece and thereby
boost the economy and taxes.

Why is Greece in trouble?
Greece
has been living beyond its means since even before it joined the euro.
After it adopted the euro, public spending soared and public sector
wages practically doubled.

However, while money has flowed out of the government's coffers, its income has been hit by widespread tax evasion.

When the global financial downturn hit, Greece was ill-prepared to cope.

It was given 110bn euros of bailout loans in May 2010 to help
it get through the crisis - and then in July 2011 it was earmarked to
receive another 109bn euros.

But that still was not considered enough.

And so, in October 2011, the eurozone asked banks to agree to
a 50% "haircut" on their Greek holdings, alongside an enhanced
130bn-euro bailout.

Since then, the economic situation in Greece has deteriorated
further and the new deal involves an even bigger debt write-off than
previously consented to by the banks.








Crisis jargon buster



Use the dropdown for easy-to-understand explanations of key financial terms:

Default









Default

Strictly speaking, a default occurs when
a borrower has broken the terms of a loan or other debt, for example if
a borrower misses a payment. The term is also loosely used to mean any
situation that makes clear that a borrower can no longer repay its debts
in full, such as bankruptcy or a debt restructuring.
A default can have a number of important implications. If a borrower is
in default on any one debt, then all of its lenders may be able to
demand that the borrower immediately repay them. Lenders may also be
required to write off their losses on the loans they have made.




Glossary in full


What about other indebted countries?
Although
Greece's troubles are the most extreme, they highlight problems in the
eurozone that also apply to some other economies.

Many other southern European countries ran up huge debts -
government debts as well as household mortgage debts - during the past
10 years. They also enjoyed rapidly-rising wage levels.

Now the bust has come, it is very hard for them to repay the
debts. And the high wage levels leave their economies uncompetitive
compared with, for example, Germany.

Because they are inside the euro, these governments cannot
rely on their central bank - the ECB - to lend them the money. Nor can
they devalue their currencies to regain a competitive edge.

Meanwhile, they are having to push through very painful spending cuts and tax rises to get their borrowing under control.

But some analysts argue this is just pushing their economies into recession, cutting tax revenues.

In the meantime, EU leaders are struggling to enhance the
"firewall", in case any further countries prove unable to repay their
debts.

In October, they agreed that the new European Financial
Stability Fund would have up to 1tn euros to guard against future
sovereign debt crises. However, the money has yet to be raised.
Recently, the IMF said it, too, would have money available.






What does all this mean to the UK?
According
to figures from the Bank for International Settlements, UK banks hold a
relatively small $3.4bn worth of Greek sovereign debt, compared with
banks in Germany, which hold $22.6bn, and France, which hold $15bn.

When you add in other forms of Greek debt, such as lending to
private banks, those figures rise to $14.6bn for the UK, $34bn for
Germany and $56.7bn for France.

The UK government's direct contribution to any Greek bailout is limited to its participation as an IMF member.

However, any knock-on from Greece's troubles would exacerbate the UK's exposure to Irish debt, which is larger.

And if it led to a major financial crisis, as well as a deep
recession in the eurozone - the UK's main trading partner - the damage
to the UK economy would be substantial.










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