Greek bailout terms may be changed, says Merkel

By Juergen Baetz Wednesday, 28 September 2011

German Chancellor Angela Merkel hinted that the second Greek bailout package might have to be renegotiated amid increasing market speculation today that European leaders want to force private holders of Greek bonds to take bigger losses.

Merkel didn't rule out altering the terms to the €109 billion ($148 billion) package, saying the decision must be based on how Greece's debt inspectors, the so-called troika, judge Athens' recent austerity efforts.

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"So we must now wait for what the troika finds out and what it tells us: do we have to renegotiate or do we not have to renegotiate?" she said in an interview with Greece's ERT television Tuesday night.

Merkel added that she "cannot anticipate the result of the troika."

Greece was saved from default last year by an initial €110 billion bailout, and the planned second rescue package includes a voluntary participation by private bondholders, who agreed to write off about 20 percent on their Greek debt holdings.

But many economists and analysts maintain that Greece — mired in a deep recession worsened by the same austerity measures implemented in return for bailout loans — must have its total debt reduced by as much as 50 percent if it is to have a chance of recovering.

The Financial Times reported that as many as seven of the eurozone's 17 members want the banks to take a bigger hit on their Greek bond holdings to allow this to happen.

Citing unnamed senior European officials, the newspaper said Germany and the Netherlands are at the forefront of the calls for the private sector to take a bigger hit, with France and the European Central Bank said to be fiercely resisting the move.

Greece "will not get back on its feet without a serious reduction in debt," said Ottmar Issing, a former chief economist of the European Central Bank, who has served as an adviser to Merkel in the past.

Athens needs to see its debt cut "at least 50 percent, probably more," Issing was quoted by Germany's Stern magazine.

Germany's banking association insisted there was no need to renegotiate the terms of the second bailout package. Banks in Germany and France are among the biggest holders of Greek bonds.

Greece's international debt inspectors will return to Athens on Thursday after they suspended their review of the country's finances early this month amid talk of budget shortfalls.

Once the fact-finding mission has made its conclusions, the finance ministers of the eurozone will organize a special meeting in October to assess them.

A positive review is required before the troika — the IMF, ECB and European Commission — can release the next batch of rescue loans Greece needs to avoid bankruptcy.

In Athens, another 24-hour public transport strike left commuters struggling to reach work without buses, subway services, taxis or trams.

Greeks have been outraged by the announcement of new austerity measures — including pension cuts and a new property levy — after more than a year of spending cuts and tax hikes.

Deputy Prime Minister Theodoros Pangalos said he will be unable to pay the new emergency levy without selling property, and argued the country's ability to pay additional taxes to cover budget gaps has been "exhausted for some time."

To help Greece and restore confidence in the euro, Jose Manuel Barroso, who heads the executive European Commission, said the 27-nation EU must develop a stronger central government.

"If we do not move forward with more unification, we will suffer more fragmentation," he told the European Parliament in Strasbourg, France. "I think this is going to be a baptism of fire for a whole generation."

"Today, we are facing the biggest challenges that this union has ever had to face throughout its history — a financial crisis, an economic and social crisis, but also a crisis of confidence," Barroso said.

The crisis, which began in Greece some 18 months ago, eventually spread to engulf Portugal and Ireland, which also needed bailouts. It now threatens to mushroom further, prompting criticism from analysts and leaders including President Barack Obama that the EU is acting too slowly.

Among the most important measures that European countries have been slow to clear is a proposal to give the eurozone's €440 billion bailout fund more powers — the ability to buy government bonds, bail out banks, and lend to troubled governments quickly before they are in a full fledged crisis. Lawmakers in Germany will vote Thursday, while Finland's parliament approved the move on Wednesday.

The proposal, along with Greece's second bailout, was agreed by eurozone leaders on July 21. But the delay in voting and implementing the decisions spooked financial markets in recent weeks.

In the meantime, the ECB has shouldered the burden, buying over €150 billion ($205 billion) in government bonds to drive down borrowing costs for Italy and Spain.

Fears that the eurozone's third and fourth largest economy, Italy and Spain, may get sucked into Europe's debt crisis had stoked concern they would lose access to market funding and be forced into requesting bailouts.

A default by Greece or another country would send shock waves through the global economy, particularly in Europe, authorities fear. Banks would suffer such large losses on government bonds they hold that they would cut off credit to the wider economy and cause a new, sharper recession.

Greek bailout terms may be changed, says Merkel - Europe, World - The Independent

Greeks protest as EU and IMF begin bailout loan audit

Greek civil servants opposing a new barrage of austerity cuts on Thursday blocked a host of ministries as senior auditors from the EU and the IMF were to begin a vital fiscal audit to see in the debt laden country can avoid default.

Protesters chant slogans against the new austerity measures during a rally in front of the finance ministry in Athens. Photo: Getty

Telegraph Staff and agencies 7:55AM BST 29 Sep 2011

State TV NET reported that nearly all major ministries were occupied by protesting staff, including the ministries of finance, development, justice, labour, health, interior affairs and agriculture.

The occupations began early this morning before official opening hours and were to continue until Friday, NET said.

Greek civil servants oppose a new round of pay cuts and layoffs imposed by the government as it struggles to slash a runaway deficit.

A high-level mission from the EU, the IMF and the European Central Bank, which saved Greece from bankruptcy last year, have returned for a report that will determine if the debt-hit nation can again escape default.

Four weeks ago the auditors quit the country abruptly, unhappy with the government's efforts to tackle its debt mountain.

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This week the Greek parliament approved a controversial property tax that aims to plug a budget hole and help unlock bailout funds.

The finance ministry said Greeks have €400bn invested in property, roughly the size of the nation's sovereign debt which is more than €350bn. It has estimated the tax is only 0.2pc of the real value of property and was "a completely tolerable burden".

"The important thing is to meet the 2011 and 2012 budgetary targets," Finance Minister Evangelos Venizelos told the parliament ahead of the vote.

Greece needs an €8bn loan, part of a €110bn rescue package set up in May 2010, to keep paying its bills in October.

EU and IMF negotiators will resume their talks with Greek's leadership on Thursday, amid mounting social tension and what the European Union describes as the biggest challenge of its history.

German Chancellor Angela Merkel has suggested a second Greek bailout may even need to be renegotiated.

Berlin, Paris and the European Central Bank are also at odds over how much Europe's banks should lose in the event of a default, which would require massive recapitalisation of bankruptcy-threatened lenders.

Asian markets gave a mixed response on Thursday following weak leads from Wall Street as worries returned over whether eurozone leaders can agree on measures to resolve their debt crisis.

As Greece waits for the funds from the first bailout approved last year, a few eurozone states have yet to sign off on a second €159bn Greek rescue package that was agreed in July.

German lawmakers vote today on expanding the scope and size of the EU's current rescue fund - the European Financial Stability Facility (EFSF).

It has already helped rescue Ireland and Portugal and will be tapped for Greece's second bailout.

Finland's parliament finally approved changes to the fund on Wednesday, despite deep-rooted reluctance there to bailing out eurozone strugglers.

But another seven of the 17 eurozone states still have to approve the measure.

Even if auditors decide the Greeks are doing enough to merit more financial aid, eurozone partners and the International Monetary Fund will still have to sign off on the money.

Finance ministers meet on Monday in Luxembourg, but EU economic affairs spokesman Amadeu Altafaj indicated that the talks in Athens would not be concluded in time for a decision by then.

The head of the German banking federation criticised talk that eurozone governments may now push private holders of Greek government bonds to accept losses of 50pc instead of 21pc as agreed in July.

"If governments now unravel the deal that was reached on private-sector involvement, then the loss in confidence for the financial markets would more than negate the benefits of any such action," Andreas Schmitz told the German daily Bild.

A Greek government spokesman said the country, where austerity measures have met fierce resistance, would escape default.

Greeks protest as EU and IMF begin bailout loan audit - Telegraph

Eurozone crisis: there are no miracles in Greek tragedies

Lending ever greater sums to a mismanaged and corrupt economy won’t make it solvent , says Jeff Randall.

Despite the claims of its prime minister, Greece is about to default. Photo: EPA

By Jeff Randall 6:49AM BST 26 Sep 2011

Just before the roof fell in on Kweku Adoboli, the UBS trader whose “miscalculations” cost his bank $2.3 billion, he posted a message on Facebook: “I need a miracle.” Keep an eye out for something similar from George Papandreou, Greece’s prime minister, who has been telling us: “Let everyone be certain, Greece will not default, we will not let it default.” Nothing short of a supernatural event is now required for that promise to be met – the Greek bubble is about to pop.

There are similarities between Mr Adoboli’s flame-out and Greece’s imminent bankruptcy: failure of regulation, credulity of investors and a desperation to throw good money after bad. The difference, however, is scale. UBS’s losses are shocking but manageable. By contrast, when Greece repudiates all, or even part, of its 370 billion euros of debt, the foundations of the single currency will crack and many bystanders will be hurt.

Financial pain will be accompanied by the political humiliation of European Union leaders and their apologists in the commentariat who boasted that such an outcome was impossible because there was the “necessary will” to prevent it occurring.

The fallacy at the heart of this crisis is that every financial problem has a political solution. If only. Yet the Brussels elite and its co-conspirators at the IMF continue to promise that by “doing all it takes” they will, somehow, defy indefinitely economic gravity. This illusion of political primacy is perpetuated because a confession of impotence would not only undermine the worth of those in power but also expose the euro’s fatal flaw: monetary union without fiscal union is a marriage that weds the prudent to the profligate with no control over the latter’s spending.

Voters who were taught that debt-fuelled consumption was the path to prosperity are now shocked to discover that the racket is bust. Unwilling to accept the agony that comes with retrenchment, they expect those in charge to administer analgesics. In the short run, chary of disappointing the electorate, pusillanimous ministers load up the system with financial morphine. For a while it feels good. Then the patient demands a bigger fix, and another, and another. Eventually the drug providers wake up to a nightmare: the syringe is empty. When costs rise exponentially, even the rich run out of money.

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The bail-out of Greece began with a 100-billion-euro package. Very soon a second deal of the same order was required. Now we learn that the 440-billion-euro European Financial Stability Facility may need to be five times bigger to beat back the Debt Beast, which, having gobbled up Greece, is turning its attention to Italy, where Silvio Berlusconi is in a 1.9-trillion-euro hole.

As my Daily Telegraph colleague Peter Oborne explains in his report for the Centre for Policy Studies, Guilty Men, Greece’s calamity and the unravelling of the euro zone are hugely embarrassing for the soi-disant intellectuals who urged the United Kingdom to abandon sterling for the euro. I still marvel at a paper, Why Britain Should Join The Euro, written in 2002 by Richard Layard (London School of Economics), Willem Buiter (Citigroup), Christopher Huhne (Energy Secretary), Will Hutton (ubiquitous Left-wing commentator), Peter Kenen (Princeton University) and Adair Turner (former director-general of the CBI).

It asserts: “Opponents of the euro have forecast disasters which have in fact never happened and which always looked most unlikely… Euro-sceptics constantly underestimated the competence of Europeans and their ability to organise things properly.” What, like allowing Greece to fiddle its entry form?

Euro-fanatics are not alone in being routed by the debacle in Athens. Those who denounced opponents of budgetary incontinence are also squirming. Warnings that excessive debt would drown countries awash with borrowings were dismissed by progressives as cave-man economics. Who are the Neanderthals now?

At the risk of giving Johann Hari, the disgraced plagiarist, more space than he deserves, here’s his analysis: “Debt isn’t the problem. Debt is part of the cure. The facts suggest [we] need to spend more, not less, to get the economy back to life – and pay back the debt in the good times, when we will be able to afford it.”

While Mr Hari is attending truth awareness classes, perhaps he should ask for some lessons in economic history. Between 2003-2007, the UK was, apparently, enjoying a boom. These were the “good times”. So how much debt did the state repay in that period? Answer: nothing. In fact Gordon Brown borrowed, on average, £32 billion pounds a year, clocking up £160 billion of debt at a time when tax revenues should have been tucked away as a shield against future storms.

The lesson of Greece is that lending ever greater sums to a mismanaged and corrupt economy does not make it solvent. It defers the day of reckoning, but delivers no salvation. To escape from debt, a sovereign borrower has four options. It can spend less than it earns and use the surplus to diminish obligations. Greece has little hope of that. It can sell assets. The trouble is, Greece’s 50-billion-euro privatisation programme knocks only a small hole in its commitments and is way behind schedule. It can inflate away its debt, but the European Central Bank, the guardian of the euro’s integrity, will not permit Greece to do so. Finally it can bilk its creditors and start again. It’s a financial solution to a financial crisis – and that’s what Greece will do. Because, as Kweku Adoboli discovered, miracles are hard to find.

• 'Jeff Randall Live’ is broadcast Monday-Thursday, 7pm, on Sky News

Eurozone crisis: there are no miracles in Greek tragedies - Telegraph

Greek PM urges Europe to 'stop the cacophony'

George Papandreou, the Greek prime minister, said on Tuesday that Athens will live up to its austerity commitments as he urged European nations to "stop the cacophony and work more in harmony" to deal with the debt crisis.

Speaking in Berlin, George Papandreou insists that Greece will meet its commitments under its international bailout Photo: AFP

Telegraph Staff and agencies 11:32AM BST 27 Sep 2011

Speaking at a conference organised by German employer federation BDI, he said Europe needed to "go one step further" and prove it can get its act together.

"Even Germany depends on Europe, its biggest trading partner, for growth and jobs," said Mr Papandreou, insisting his debt-laden country can emerge from its economic crisis and cautioned against heaping "punishment and scorn" on Greeks.

He said that the criticism levelled at Athens was "frustrating not only at a political level, where a superhuman effort is being made to met stringent targets in a deepening recession but frustrating for the Greeks who are making these painful sacrifices and difficult changes."

It is going to take "years to make these major changes," he said, adding: "We are simply asking for respect for the facts."

"If people feel only punishment and scorn, this crisis will not become an opportunity, it will become a lost cause. And we are determined to make this a success," Mr Papandreou said.

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Bailing out Greece is unpopular among voters in Germany, Europe's biggest economy, while in Greece the harsh austerity measure needed to reduced the nations heavy debt has led to unrest.

Greece's creditors, among them Germany, want Athens to fully implement austerity measures agreed in exchange for rescue loans and are holding up payment of the next tranche of the loans until an external review of the reforms is completed.

Without the money, Greece will go bankrupt in October, potentially sending shock waves through the financial sector in Europe and abroad.

Mr Papandreou compared the challenges Greece faces with those that Germany overcame when West Germany and communist East Germany were united in 1990.

"Greece will make the same surprising transformation that Germany made in the 1990s," he said. "What we want is nothing less than the rebirth of our nation."

International debt inspectors are expected to return to Athens in coming days to assess whether the next installment of bailout loans can be paid out.

On Thursday, Germany's parliament is to vote on beefing up the powers and lending capacity of the eurozone's €440bn rescue fund - a facility that already has intervened to help Ireland and Portugal.

Greek PM urges Europe to 'stop the cacophony' - Telegraph

Greek shops shuttered amid nation's financial crisis

By Karolina Tagaris, Reuters

September 28, 2011

ATHENS—

— His gaze fixed on the ground, an Athens jeweler harks back to the good old days, when the city flourished and people always wanted his hand-beaten gold rings and ornate necklaces.

"Today, no one came," said Themis Lizardos, 44. "This is true every day." Another shop in the now partly derelict building has been boarded shut.

Generations of merchants set up successful businesses in the "commercial triangle" of Athens, a stone's throw from the central Syntagma Square, the flash point of bloody anti-austerity protests that erupted just over two months ago but in better times a popular tourist site.

Now, the mood among shopkeepers in the once-vibrant area, enclosed by the capital's three main squares, is somber.

Tens of thousands of small businesses, which make up a big chunk of the Greek economy, have closed since the government secured a bailout package worth about $150 billion from international lenders in exchange for promises of painful austerity measures.

"There is no helping hand (from the government)," Lizardos said. "There is only one hand, the one that presses on our heads and pushes us further to the ground."

The walls of his shop are full of photographs from a time when staff worked into the night to keep up with demand for gold jewelry from Greeks, who have treasured it as part of their culture for centuries.

A gracious thank-you note accompanies one of worldwide Orthodox Church leader Patriarch Bartholomew, an intricate gold pendant around his neck.

Today, the workshop is run by four people, including Lizardos' cousin and uncle, who together with his father opened the business five decades ago. Since then the shop has been the family's only source of income, and the prospect of having to shut it down due to fallout from the Greek debt crisis keeps Lizardos awake at night.

It's business, it's family

Rising gold prices and high taxes have made it too expensive to run the workshop, and he cannot afford to buy stock to keep the business running.

"If I close down my businesses, what will I do now at 44?" said Lizardos, echoing the plight of many small-business owners throughout Greece.

His wife is half-American, and the family is considering moving to the United States, where he believes his teenage daughters would have a better future.

"When I got married, I stayed for this reason, not to abandon what my father worked for all those years," he said.

"Our customers are not strangers; they are people you see in the market every day: the civil servant, the grocer, the electrician. Some of them are priests, but even they have stopped buying. They don't want to provoke people by appearing to be extravagant."

Violent street protests against tax increases and salary cuts have driven many Athenians from the city center. A police bus is permanently on standby on the corner of Lizardos' street.

The austerity measures and the protests have cast a shadow over small businesses in the city, with demonstrations alone costing them about four working hours a day, trade bodies said.

In the Athens area, more than 20 percent of shops have closed since 2010, according to the ESEE retail federation.

Closures likely to continue

Closing down or declaring bankruptcy is not easy, so many businesses simply pull down their shutters, and debts start to pile up, according to ESEE.

"It will be a defining winter for small businesses. Many will not make it into the next year," said ESEE Chairman Vassilis Korkidis.

Business owners in the area have started staffing their shops themselves, often with the help of their spouse or children. Usually employing fewer than 10 people, most of the country's small businesses are family owned.

"How can you fire your brother, your cousin, your family?" said 53-year-old Nikos Apostolakis, who runs a textile shop opened by his father in the 1970s on the same street as Lizardos' jewelry business. "Even if I cut their wages to half, it wouldn't help."

More than 68,000 small businesses have shut down this year, according to ESEE. It expects about 53,000 to close down in the next six months.

"The latest measures have created an atmosphere of fear, that tomorrow people will not have enough money to eat," said Korkidis. "They should impose taxes that businesses will be able to cope with in the current climate."

Greece has adopted yet more austerity measures to secure a bailout installment crucial to avoid running out of money next month.

"Regardless of what happens with the latest aid tranche, there is going to be a lot of concern among households and businesses that in three months' time there may need to be a new barrage of fiscal measures," said Ben May, a London-based analyst at Capital Economics.

Against the backdrop of contraction, people are less inclined to buy to stimulate the economy, and there will also be a reluctance to invest, he said.

Lizardos is worried Greece will lose a crucial part of the economy and will become a nation of big corporations.

"Slowly, we are all going to close down and we will work in factories for the big guys, for a 500 euro (monthly) salary," he said.

"Inside me, I want to believe that maybe something will change, maybe a miracle will happen, but I don't really believe it. I wish for it, though."

Greek shops shuttered amid nation's financial crisis - chicagotribune.com

Greek government announces new austerity measures

Greece will suspend more civil servants than originally planned and impose new pension cuts as part of more austerity measures, the government said today.

Image 1 of 2 A civil servant holds a banner during a protest against new austerity measures in Athens.

Image 1 of 2 Greek Finance Minister Evangelos Venizelos holds a second confrence call with the IMF and EU monitors this evening. Photo: AP

By Agencies 6:37PM BST 21 Sep 2011

The move came as Greece tried to persuade international creditors to continue bailout payments needed to avoid a chaotic default.

Government spokesman Elias Mossialos outlined the new spending cuts after a Cabinet meeting lasting more than six hours, the outcome of which was being watched closely by nervous global markets.

The new measures include increasing the number of civil servants to be suspended on partial pay to 30,000 this year from 20,000. Monthly pensions above €1,200 (£1,000) will be subject to new cuts, as will pensions of people under the age of 55.

The tax-free limit on annual income will drop to €5,000 from €8,000, and the cut will be applied to this year's income, he said.

The prospect of more tax increases and spending cuts are likely to be met with mounting concern in a country mired in a deep recession and with the number of unemployed rising to around one in seven. Greece's two largest labor unions already called earlier Wednesday for another general strike on October 19.

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The measures came after Finance Minister Evangelos Venizelos briefed Parliament on the results of tough negotiations with the country's international debt inspectors during teleconferences on Monday and yesterday.

"We have to take supplementary measures ... because of the recession, because of the difficult task, and the weakness of the central administration have not produced the required results," he told lawmakers in the Parliament session.

Greek government announces new austerity measures - Telegraph

Going... Going... Greece on the Brink

 

Maria Margaronis on September 20, 2011 - 11:22am ET

Man-made catastrophes tend to happen in slow motion. The danger is evident but the steps required to avert it are too difficult, or controversial, or unclear. So we keep leaning over the parapet, just a bit longer, just a little further; the tipping point is only obvious when it is too late.

On the European debt crisis, we are now in planking mode. In a marathon teleconference set to continue today, Greek finance minister Evangelos Venizelos is desperately trying to hammer out a last-ditch deal with the EU and the IMF, which have put off the decision to release the next tranche of Greece’s bailout because the country has once again failed to implement agreed reforms and austerity measures. The program voted through the Greek parliament in a fog of tear gas at the end of June has been rendered inadequate by delay—and by the fact that the measures taken so far have only plunged the country further into recession. According to Greek newspapers the creditors’ demands include the lay-off or suspension of 70,000 public employees by the end of 2012; further cuts to wages and pensions; higher social security contributions; and yet more tax rises.

The threat is that if the EU and the IMF don’t like what the Greeks come up with they will take their toys and go home, leaving Greece to—what, exactly? And with what consequences for the rest of the Eurozone? Beyond the fact that the Greek government is due to run out of cash in mid October for wages and welfare payments, nobody seems to know. The Financial Times has produced a handy graphic showing the chain reactions that might be triggered by default and, in a worst-case scenario, lead to a breakup of the euro; the steps along the way include “market turbulence,” “economy stalls,” “streets explode” and “social misery.” Like a malign goblin bent on making mischief, the rating agency Standard & Poor helped those predictions along today by downgrading Italy’s debt. The markets bumped down half a floor at stomach-churning speed.

In Greece, apart from deepening poverty, the pattern of “last chances” followed by painful reprieves has produced a stifling sense of dread, anxiety and drift. With each round, the government makes promises it lacks the will or the capacity to keep. Paralyzed before the task of ending large-scale tax evasion, unwilling to slash its public sector base (some, but not all, of whose members are also its clients), unable to sell the country’s assets even at Walmart prices, riven by dissent, George Papandreou’s socialist administration is flailing for quick fixes to offer its creditors. An ill-thought-out universal property tax announced this month, to be collected through electricity bills and enforced by the threat of power cuts, was meant to raise 2 billion euros; it failed to convince the money men at the EU and IMF. Rumors of an impending election or referendum don’t help. It’s not only the Europeans who’ve had it with Greek politicians: at home, disgust with the entire political class is close to boiling point.

Meanwhile the Eurozone’s leaders are just as paralyzed, divided and ineffective. Individually, they all defend the single currency (“If the euro fails, Europe fails,” in Angela Merkel's phrase); collectively, they won’t step up to the measures needed to save it. Torn between placating their own electorates (who don’t want to cough up for the Greeks, the Irish and the Portuguese) and appeasing the markets (which want a quick resolution), they fudge and prevaricate; the structural problems of the Eurozone—just like the structural problems of the Greek economy—remain beyond their reach.

But the game can't go on for ever, and given the general failure of leadership and will, the gathering consensus is that Greece must be cut loose. Hence the new tougher line from the EU and IMF. Back in June, EU Commissioner Ollie Rehn declared there was “no Plan B” for Greece; but what he actually meant was that there was no Plan B yet . Since then, Merkel especially has been under fierce pressure not to keep throwing good money after bad; the wizards in her finance ministry have been working away on plans to protect the rest of Europe from a Greek default. That default has been “priced in” to the markets for some time; central banks are preparing for it as if for a hurricane, pledging extra liquidity to keep the system afloat. Judging by the rating agency Fitch’s announcement today, the preferred scenario now is for Greece to default on its loans without leaving the Euro—which, less than three months ago, was seen as impossible. The stage is being set for a collective sigh of regret for a peripheral country which just couldn’t get it together—and a barrage of talking heads explaining why this is the best outcome for the Eurozone, why the Italian downgrade can now be contained, why the FT’s worst-case scenario just won’t come to pass, at least until the next big crisis comes along.

Will that be such a bad thing for Greece? Plenty of learned economists and serious commentators argue that the country should long ago have jumped before it’s pushed, as Argentina did in 2002. I  hope they're right; I wish I thought they were. But their theories presuppose a faith in Greek politicians that I can’t quite share. They see a new beginning with the capacity to devalue, reform and develop in a more sustainable way. I see the government falling; an election that brings Antonis Samaras’s New Democracy to power on a populist and xenophobic platform; corruption and tax evasion continuing as before; people—even more than now—rummaging through rubbish bins; and all the country’s assets sold off anyway to multinational corporations, Russian and Chinese developers, anyone looking for a cheap deal in a sunny place. I have never, ever wanted so much to be wrong.

Going... Going... Greece on the Brink | The Nation

Germany and France: eurozone will not force out Greece

Germany and France were last night forced to insist that Greece would not be pushed out of the eurozone amid new warnings that the single currency was poised to “explode”.

By James Kirkup, and Bruno Waterfield in Brussels

12:10AM BST 15 Sep 2011

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France held a conference call with George Papandreou, the Greek prime minister. Following the call, the three leaders insisted that Greece, which is still struggling to pay its debts, would not be forced to leave the single currency.

But beyond telling Greece to stick to the austerity measures imposed on it by the European Union and the International Monetary Fund, the German and French leaders announced no new measures to support the eurozone.

Mr Sarkozy’s office last night said that he and Mrs Merkel had “informed the Greek prime minister of the importance attached to the strict and effective implementation of the recovery programme for the Greek economy”. The two leaders were “convinced that the future of Greece is in the eurozone,” the Élysée said.

Mr Papandreou stressed his government’s “absolute determination to take all necessary measures” to meet the country’s obligations.

In a separate statement issued in Athens, the Greek government insisted that “despite recent rumours, all parties stressed Greece will remain in the eurozone”.

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The conference call was held amid mounting expectations that the single currency’s debt crisis will end in either break-up or a major step towards the fiscal integration of its members — a move that Germany has so far resisted.

Jacek Rostowski, the Polish finance minister, gave a bleak warning to the European Parliament yesterday, saying that if the eurozone was to “explode” then “the EU will not be able to survive”.

Despite Mr Papandreou’s assurances, many European politicians are increasingly angry at what they see as Greece’s failure to make progress on the programme of spending cuts demanded in exchange for bail-outs.

José Manuel Barroso, the president of the European Commission, yesterday said that he will soon set out plans for “eurobonds”, loans underwritten by all 17 euro members, to restore investors’ confidence in the currency.

But he said that even that move, which would be hugely controversial in Germany, would not be enough.

“We must be honest: this will not bring an immediate solution for all the problems we face,” he said.

He told the European Parliament: “This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world.”

Mr Rostowski gave an even more stark warning, saying that the EU was on brink of destruction. “Europe is in danger,” he told MEPs. “If the eurozone breaks up, the EU will not be able to survive.”

Without the EU, a pillar of Europe’s security alongside Nato, Mr Rostowski predicted there could be a new war within a generation.

“If the eurozone were to disappear, to explode, then there is a risk,” he said. “A shock of that kind would lead to the demise of the whole European project and that could lead to a situation over a number of years, not immediately, when we are faced with great danger.” Despite last night’s Franco-German assurance, European politicians are still openly discussing Greece’s departure.

Peter Ramsauer, the German transport minister, told a newspaper yesterday that it would “not be the end of the world” if Greece were forced to exit the eurozone.

Germany and France: eurozone will not force out Greece - Telegraph

Greek Prime Minister’s Promises Ring Hollow

Written by Bob Adelmann

Sunday, 11 September 2011 17:30

Prime Minister George Papandreou’s speech on Saturday evening in Thessaloniki was designed to reassure not only his Greek citizens that all would be well but also that those holding Greek sovereign debt would be getting their money back. The government’s top priority, he said, is “to save the country from bankruptcy.”

Said Papandreou: "We have taken the decision to fight to avoid a catastrophe for our country and its citizens: bankruptcy. We will remain in the Euro. And this meant and means difficult decisions.... If this year the recession [already in its third year] is markedly greater than the estimates of international organisations on which the medium-term fiscal plan [to obtain additional bailouts from the European Central Bank] was based, despite that, Greece will make its fiscal targets, doing all that’s needed in this direction."

Those difficult decisions, as noted here and here, have involved raising the Value-Added Tax rate, seeking out tax-evaders, selling off state-owned assets, firing 20,000 government workers and cutting the salaries of others, and imposing a one-time “solidarity contribution” tax — decisions that have so angered the citizenry that 20,000 of them showed up at his speech (probably why it was in Thessaloniki in northern Greece rather than in more heavily populated Athens) to protest them and him and his cabinet. 

Papandreou’s Finance Minister Evangelos Venizelos earlier warned that Greece’s situation was “critical” and that the next two months would be “decisive for our existence.” But Venizelos then tried to squelch rumors that the situation was so dire that they might have to default, reject the euro, and quit the Eurozone altogether. He called such rumors “a game in bad taste; an organized piece of speculation against the Euro and the Eurozone countries,” and he said that Greece would move ahead with the austerity measures demanded by the European Union and the International Monetary Fund “without taking into consideration any element of political cost.”

The chances that those Draconian measures will bring down the deficit to the requisite 7.5 percent of GDP in order to qualify to receive the next $10 billion of bailout money are between slim and none. Those measures have successfully slowed the already staggering economy so that budget deficits have increased by 24 percent just since the first of the year. And that is being reflected in the debt markets for Greek securities. Interest rates on their two-year treasury notes have risen to nearly 60 percent, and the cost of insuring their five-year notes against default have risen from the usual 1 to 2 percent to nearly 33 percent. To put that into perspective, a holder of a $10 million, five-year Greek note would have to pay an insurance premium of $3.2 million just to guarantee that he’ll get his money in five years. Other measurements of risk are indicating that the chances of a Greek default are approaching 100 percent by the end of the year, perhaps sooner. 

German reluctance to allow Greece to receive the next round of bailout money was expressed by German Finance Minister Wolfgang Schaeuble at a meeting in Berlin last Wednesday: “I understand that there is resistance among the Greek population [polls are showing 90% opposed] to austerity measures. In the end it is up to Greece whether it can fulfill the conditions necessary for membership of the common currency. We offer no discounts.” He added that if Greece doesn’t meet its obligations, then “it’s up to Greece to figure out how to get financing without the euro zone’s help.”

A “troika” of representatives from the European Central Bank and the IMF left Athens without being able to determine if Greece would even come close to meeting the terms. Schaeuble said, “Ladies and Gentlemen, the situation in Greece is serious. At the moment the troika mission is suspended. There can be no delusions here. As long as this mission cannot confirm that Greece has fulfilled the conditions, then the next aid tranche cannot be paid. There is no wiggle room here.”

And so Greece is out of options. It can’t pay its bills because it can’t comply with the conditions necessary to obtain the money. And it can’t comply because the conditions are so onerous that they are working to push Greece further away from compliance. According to CNBC, “Time may already have run out. No more money means a hard restructuring for Greece and a massive recapitalization of Europe’s banks.” And that translates into huge losses for those holding soon-to-be worthless Greek government debt. “Haircuts” (reductions in principal) are expected to be between 50 and 90 percent, which will be sufficient to jeopardize the capital positions of the European Central Bank (ECB) and other banks, including those in Germany, holding that debt. As a result, Germany has announced a plan to protect its banks in the event of the inevitable Greek default. 

The downward spiral will continue. When Greece defaults, at least two other countries teetering on the far edge of financial disaster, Spain and Italy, will likely see that as an opportunity to default as well, putting the entire European Union into jeopardy. 

For those who have been predicting the natural end result of trying to fool basic economic laws and of trying to create a regional dictatorship without the consent of its victims, the Greek tragedy currently being played is just one act in a larger European tragedy. As commentator Gary North reflected in his recent newsletter, “The defection and default by Greece’s government will be the warning shot. The doom of the Euro is sure. This will be the first visible step in the break-up.”

North continued: "The experiment has failed. The New World Order can’t do a thing about it. They will seek fiscal union. They won’t get it. The voters will not accept it. No treaty among parliaments will work, any more than the [European Union] treaty has worked.

Greek Prime Minister’s Promises Ring Hollow

Private Banks Urged to Support Greek Bonds

Written by Bruce Walker

Saturday, 10 September 2011 16:00

Collectivist statists from America to southern Europe are singing a familiar tune: The private sector is to blame for the economic nightmare that they have created. The Obama administration began complaining that businesses with cash were not instantly using that cash to hire employees, whether market conditions made that a prudent decision or not.  Now the Greek government is issuing more bonds and, according to the condition of their second proposed bailout by the European Union, is being required to convince private investors to acquire the vast majority of the new debt of the Greek government.

The feedback that the Greek government is getting over its sovereign debt crisis is more than just from the private sector. German Chancellor Angela Merkel, whose own job hangs by a thread and who has just been limited by Germany’s Constitutional Court in using German assets to solve the Greek sovereign debt crisis, is now acknowledging that it was a mistake to admit Greece to the European Union. Merkel remained committed, however, to keeping Greece in the union, provided that no more help is needed from nations with stable and sound fiscal policies, and the Chancellor also warned the rest of the "PIIGS" nations to expect no more bailouts.  European Central Bank President Jean-Claude Trichet echoed Merkel’s sentiments, and warned that the purpose of the ECB was to maintain the stability of the euro and not to protect nations that incurred debt far beyond the nations’ ability to repay those debts.

Meanwhile, the Managing Director of the International Monetary Fund, Christine Lagarde, called again on European countries to recapitalize their own banks to prevent those banks from floundering or even falling under the weight of the bad sovereign debt of nations like Greece, Portugal, Spain, Ireland, and Italy. "In view of the heightened risks and uncertainties — and the need to convince markets — some banks need additional capital. We must not underestimate the risks of a further spread of economic weakness, or even a debilitating liquidity crisis. That is why action is needed so urgently so that banks can return to the business of financing economic activity." Lagarde seems to be making the same sort of mistake that Merkel and Trichet have promised not to make: using the power of government or super-governmental organizations like the IMF to get private businesses to do things that they would not otherwise do.

That is a polite way of saying that the looming likelihood of a default on Greek government bonds could pull down major banks in Europe, and that those who have money — and are not themselves governments or part of super-governmental organizations — ought to make otherwise imprudent investments in order to prevent Greece, Italy and other nations from defaulting. In the case of Greece, it is hard to see how things could get much worse. The short-term bond rate, which is needed to turn over existing debt, has risen like a shot — over 45 percent interest. In late August, Greek officials revised their estimate of the country’s national deficit, and the revision, predictably, was bad news — the deficit will be larger than anticipated and reported earlier. Still, some Greek bankers are trying to sound optimistic. An Athenian banker, pondering what percentage of this debt will be bought by private banks and investors, said: "Even with a participation rate of 70 percent or better, which is my current view, (it) will proceed." The markets are reacting. Both the euro and Greek bank stock prices dropped and the cost of insurance against a Greek debt default soared.

Perhaps more pointed, political leaders in Germany, Holland, and Finland are suggesting that Greece may have to leave the European Union. The Dutch Economic Affairs Minister Maxime Verhagen, however, explained that his government’s proposal for a European fiscal discipline "czar" was not aimed to pushing Greece out of the European Union.  Perhaps more candidly, Timo Soini, leader of the True Finns Party said that a Greek default was certain and that bailouts would only make matters worse. Pulling few punches, Soini said:  "With Greece it is clear that they cheated -- some of their politicians. Of course the ordinary people are in trouble and they are innocent in this one, but if the political system doesn't fix itself then the consequences are really hard.  We think also that those countries that cannot follow the rules, they must exit the system. Or the other option is that countries like Finland, Holland, maybe Germany, leave because they cannot pay any more.”

But just as President Obama and his allies have found it comfortable to attack struggling businesses for not hiring more people when they have the money (as if maintaining the president’s popularity was a solemn patriotic duty), expect the Greek government and several of the other PIIGS to try blaming investors who have no confidence in the security of their sovereign debt on the selfishness of private banks. Recall that these governments quickly jumped on the attack when investment rating services, whose economic information has value only if it is honest and impartial, reduced the creditworthiness of those government bonds.

The market works and the information it provides — lowered rating services, high interest to attract buyers of sovereign debt instruments, and companies finding other use for liquid assets rather than hiring unnecessary workers to inflate employment figures — is much more valid that the promises of politicians.

Private Banks Urged to Support Greek Bonds

Germany and Greece flirt with mutual assured destruction

Bild Zeitung populism has prevailed. Germany is pushing Greece towards a hard default, risking the uncontrollable chain reaction so long feared by markets.

Greece can, if provoked, pull the pin on the European banking system and inflict huge damage on Germany itself. Photo: AP

By Ambrose Evans-Pritchard, International Business Editor

7:35PM BST 11 Sep 2011

First we learn from planted leaks that Germany is activating "Plan B", telling banks and insurance companies to prepare for 50pc haircuts on Greek debt; then that Germany is “studying” options that include Greece's return to the drachma.

German finance minister Wolfgang Schauble has chosen to do this at a moment when the global economy is already flirting with double-dip recession, bank shares are crashing, and global credit strains are testing Lehman levels. The recklessness is breath-taking.

If it is a pressure tactic to force Greece to submit to EU-IMF demands of yet further austerity, it may instead bring mutual assured destruction.

"Whoever thinks that Greece is an easy scapegoat, will find that this eventually turns against them, against the hard core of the eurozone," said Greek finance minister Evangelos Venizelos.

Greece can, if provoked, pull the pin on the European banking system and inflict huge damage on Germany itself, and Greece has certainly been provoked.

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Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets. They had better be well armed. The headlines in the Greek press have been "Unconditional Capitulation", and "Terrorization of Greeks", and even “Fourth Reich”.

Mr Schauble said there would be no more money for Athens under the EU-IMF rescue package until the Greeks "do what they agreed to do" and comply with every demand of `Troika' inspectors.

Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany's austerity dictates in the long run. From there the chain-reaction into EMU's soft-core would be fast and furious.

Let us be clear, the chief reason why Greece cannot meet its deficit targets is because the EU has imposed the most violent fiscal deflation ever inflicted on a modern developed economy - 16pc of GDP of net tightening in three years - without offsetting monetary stimulus, debt relief, or devaluation.

This has sent the economy into a self-feeding downward spiral, crushing tax revenues. The policy is obscurantist, a replay of the Gold Standard in 1931. It has self-evidently failed. As the Greek parliament said, the debt dynamic is "out of control".

We all know that Greece behaved badly for a decade. The time for tough love was long ago, when the mistakes were made and all sides were seduced by the allure of EMU.

Even if the Papandreou government met every Troika demand at this point, it would not make any material difference. Greek citizens already understand this, and they understand that EU loan packages are merely being recycled to northern banks.

Instead of recognizing the collective EU failure at every stage of this debacle, the creditor powers are taking out their fury on what is now a victim.

We have never been so close to EMU rupture. Friday's resignation of Jurgen Stark at the European Central Bank is literally a kataklysmos, a German vote of no confidence in EMU management. Dr Stark is not just an ECB board member. He is the keeper of the Bundesbank's monetary flame.

The vehemence of his protest against ECB bond purchases confirm what markets suspect: that the ECB cannot shore up Italian and Spanish debt markets for long without losing Germany.

"I look at what is happening in EMU and the words that spring to mind are total and utter disaster", said Andrew Roberts, credit chief at RBS. He thinks German Bund yields could break below 1pc in the flight to safety.

Citigroup and UBS both issued reports last week on the mechanics of EMU break-up, both concluding with touching faith that EU leaders cannot and will not allow it to happen.

"The euro should not exist," said Stephane Deo from UBS. It creates more costs than benefits for the weak. Its "dysfunctional nature" was disguised by a credit bubble. The error is now "painfully obvious".

Yet Mr Deo warns that EMU exit would not be as painless as departing the ERM in 1992. Monetary unions do not break up lightly. The denouement usually entails civil disorder, even war.

If a debtor such as Greece left, the new drachma would crash by 60pc. Its banks would collapse. Switching sovereign debt into drachma would be a default, shutting the country out of capital markets. Exit would cost 50pc of GDP in the first year.

If creditors such as Germany left, the new mark would jump 40pc to 50pc against the rump euro. Banks would face big haircuts on euro debt, and would need recapitalization. Trade would shrink by a fifth. Exit would cost 20pc to 25pc of GDP.

UBS concludes that the only course is a "fiscal confederation", a la Suisse.

Well, perhaps, but Germany's top court chilled such hopes when it ruled that the Bundestag's budgetary powers may not be alienated to "supra-national bodies". Nor do I believe that German society is willing to undertake such a burden for Greco-Latins in regions equal to six times East Germany.

Citigroup's Willem Buiter disputes the "federalism or bust" dichotomy, saying Anglo-Saxon commentators are trapped in the mental world of the Peace of Westaphalia in 1648, which established the sovereign state as pillar of international order.

"There is no recent, close analogue to the EU," he says. As a blend of national and supra-national, the EU resembles the Holy Roman Empire, which united central Europe from the 10th Century until Luther (technically until 1806).

Dr Buiter says the two "canonical models" for EMU break-up - that debtors walk out, or the German-led core walks out - are both are fraught with perils.

The weak would sell their souls for a mess of potage, discovering that devaluation can be an "uncontrollable process" with little lasting gain for exports.

If the German bloc left to create a "Thaler", the costs would be less. However, the rump euro would fall apart, with massive dislocations. "It would not be pretty," he says.

Ultimately, political investment in the EU project is by now too great to entertain such thoughts. The eurozone will muddle through along a third way, with spasms of debt restructuring kept within the euro-family. It will fall short of a transfer union or a debt pool, he said.

Each of these reports is a terrific read, but as an unreconstructed Westpahlian - and having covered a lot of NO votes to EU referendums - I don't accept that Europe has a teleological destiny towards closer union.

It has already pushed its ambitions beyond the tolerance of Europe's historic states and cannot be made democratically accountable.

The new fact of recent months is that German society has begun to discern a clash between its own democracy and the fiscal drift of EMU. The two are seen to be in conflict for the first time. Germans may be forced to choose. The outcome to that is far from clear.

Nor do I accept the headline figures of UBS. Every Treasury official and every voice of orthodoxy warned in 1931 that British exit from the Gold Standard would unleash the seven plagues. It proved a liberation. The UK, the Empire, and allied states broke free from a system that had become an engine of deflationary Hell. It cleared the way for monetary stimulus and recovery.

There is a close parallel between 1930s Gold and EMU, both in destructive effect and totemic sanctity. The Gold Standard was more than a currency system. It was the anchor of an international order and way of life.

My solution - like that of Hans-Olaf Henkel, the ex-head of Germany's industry federation (BDI) - is to split EMU into two blocs, with France leading a Latin Union that keeps the euro. This bloc would devalue but not by 60pc, yet uphold its euro debts intact. The risk of default and banking crises would decrease, not increase.

The German bloc could launch their Thaler, recapitalizing banks to cover losses from rump euro debt. Disruptions could be contained by capital controls at first. None of this is beyond the wit of man. My bet is that aggregate losses would be lower than the status quo, and the long term outcome much healthier. The EU might even carry on, unruffled.

The status quo, however, is not acceptable. EMU's debt-deflation strategy has trapped half of Europe in depression, with youth unemployment reaching 46pc in Spain and no way out for years.

Perhaps a global coalition of the G20, IMF, China, and the oil powers will combine to rescue Euroland, as some now hope. But how would that bridge the gap between EMU’s North and South? It solves nothing.

Germany and Greece flirt with mutual assured destruction - Telegraph

German minister raises ‘orderly default’ for Greece

Germany has stepped up its rhetoric against Greece, warning that the debt-laden country could default on its debts in a move that highlights the growing divisions at the heart of Europe.

Germany's economy minster has said an 'orderly default' for Greece can no longer be ruled out. Photo: Reuters

By Jonathan Sibun

9:30PM BST 11 Sep 2011

Philipp Roesler, Germany’s economy minister, said an “orderly default” for Greece could no longer be ruled out and branded the country’s deficit-reduction measures “insufficient”.

The warning is likely to spook financial markets further and comes despite Greece yesterday announcing a fresh €2bn (£1.7bn) of budget cuts and the introduction of a country-wide real estate tax.

Evangelos Venizelos, the finance minister, said the cuts and tax measure were necessary to allow Greece to meet obligations demanded by the European Union and IMF in exchange for bail-out funds.

Writing in the Die Welt newspaper, Mr Roesler said: “To stabilise the euro, we must not take anything off the table in the short run. That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available.”

He said such a default would mean “re-establishing the affected state’s ability to function, perhaps with a temporary restriction of its sovereign rights”.

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Mr Roesler’s comments come as Germany’s Der Spiegel magazine said finance minister Wolfgang Schaeuble had ordered preparations be made for a Greek bankruptcy. The report claimed the German government is preparing for two eventualities under that scenario – Greece staying in the euro or the country exiting and reintroducing the drachma. Despite the speculation, the European Commission said it was sending a team to Athens “in the next few days” tasked with finalising the payment of a new tranche of loans for Greece by the end of the month.

EU economy commissioner Olli Rehn said the team – which represents the troika of the Commission, the European Central Bank and the IMF – would “provide technical support to the Greek authorities”. The previous team was pulled out of Athens earlier this month because of a lack of progress by the Greek government in reducing its deficit.

Mr Rehn on Sunday praised Greece’s new cuts, saying they would “go a long way to meeting the fiscal targets” for 2010 and 2011. “Greece needs to meet the agreed fiscal targets and implement the agreed structural reforms to fulfil the conditionality and ensure funding from its partners,” he said.

G7 finance ministers late on Friday vowed to “take all necessary actions to ensure the resilience of banking systems and financial markets”. However, underlining the difficulties facing German authorities, a survey showed 53pc of Germans oppose further aid for Greece and would not save the country from default should it fail to fulfil loan criteria.

German minister raises ‘orderly default’ for Greece - Telegraph

From Father To Son, PASOK Celebrates its 37th Birthday

Posted on 05 September 2011 by Emmanouela Seiradaki

September 3rd 1974: Andreas Papandreou flaunting the famous "Third of September Manifesto". 37 years later, amid massive protests in Constitution Square (Syntagma), his son faces the most challenging moment in his political career

In 1974, a couple of months before the colonels’ junta collapsed, current Prime Minister’s father, Andreas Papandreou, left Toronto and returned home, in order to create the Pan-Hellenic So-cialist Movement, known as Pasok. Andrea’s political “child” had a a tint of Marxism mixed with a nationalist and socialist agenda. Thirty seven years on, Andreas son has taken over his dad’s business (family-run businesses are very popular in Greece) but he is paying for his father’s sins and is forced to apply policies that can hardly be perceived as socialistic. From salary cuts to increasing souvlaki’s VAT to 23% PASOK has long forgotten its socialistic roots and as a result, saw its popularity wane. Three opinion polls published in Sunday newspapers showed that PASOK’s main conservative opposition New Democracy party had widened its lead.  So what went wrong for the party that has won six of the nine elections since 1981?

Andreas brings change

On August 16, 1974 Andreas Papandreou‘s plane arrives at the old airport in Elliniko. Wearing a black leather jacket and sporting the sideburns trend, the charismatic academic, with almost zero governmental experience, had came to bring change. His supporters shouted numerous slogans, also referring to Andrea’s father, the (old man of Democracy), Georgios Papandreou-current prime minister’s namesake grandfather also a Greek prime minister- urging him to raise from the dead in order to see his son (σήκω Γέρο για να δεις το παιδί της αλλαγής!). Andrea’s popularity rallied. By 1981, his leftist ideological rhetoric and political Utopia, had diminished the Conservative Party’s leader and Greece’s prime minister Konstantinos Karamanlis-his direct right wing antipodes- who foreseeing his defeat quits and moves on to Greek democracy’s presidency. Andreas wins a crushing general election victory with 48% and his supporters go ballistic

He was determined to make big social reforms that would change Greeks’ quality of life after years of starvation and war. He creates ESY (Greek National Health-care System), he boosts the welfare system, healing of the wounds of the German invasion and the Greek civil war which enabled thousands of ex-communists and rebels to gain pensions. He upgrades forgotten rural counties by creating schools and medical centers. From sheep farmers on the rocky slopes of Crete to fishermen in Cyclades, the Greek underclass voted for him massively. And why wouldn’t they? He was the first to pay attention to ordinary Greeks like them. Pasok workers had visited the farmers in villages and islands that men of power in Athens had always ignored.

The fall out

But then spending went out of control. Despite the fact that at first he fiercely opposed to the European Union, Andreas kept Greece in the club and started milking it of money. Instead of investing the European packages, he hired thousands and thousands of civil servants in the already over-bloated public sector only based on “rousfeti” (Turkish word for reciprocal dispensation of favours). He even ”hires” his son (current prime minister) in his cabinet. He nationalized failing companies, increased government handouts of every shape and form. He allowed female civil servants to retire at thirty five and granted tens of thousands of disability benefits to perfectly healthy people (there still are Cretan villages where 98% of the population is either blind or handicapped). Famous “Delor’s packages” kept pouring money for Greek rural areas to develop, funding non-existent cultivations and the same five sheep the villagers kept moving around the village  so that inspectors would give them the valuable  “επιδότηση” while Andrea’s Minister of Finance Dimitris Tsovolas, becomes the most recognisable slogan of the eighties ”Τσοβόλα δώστα όλα!”(Tsovolas give us everything).

“Dirty ’89″

A plump man with steady dark eyes, George Koskotas, was the reason Andreas Papandreou fell off power, was taken to court and one of his Ministers had a heart attack and died during the trial- live on national television.The Koskotas scandal revealed a government riddled by extortion and criminality. The press claimed that Bank of Crete sponsored PASOK and the missing dollars were actually payoffs that went directly to PASOK officials. Andreas was also accused of using Koskota’s publishing empire to manipulate public opinion. Hilarious stories about suitcases full of cash coming back and fourth from the Maximos Mansion (the Greek government offices) were catching headlines on a daily basis.

Back at his seat

However being dragged to court, however all the bad press on his inner court of cronies corruption, however marrying  a rather controversial-some say vulgar- blond flight-attendant half his age, Greek people brought Andreas right back where he was. In 1993, Mr Papandreou led his party yet again to victory with an extraordinary 47% of the vote. But his body couldn’t take the heat and he was now on  life-support machines. Andreas remained leader of Pasok until his death and only surrendered the prime ministership a few months before he passed away.

The Simitis era

Compared to his populist predecessor,  Mr Simitis seemed like a more low-key, modern-minded prime minister. Greeks perceived him as the leader who would finally turn Greece into a European country and he did-at least on the surface. Simitis certainly lacked Andrea’s rhetoric-he was actually nicknamed “the book keeper” for boring audiences with statistics- but within his first four years of governance Greek economy revived so perkily that Greece joined the Euro-zone. Simitis was also the man who prepared Athens 2004 Olympic Games major projects.

Greeks were proud to have entered the euro and for pulling off the Olympic Games bet-despite widespread scepticism. But while both his accomplishments- entering the Eurozone and organizing the Games, gave a morale boost to the Greek ego- a couple of years later, the “Simitis bubble” was brutally burst both for his European counterparts and the Greek people. Turn’s out that the ”book keeper’s” statistics -based on which Greece entered the euro-zone-were all fake, as was the revival  of the Greek economy which was basically the result of overpriced Olympic Games where Greece won-yet again- the gold medal for overspending borrowed money.

Papandreou The Third

After an admittedly disastrous PASOK-governance-brake,  Papandreou The Third swept into power, as Karamanlis The Second hoped off the sinking ship. Trim, fit and elegant, the American born Greek prime minister is often getting mocked by the Greek press for his small grammatical errors and for his unrealistic visions such as wanting to turn Greece into the Sweden of the Mediterranean!

In an agonising attempt to save Greece from bankruptcy, Papandreou Jr is trying to explain to the Greek people why he pushes all those unpopular reforms, blaming  political parties for promising government jobs, social security perks and overspending-conveniently forgetting that it was his party governing the country for most of the time after 1981. And it is his own “comrades” that fight with him the most: the old PASOK guard who’s still hooked on his father’s enduring myth limiting the current office holder’s room for manoeuvre. And they prove to be harder to convince -even more so than his once close friend and dorm-mate at Amherst College in Massachusetts, current New Democracy leader, Antonis Samaras.

From Father To Son, PASOK Celebrates its 37th Birthday | Greece.GreekReporter.com Latest News from Greece

Greek police arrests ten people after demonstration in Athens

 

Greek police arrests ten people after demonstration in Athens

© AFP/ Louisa Gouliamaki

15:33 04/09/2011

ATHENS, September 4 (RIA Novosti

Ten people have been arrested in Athens after manifestation near the Greek parliament, city police department said on Sunday.

Clashes between the protesters, who are disagree with the governmental economic policy, and police began in early morning on Sunday when police officers decided to push the demonstrators aside from a square near the parliament.

This summer thousands of Greeks protested against the government's austerity measures as the country is in a deep economic turmoil now with debt to gross domestic product ratio nearing 160 percent, Europe's highest.

The new bailout worth 109 billion euros ($155 billion) from the EU come on top of 110 billion euros already granted to Greece by the union in May last year.

Under the guarantees for the bailout, Greece must implement a 50 billion euro privatization program by 2015.

Greek police arrests ten people after demonstration in Athens | News | RIA Novosti

European Debt Concerns Rear Up Again

 

Angelos Tzortzinis/Bloomberg News: Greece's finance minister, Evangelos Venizelos, center, said the economy would shrink this year.

By MATTHEW SALTMARSH AND NIKI KITSANTONIS

Published: September 2, 2011

LONDON — Concerns about the euro zone’s ability to cohesively respond to its debt crisis resurfaced Friday after talks between Greece and its foreign creditors were interrupted and the head of the European Central Bank warned Italy to stick to its austerity program.

Yields on 10-year Italian bonds rose almost a tenth of a percentage point, to 5.21 percent — well above the 5 percent level that policy makers consider the top desirable rate. The yield on Spain’s 10-year securities climbed slightly to 5.06 percent, despite passage in the lower house of the Spanish Parliament on Friday of an amendment that will enshrine stricter budgetary discipline in the Constitution.

Europe’s central bank began the extraordinary step of buying Italian and Spanish debt on Aug. 8 to help calm markets after 10-year rates spiked to around the 6 percent level.

David Schnautz, interest rate strategist at Commerzbank in London, said many investors had chosen to use the central bank’s recent bond-buying program to offload those bonds, and that was causing yields to drift up now.

“There’s still no genuine investor demand for Spanish and Italian government bonds,” he said.

In the debt talks in Athens, European and International Monetary Fund officials withdrew early as they apparently disagreed over the country’s deficit figures and how to make up for a growing budget shortfall.

The mission had been sent to determine whether Greece would meet the conditions for the next tranche of emergency loans, expected this month.

Representatives of the European Commission, the European Central Bank and the I.M.F. said in a statement that “good progress” had been made, but that they wanted to allow time for the Greek government to complete technical work on the 2012 budget and reforms.

The delegates, who had been scheduled to leave next week, said they would return to Athens by mid-September, “when we expect the Greek authorities to have completed the technical work, to continue discussions on policies needed to complete the review.”

An initial loan package, agreed to last year, has since been supplemented by a second bailout deal that was reached in Brussels in July, but now hangs in the balance amid demands by some euro zone countries for guarantees from Greece in the form of collateral. Without that fresh aid, Greece could default on its obligations.

The Greek finance minister, Evangelos Venizelos, denied that there was a rift with the auditors over the country’s ability to meet deficit reduction targets set by the foreign creditors.

The minister told reporters at a news conference that talks were continuing with auditors in “a very friendly and constructive climate,” and that he expected the team back on Sept. 14 for a second phase once the Greek government had finished a draft of the national budget for 2012.

Greek officials had not previously suggested that there would be a break in negotiations with the inspectors, whose earlier audits had lasted two weeks.

One issue that dominated talks, which concluded early Friday, was a deeper-than-expected recession in Greece that would necessitate “some additional elaboration to ensure there is no divergence” from deficit reduction targets, Mr. Venizelos said.

A European official, speaking on condition of anonymity because the talks were confidential, said that without additional information, there was a risk that some euro zone countries might not agree to releasing the round of aid.

Mr. Venizelos also said that Greece’s economy was expected to contract by “up to 5 percent” but would not give a figure for the Greek budget deficit, broadly expected to overshoot a deficit target of 7.6 percent for 2011 by up to one percentage point.

Analysts said the government’s procrastination in adopting tough measures — like a crackdown on tax evasion and an ambitious privatization scheme — could cost the country dearly.

Moses Sidiropoulos, economics professor at Aristotle University in Thessaloniki, told the private television channel Skai that Greece’s future in the euro zone was at stake.

“If immediate action isn’t taken, even one thing, an example to the foreign creditors that we are serious, I fear Greece will soon be featured in textbooks as a paradox of economic management,” he said.

Greek two-year note yields climbed Friday as much as 358 basis points to reach a euro-era record 46.51 percent, according to Bloomberg News.

Separately, Jean-Claude Trichet, the president of Europe’s central bank, said that Italy’s struggling center-right government must deliver on its promised austerity package, adding to pressure on Prime Minister Silvio Berlusconi.

The bank’s support is vital because it has been buying Italian bonds to keep yields low enough for the Italian government to continue borrowing from investors. There are no fresh Italian bond sales planned for two weeks.

Mr. Trichet said in an interview with Italian business daily Il Sole 24 Ore that measures announced on Aug. 5 by Mr. Berlusconi to balance the budget by 2013 were “extremely important.” Subsequent to that, Mr. Berlusconi has appeared to back off some of his initial commitments.

In Spain, the constitutional amendment, which was proposed last week by Prime Minister José Luis Rodríguez Zapatero, is expected to be endorsed by senators from the upper house next week.

José Blanco, one of Mr. Zapatero’s senior ministers and the government spokesman, said that the inclusion of a “principle of budget stability” in the constitution should help Spain confront further market pressure, after an August when investors raised the country’s borrowing costs close to record highs.

“We need to do everything possible to protect ourselves against months as difficult as was August,” Mr. Blanco told reporters at a news conference after Friday’s parliamentary vote.

Mr. Blanco also argued that the constitutional reform, which Mr. Zapatero proposed under pressure from Germany and France, would now put Spain at the forefront of countries that are “betting on European economic governance.”

Lawmakers approved the amendment by 316 to 5. Still, several lawmakers from smaller parties abstained from Friday’s vote, mostly in protest against the fast-tracking of the constitutional change.

Trade unions as well as some citizens’ groups have also called for a referendum before modifying the Constitution, which Spain adopted after returning to democracy in the late 1970s.

The outcome of the parliamentary vote was expected after an earlier agreement between Mr. Zapatero and Mariano Rajoy, the leader of the Popular Party, the main center-right opposition. On Friday, Mr. Rajoy said that the constitutional reform was “what everybody has been asking for” and would help put Spain on the path toward economic recovery.

Still, the latest employment data released on Friday underlined the severity of Spain’s economic crisis, with a rise of 1.25 percent in joblessness in August compared to July, leaving 4.13 million unemployed.

Matthew Saltmarsh reported from London and Niki Kitsantonis from Athens. Raphael Minder contributed reporting from Madrid.

European Debt Concerns Rear Up Again - NYTimes.com