Crisis Deepens; Chaos Grips Greece

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Crisis Deepens; Chaos Grips Greece
  • OB-IJ884_8greec_F_20100505084108.jpg
    <CITE>John Kolesidis/Reuters</CITE>
Demonstrators smashed shop windows, overturned garbage bins and set fire to at least two businesses.



ATHENS?Greece's fiscal crisis took a new turn to violence Wednesday when three people died in a firebomb attack amid a paralyzing national strike, while governments from Spain to the U.S. took steps to prevent the widening financial damage from hitting their own economies.
U.S. Treasury officials have been quietly urging their European and International Monetary Fund counterparts to put together a Greek rescue plan more quickly to contain the damage, it emerged Wednesday, as U.S. policy makers worry the continent's problems could undermine a U.S. recovery much as U.S. housing woes hammered Europe in 2008.
In Spain, rival political leaders came together Wednesday with an agreement that aims to shore up shaky savings banks by the end of next month. Banks in France and Germany, which are among Greece's top creditors, pledged to support a Greek bailout by continuing to lend to the country. Investors, meanwhile, are pouring money into bonds of countries seen as less exposed to the crisis, from Russia to Egypt.

<OBJECT id=MicroPlayer_441101 class=inlineimg title="Big Grin" border=0 alt="" classid="clsid:D</OBJECT>Greece was gripped by a nationwide strike, in what is seen as a key test of the government's ability to shepherd through tough austerity measures. Charles Forelle, Evan Newmark and Mike Reid discuss.


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Anxiety over the euro-zone economies sent the euro down to about 1.29 to the dollar, its lowest level in more than a year. The Dow Jones Industrial Average fell for the second straight day, losing 58.65 points, or 0.54%, to close at 10868.12.
Greece's 24-hour nationwide general strike brought much of the country to a standstill, closing government offices and halting flights, trains and ferries.
At the same time, tens of thousands of protesters marched through Athens in the largest and most violent protests since the country's budget crisis began last fall. Angry youths rampaged through the center of Athens, torching several businesses and vehicles and smashing shop windows. Protesters and police clashed in front of parliament and fought running street battles around the city.
Witnesses said hooded protesters smashed the front window of Marfin Bank in central Athens and hurled a Molotov cocktail inside. The three victims died from asphyxiation from smoke inhalation, the Athens coroner's office said. Four others were seriously injured there, fire department officials said.
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A police spokesman said eight fires in Athens office buildings and bank buildings had been brought under control.
Later Wednesday, black smoke billowed from fires on one of Athens's main shopping streets. Glass shards and smoldering garbage littered the sidewalks.
Greek Prime Minister George Papandreou condemned the violence. "Everyone has the right to protest," he said in a statement to parliament. "But no one has the right to violence and especially violence that leads to the death of our compatriots."
Wednesday's protests were sparked by Greece's weekend agreement to adopt austerity measures in exchange for a ?110 billion ($143 billion) bailout loan from the European Union and the IMF. Unions challenged Greece's parliament, which could consider the measures as soon as Thursday, to vote them down.
The general strike marks the broadest challenge to date to the government of Mr. Papandreou, which is pressed to pass the austerity legislation to unlock bailout funds to meet a debt payment later this month that it otherwise couldn't meet.



Fire Bomb Hits Bank During Greek Riots

<SMALL>1:04</SMALL> A fire-bomb attack on a bank in Greece killed at least three people Wednesday as protesters are furious about brutal budget cuts designed to avoid national bankruptcy. Video courtesy of AFP





The protests also brought out many Greeks who were resigned to belt-tightening. Their unhappiness at the cuts was matched with rancor toward a generation of politicians who they say spurred the crisis with decades of corruption, kickbacks and accounting legerdemain aimed at obscuring to the EU the true level of Greece's annual deficits.
"For 30 years the Greek people have been held hostage," said Periandros Athanassakis, 48, a garbage collector in Piraeus, the port near Athens. "Those who stole the money should pay."
Some officials saw in Wednesday's protests the seeds of broader discontent. "We may have an uprising in the making," one senior Greek official said.
Greeks generally don't blame Mr. Papandreou for the country's problems, however, saying he inherited them from predecessors. It was his administration, elected in October, that announced the government's budget deficit for 2009 would be equivalent around 13% of gross domestic product, compared with the 6% claimed by the previous administration.
Mr. Papandreou's approval ratings are higher than those of the leader of the main opposition party.
Analysts also said the shock of Wednesday's deaths could nudge Greece's fractious political parties toward closer cooperation in dealing with the crisis and making it easier to pass reforms.
"This changes the political scene," said George Sefertzis, an independent political commentator with the Athens consultancy Evresis. "There is no doubt that the deaths ease some of the political pressure."
Under terms of the bailout deal, Greece's government has announced a ?30 billion package that will slash public-sector wages, cut pensions, freeze public- and private-sector pay, liberalize Greece's labor laws and raise some taxes.
In Berlin on Wednesday, Chancellor Angela Merkel called on parliament to approve Germany's contribution of ?22.4 billion in loans to Greece. German public opinion opposes a Greek bailout but Ms. Merkel said it was essential. "Europe stands at a crossroad," she said. "With us, with Germany, there can and will be a decision which lives up to the political, historical situation."
Protests Rage

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<CITE>Thanassis Stavrakis/Associated Press</CITE> A riot police officer was engulfed in flames from a fire bomb thrown by protesters in Athens.





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<CITE class="cMetadata metadataType-comment">?Gilberto Fondu</CITE>

In Greece's northern city of Thessaloniki, there were reports of violence as police clashed with demonstrators who were attacking shop fronts amid a rally that drew at least 20,000 protesters to the streets.
Police officials estimated there were 20,000 protesters in Athens. Union officials said union-affiliated protesters alone totaled more than 60,000. Others put the number higher still. "This rally was double the size of the largest rally that has ever been held in Greece," said Spyros Papaspyros, president of Adedy, a civil-service umbrella union. "If the government doesn't listen, there will be more strike action next week."
The day's general strike, the year's third, shut ministries and public offices. State hospitals and public utilities operated with skeleton staff. Shopkeepers joined the strike at midday, while journalists, bank workers, teachers, court workers, lawyers and doctors also walked off the job.
Many Greeks taking part in the demonstration saw little alternative than to accept the government measures and brace for a long, deep recession.
"I don't expect the measures to be withdrawn," said Pericles Papapetrou, 61, an architect and engineer who used to be mayor of the town of Elefsina. But, he said, the measures "could lead to extreme situations, such as an increase in crime, and also to an explosion of young people with no future."
Artemis Batzak Panayou, a cleaning lady working for a local government, saw her ?1,200 monthly salary, on which she supports three children, cut by ?250 at the beginning of the year. She believes it will fall further. "There is no way to survive on the daily wages in the public sector," she said, adding: "Greece won't be fixed until all the crooks are removed from government."
<CITE class=tagline>?Costas Paris and Nick Skrekas contributed to this article.</CITE>
 
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Many possible triggers for wider euro debt crisis

Many possible triggers for wider euro debt crisis

Many possible triggers for wider euro debt crisis
Wed, May 5 2010
By Brian Love, European Economics Correspondent - Analysis

PARIS (Reuters) - Europe may be months, conceivably weeks away from an expanded debt crisis that cuts more countries off from access to the markets and forces fresh emergency action by rich governments or the European Central Bank.

The many potential triggers for an expanded crisis include a failed bond auction, any signs that Athens or donor nations were backing away from a 110 billion euro ($141 billion) bailout of Greece, and a freezing up of Europe's interbank money market.

For now, Portugal, Ireland and Spain, widely seen as the next possible "dominos" after Greece, remain in significantly better shape. The interbank market is far from grinding to a halt as it did after Lehman Brothers collapsed in late 2008.

But the spread of investor jitters in the past 24 hours, affecting markets as distant as yen swaps in Tokyo, suggests market conditions could deteriorate as rapidly as they did during the global financial crisis of 2007-2009.

"In my view there is a 10-20 percent chance that at least one more country will need rescuing as it finds itself shut out of the markets," said Marco Annunziata, chief economist at Italy's UniCredit bank.

"If it happens, it is most likely to happen in the coming six months."

Lena Komileva, head of G7 market economics at money broker Tullett Prebon, said the crisis over Greece's solvency had morphed into a capital markets crisis, and the markets had begun to feed on their own momentum.

"Another credit event similar to Greece can happen within weeks," she said.

German Chancellor Angela Merkel and top economic policy makers in the euro zone appeared to recognize this in their warnings about the risk of an expanded crisis on Wednesday.

"It's absolutely essential to contain the bushfire in Greece so that it will not become a forest fire and a threat to financial stability for the European Union and its economy as a whole," said European Monetary Affairs Commissioner Olli Rehn.

TRIGGERS

Greece became unable to finance its debt at affordable rates when its 10-year government bond yield soared near 10 percent in April. The euro zone's other weak countries have not reached that stage; Portugal's yield was below 6 percent on Wednesday.

Portugal sold 500 million euros in six-month Treasury bills on Wednesday at a yield of 2.955 percent, which was about four times the rate at the last such sale on March 3 but was well below maximum levels in the secondary market. This was seen as a moderately positive sign by analysts.

Spain is expected to succeed in selling 2-3 billion euros of government bonds on Thursday, although at a much higher yield than in its last auction, analysts said.

Nevertheless, every debt sale by weak euro zone states in coming months is likely to be viewed as a potential flashpoint for an expanded crisis. Portugal plans to offer more T-bills on May 19 and Spain plans another bond sale on May 20.

Annunziata estimated Spain's bond spreads were still low enough for it to borrow at current rates for at least a year or more without doing serious damage to its finances. Portugal can keep borrowing at current rates for at least a year, he said.

But he added, "The problem, as for exchange rates, is also the speed of the movement. If spreads keep widening then markets could more quickly lose confidence and the problem would be the quantity of available financing, not the cost."

Meanwhile, the Greek bailout package announced this week imposes such harsh austerity measures on Greece that the markets will continue doubting the country's political will and economic ability to stick to the package.

Any sign that the government of Prime Minister George Papandreou was backing off from key fiscal reforms in the face of public opposition could raise the prospect of a Greek debt restructuring or default, triggering an expanded crisis.

The European Commission and the International Monetary Fund will monitor Greece's progress every quarter and link aid disbursements to those reviews. The reviews could become triggers for an expanded crisis if Germany, where public opinion strongly opposes helping Greece, decides Athens is not meeting aid conditions and balks at a disbursement.

The markets could also panic if commercial banks around Europe, which have cut off funding lines to Greek banks, decide to do the same to banks in Portugal, Ireland and Spain.

So far the stresses in the money markets do not approach those seen at the peak of the global crisis. The two-year euro zone swap spread, which measures the aversion of lenders to deal with any but the most creditworthy borrowers, has widened to 65 basis points, its widest since mid-March 2009, but is far below the record 130 bps hit in October 2008.

However, large Spanish and Portuguese banks are having to pay a higher price to access the interbank market, and this premium could widen if sovereign debt markets sink further.

EMERGENCY STEPS

The political difficulty of assembling an international bailout for a country -- the Greek bailout was preceded by months of wrangling between angry governments -- suggest the ECB would be the first institution to respond to an expanded crisis.

It could reintroduce emergency measures taken during the global crisis, resuming a programme of lending in dollars and Swiss francs over six- and 12-month maturities, or extending its promise to lend banks all the weekly funds they need at fixed rates beyond mid-October.

It might also abandon minimum credit rating requirements for more countries' sovereign bonds when they are used as collateral in its money market operations, as it did for Greece this week.

Its most radical step would be to buy countries' bonds from the secondary market, shouldering their debt -- though that would be hugely controversial and hurt the ECB's reputation for conservative monetary policy. Analysts think it might pledge some 200 billion euros in such purchases.

"They've a huge amount of armoury at their disposal. They can do a huge amount of things and I think they will be able to stabilize the market at some point," said UBS chief European economist Stephane Deo.

An expanded crisis could also prompt a fresh bailout effort by rich euro zone governments desperate to preserve confidence in their currency and protect their banks from defaults. Analysts estimate a bailout of Portugal, Ireland and Spain might cost around 400 billion euros.

But the political difficulties of agreeing on an expanded bailout could dwarf the challenge which Greece posed. The European Commission is to propose a permanent mechanism for handling such crises on May 12, possibly drawing on a German proposal for a European Monetary Fund. But actually creating the mechanism might require contentious changes to the European Union Treaty that would require many months.

Regardless of how Europe resolved an expanded debt crisis, the reputation of its key economic institutions, which failed to act quickly and decisively to address Greece's troubles, would likely suffer lasting damage among investors.

Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital, said Portugal would probably also need emergency aid from the EU and the IMF.

"This short-term fix could have serious negative... consequences for Europe, the IMF, the ECB and the euro," he said, predicting both Greece and Portugal would likely reschedule their debts eventually.

"I maintain my view that there will be no happy ending for Greece."


I have heard far too many of the talking headtards proclaiming that it's really not that bad, what? And they can't undersatnd why the people are attacking the banks, double what,what? Don't be fooled by these helmet polishers, this is not a good situation for Europe and US, why do you think NORTHCOM IS ON ALERT? Story I posted last week. I got mine, do you have yours?
 
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Romania braces for austerity

Romania braces for austerity

Romania braces for austerity

romania.jpg


A romanian worker fixes communications cables on a pole downtown Bucharest. Romania will slash wages in the public sector by 25 percent and pensions by 15 percent in order to meet IMF deficit target
Click to expand...

BUCHAREST - ROMANIA braced on Friday for a wave of protests after the president unveiled austerity cuts in public sector wages and pensions to meet a deficit target set by the IMF and avoid a Greek emergency scenario.

'This programme to cut public expenses was inevitable,' President Traian Basescu said during a press conference on Thursday after a meeting with IMF and European Union representatives in Bucharest.

Wages in the public sector are to be cut by 25 per cent, Mr Basescu said, adding that 'all salaries, including the minimum one, will be affected.' Pensions will be slashed by 15 per cent, just like unemployment benefits.

These cuts should help Romania 'avoid an extremely difficult situation, generated not so much by what is going on in its own economy, as by developments in the region,' he said, in a reference to the Greek crisis.

Romania last year pledged to trim the bloated civil service and freeze public wages and pensions in exchange of a 20-billion-euro aid package from the IMF, the European Union and the World Bank. But with reforms slower than expected, the deficit threatened to balloon beyond the 5.9 per cent target set by international lenders.

Moreover, the IMF has reduced Romania's growth forecast for 2010 from 1.3 per cent to 0.8 per cent. In 2009, its economy contracted by 7.1 per cent. Mr Basescu said the government had chosen the 'bitter pill' of slashing public spending instead of raising taxes. The cuts will be effective from June. -- REUTERS, AFP
 
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US Faces Same Economic Woes As Greece: Marc Faber

US Faces Same Economic Woes As Greece: Marc Faber

US Faces Same Economic Woes As Greece: Marc Faber


The US is facing the same dire economic problems as Greece, Marc Faber, author of the Gloom, Doom and Boom Report, told CNBC Friday.

"Many people haven't woken up to the severity of the US fiscal crisis," Faber said by phone. "The only difference for the US from Greece is that it can print more money."

Faber said that most western countries as well as the US cannot pay for unfunded liabilities and that more sovereign defaults will happen in the future.

As for Greece, Faber said the country was basically bankrupt and the EU will most likely have to bail it out.

"That's good for Greece," Faber went on to say, "but it's a big negative for the EU to have to come up with the funds."

Asked about Thursday's plunge of the Dow, Faber pointed to reasons beyond the Greek government's vote for an austerity package and the following protests.

"It's not that Greece alone produced the market sell-off," said Faber. "It was a trigger but the market was probably overbought and we were ahead of economic fundamentals."


As for predictions that the Chinese economy is headed for a recession, Faber said that he expected a slowdown over the next couple of years.

"The Chinese stock market is already down by 25 percent from last August," said Faber. "A real estate bubble exists in some parts of the country. But it won't be as bad as what the US has had. How bad the recession there will be is hard to say. I still believe in the Chinese economy, but there will be a slowdown."
 
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ga_ben said:
Exactly Wease, to the tune of around 49 billion. Somewhere around 17% of the IMF contribution. Nevermind the Constitution. Nothing to see here sheeple, move along, move along.
Click to expand...

How many Euro Country Bailouts will it take before America just says "No More" !
 
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Europe Officials Move to Carry Out Rescue Package

Europe Officials Move to Carry Out Rescue Package

Europe Officials Move to Carry Out Rescue Package</NYT_HEADLINE><NYT_BYLINE>
By JAMES KANTER and LANDON THOMAS Jr.

</NYT_BYLINE><NYT_TEXT><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>FRANKFURT ? European central banks began buying euro-zone government bonds directly on Monday ? an unprecedented move to inject cash into the financial system ? after European leaders agreed to provide a huge rescue package of nearly $1 trillion to combat the debt crisis that has engulfed Europe.
In response to the extraordinary show of solidarity in defending the euro, markets rallied around the world and the risk premium on Greek and other government bonds plunged. But analysts pointed out that the package does nothing to reduce overall debt, and that market could lose faith again unless European nations take bold steps to reduce their borrowing.
?If the will for fiscal discipline in the E.U. is plainly evident, long-term confidence in the euro will be restored,? Michael Heise, chief economist of German insurer Allianz, said in a note to investors.

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After hours of meetings that lasted into early Monday morning, finance ministers from the European Union agreed on a deal that would provide $560 billion in new loans and $76 billion under an existing lending program to countries facing instability. Elena Salgado, the Spanish finance minister, who announced the deal, also said the International Monetary Fund was prepared to give up to $321 billion separately.
Officials were hoping the size of the program ? a total of $957 billion ? would signal a ?shock and awe? commitment to such troubled countries as Greece, Portugal and Spain, in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008.
On top of the huge sum, the European Central Bank reversed its position of just a few days ago and said it would buy government and corporate debt. And the world?s leading central banks, including the U.S. Federal Reserve, announced a joint intervention to make more dollars available for interbank lending.
?The channels of normal monetary policy were not functioning,? Jean-Claude Trichet, president of the E.C.B., said at a press conference in Basel on Monday.
Central bank purchases of euro-zone government bonds began Monday, although the E.C.B. did not immediately release details.
The initial market reaction was ecstatic. The euro jumped back above the $1.30 mark for the first time in a week before falling back slightly. reece?s 10-year borrowing costs plunged by almost half.
In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, rose more than 8 percent, following on modest gains in Asia.
The package was much larger than expected, and represented an audacious step for a bloc that had been criticized for acting tentatively, and without unity, in the face of a mounting crisis.
Philippe Gijsels, head of research at at BNP Paribas Fortis Global Markets in Brussels, said the central bank action was in some ways the most crucial, because the E.C.B. would be in effect funding government budget deficits by monetizing their debt.
The trick now, he said, would be to ensure that Greece and other countries in similar straits are held to their promises to straighten out their finances.
?The debt is still in the system,? Mr. Gijsels said. ?Eventually all these problems will rise again.?
The E.C.B., which had said buying bonds was not even on the agenda at its regular meeting last Thursday, announced the reversal early Monday after an emergency telephone conference by members of its Governing Council. The purchases began Monday, but the central bank did not immediately say which government bonds the banks are buying or what amounts. A Bundesbank spokesman also declined to provide details.
It is likely the banks are bonds from Greece and such countries as Portugal or Spain, as the E.C.B. tries to stop a sell-off of debt from those countries that would push up their borrowing costs.
In its statement, the E.C.B. said that the liquidity that the bond purchases will pump into the European financial system will be ?sterilized,? or offset with other monetary operations to drain liquidity from the system. In doing so, the bank seemed to be trying to answer criticism that buying bonds is the same as printing money and could lead to inflation.
The E.C.B. also said it would lend unlimited dollars to banks that can provide collateral in return. The action appeared to be an attempt to take pressure off the euro. While many analysts still consider the euro to be overvalued against the dollar, the E.C.B. may want to avoid a sudden drop in the currency, which would be disruptive for businesses and boost the price of oil and other commodities in euro terms.
Underscoring the urgency of the situation, President Barack Obama spoke to the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, on Sunday about the need for decisive action to restore investor confidence. The actions by the United States represented significant concern that the European crisis could spill over and hinder the American recovery.
New political complications in two of Europe?s most important countries added to the challenge. In Germany, voter anger at the effort to save Greece cost Mrs. Merkel an important regional election Sunday, undermining her leadership, and in Britain the government remained in a state of suspended animation because of the inconclusive parliamentary elections last week.
Financial unease has been mounting. Riots in Greece, ever-tightening terms of credit and the unexplained free fall in the American stock market last Thursday have compounded the sense that the European Union?s inability to address its sovereign debt crisis might lead to the type of systemic collapse that followed the fall of Lehman Brothers.
The debt crisis began with Greece teetering toward default, and fear quickly spread about other weak economies like Portugal, Spain and even Italy. Previous efforts by the European Union to shore up investor confidence were viewed as too little, too late, with the markets making clear that they were looking for a bolder plan.
Olli Rehn, the European commissioner for monetary policy, described the arrangement as ?a consolidation pact? that would be ?particularly crucial for countries under speculative attacks in recent weeks.? He specifically mentioned Portugal and Spain.
Mr. Rehn said the I.M.F. would provide ?half as much as the European Union? following lengthy talks with fund officials.
?We shall defend the euro whatever it takes,? Mr. Rehn said.
What emerged from the discussions, which covered more than 10 hours, represented a partial retreat from a system discussed earlier in the day that would have radically expanded the powers of the European Commission to raise funds.
Instead the ministers devised a system that would speed up the pace at which states that use the euro could lend to one another, but on a bilateral and voluntary basis.
One of the crucial decisions that ministers made was to create a so-called special purpose vehicle to disburse the $560 billion in new loans, should that support be required by member states in economic difficulties.
The use of such a financial instrument reflected the difficulties that individual European governments ? and Germany?s in particular ? had in committing huge sums to a central authority. Having a body like the European Commission, Europe?s executive body, oversee the economic management of the bloc was seen by some countries as a clash with national sovereignty.
The Bank of Japan joined in the global response, saying after an emergency board meeting Monday that it would pump 2 trillion yen, or $21.6 billion, into financial markets for a second consecutive trading day in a bid to ease credit.
In a statement after their meeting, the ministers emphasized that the special purpose vehicle would expire after three years and that its use would be strictly dependent on ?national constitutional requirements.?
The language most likely reflected the reservations of some governments to providing even more money than is available in bailout packages already approved.
Ministers said their first line of defense against financial turmoil was to employ an existing loan program, which they expanded by $76 billion, and to use the further loans approved Monday as a ?complement? as required.
There were many complications in trying to forge a consensus. They included defining the role of Britain, which lies outside the euro zone and had said it would not help in propping up the euro, as well as the European Central Bank. The fractiousness underscores the frailty of a monetary union in which the richest member, Germany, is also the most opposed to a financial rescue.
Since it became clear that Greece would not be able to meet its financial obligations and fears spread that other indebted nations like Spain, Portugal and Ireland would have similar troubles, Europe has responded fitfully.
The meetings on Sunday represented an extraordinary convergence of diplomatic activity, crammed into a tight time frame. Political leaders including Mr. Sarkozy of France said early Saturday, at the end of an earlier summit meeting, that a loan mechanism intended to restore confidence should be ready by Monday morning. That effectively left the European Commission and finance ministers a single weekend to change the way the European Union operates its finances.
<NYT_AUTHOR_ID>
James Kanter reported from Brussels, and Landon Thomas Jr. from London. David Jolly contributed from Paris, Jack Ewing from Frankfurt, Sewell Chan from Washington and Bettina Wassener from Hong Kong.


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