Monday, October 31, 2011

Greece to Hold Referendum on New Debt Deal

New York Times
October 31, 2011

Prime Minister George Papandreou announced Monday night that his Socialist government would hold a rare national referendum on a new debt agreement for Greece that was hammered out with the country’s foreign creditors last week, raising questions about Greece’s ability to follow through on its part of the hard-won deal to stabilize the euro.

The surprise announcement, made to lawmakers in Athens, again chained the health of the European Union to Greek domestic politics. Standard & Poor’s 500-stock index fell almost 2.5 percent and the Dow Jones industrials fell about 2.3 percent. European markets, which closed before the announcement, were also down sharply on Monday.

Mr. Papandreou said that the decision on whether to adopt the deal, which includes fresh financial assistance for the country but also imposes unpopular austerity measures, belonged to the Greek people. “Let us allow the people to have the last word, let them decide on the country’s fate,” he said, describing the vote ahead as “an act of patriotism.”

More

Papandreou to Put Loan Plan to Referendum

Bloomberg
October 31, 2011

Greek Prime Minister George Papandreou pledged to put the European Union’s new agreement on financing for Greece to a referendum, saying Greeks will give him the support to forge ahead with economic reforms.

“For the new agreement, we must go to a referendum for Greeks to decide,” Papandreou told lawmakers of his ruling socialist Pasok party in statements carried live today from Athens on state-run Vouli TV. “Democracy is alive and well and Greeks are being called to rise to a national duty beyond the regular electoral processes.”

Papandreou’s gambit risks pushing the country into default if rejected by voters and raises the ante with dissidents inside his own party. Papandreou’s popularity has plunged after a raft of austerity measures cut pensions and wages, increased taxes and sparked a wave of social unrest. An opinion poll published Oct. 29 showed most Greeks believe the accord on a new bailout package and a debt writedown is negative.

“Papandreou could lose the referendum, which means that new elections would have to be called,” Thomas Costerg, European economist at Standard Chartered Bank in London, said in an e-mail. “Heightened Greek uncertainty could propagate to other fragile euro-area countries, in particular Italy.”

More

EFSF needs bigger bazooka to maximise its firepower

by Willem Buiter

Financial Times

October 31, 2011

The European Summit to save the euro has brought temporary and partial solutions to three immediate problems facing the EU. First, to restructure insolvent sovereigns (Greece, most likely Portugal, quite possibly Ireland). Second, to recapitalise the many European Union zombie banks. And third, to ring-fence those sovereigns that, although most likely solvent, are at risk of a market liquidity ambush.

The 50 per cent loss likely to be imposed on private creditors is not enough to restore Greece’s sovereign to solvency. I expect that, ultimately, both private and official creditors (including the European Central Bank, but probably excluding the International Monetary Fund) will have to write off most of their Greek sovereign exposure. Likely future restructuring of the Portuguese sovereign was not addressed, nor was the likely need for further funding concessions for Ireland.

Bank recapitalisation worth around €106bn is likely to provide between a third and a quarter of what will ultimately be required to bring about a fully functional EU banking system. Public resources also have to be found to guarantee new issuance of senior unsecured bank debt.

Without that, the ECB will be the dominant source of short-term and long-term bank funding. As regards ring-fencing Spain and Italy, nothing has been achieved except to gain some time to achieve a proper solution. Evidence of this is Italy’s 10-year borrowing cost, which, following the summit, exceeded 6 per cent – an unsustainable level.

More

Greeks hostile as EU ‘task force’ starts work

Financial Times
October 31, 2011

Last week, a shudder went through the Athens office that is the temporary home to the “task force”, the team of European Union civil servants dispatched to Greece to share their administrative expertise and help revive the country’s crisis-hit economy.

It was not a reaction to the uncollected trash that had piled up outside the building thanks to protests by the city’s rubbish collectors. Rather, it was the discovery that a leftwing Greek newspaper had printed photos of each task force member along with a front-page headline announcing: “The Prison Guards Have Arrived.”

Bureaucrats do not usually receive such publicity. But in this case it is a measure of the unpopularity with which they are viewed by a nation trying to come to terms with its humiliating loss of sovereignty.

Other Greek tabloids published cartoons depicting the taskforce’s German director, Horst Reichenbach, dressed in full military uniform and barking orders – a not-so-subtle allusion to Germany’s wartime domination of Greece.

More

EU Summit Paves the Way for a Split Continent

Spiegel
October 31, 2011

Last Wednesday's summit in Brussels took important steps toward saving the European common currency. But it also made it clear that the European Union is being divided in two. Germany is the new Europe's leader -- for better or worse. By SPIEGEL Staff


At 7:45 p.m., European Council President Herman Van Rompuy could no longer avoid the embarrassing and unpleasant task of throwing out 10 people. Friendliness was called for, of course, and nice words. But so too was firmness: Their presence was no longer required, and they were asked to leave the assembly hall of the Justus Lipsius building in Brussels.

They were all proud people, the sort who usually do the throwing out themselves: national leaders like British Prime Minister David Cameron and Polish Prime Minister Donald Tusk -- all from the 10 countries that are part of the European Union but don't use the euro.

They met last Wednesday with their 17 counterparts from the euro zone to discuss the future of Europe. In reality, though, they complained that the 17 euro-zone nations were embarking on their own path and not involving them sufficiently.

There was no shortage of grievances. Indeed, the full, 27-member session had already taken much longer than planned when Van Rompuy braced himself and asked Cameron, Tusk and the other eight leaders of non-euro-zone nations to leave. He thanked them for the "positive" discussion -- a choice of words which belied the heated atmosphere which characterized the session -- and went about his extremely unpleasant task.

There was a break, and then dinner was served. Now the 17 heads of state and government of the euro zone could finally tackle the important part of the meeting. Over dinner, they discussed how to save the euro.

More

The magic money tree

Economist
October 31, 2011

It is hardly surprising that the markets are having second thoughts about last week's euro zone rescue deal. The scale of the relief rally on Thursday was surely prompted by the fact that some deal was done, not by the (sketchy) details of the deal itself.

Take the three aspects of the deal - Greek debt write-down, bank recapitalisation and the boosting of the firepower of the EFSF. On Greece, a 50% writedown of debt is what many people had called for. But this is just a write-down of private sector debt (even then it's not clear whether this can be achieved on a voluntary basis). A lot of Greek debt is now owned by official bodies who are not willing to take a write-down at all. So Greece will still be left with an 120% debt-to-GDP ratio by 2020, a level that looks unsustainable. The word "solution" hardly seems to apply.

Any Greek write-down would hit the banks which is why recapitalisation is needed. But the €106.5 billion being raised is a lot less than others thought necessary (including the IMF). Nor is it clear from whom the money will be raised or whether the capital ratio will be boosted instead by banks shrinking their balance sheets, a development that would be unhelpful for the European economy.

More

Trichet on His Legacy, ECB, Sovereign Debt, Draghi

Bloomberg
October 31, 2011

Jean-Claude Trichet, the outgoing president of the European Central Bank, talks about the sovereign-debt crisis, the collapse of Lehman Brothers Holdings Inc. and his eight-year ECB presidency. Trichet, who will be replaced by Italy's Mario Draghi tomorrow, spoke with Bloomberg's Francine Lacqua in London on Oct. 13.



More

The ECB’s Battle against Central Banking

by J. Bradford DeLong

Project Syndicate

October 31, 2011

When the European Central Bank announced its program of government-bond purchases, it let financial markets know that it thoroughly disliked the idea, was not fully committed to it, and would reverse the policy as soon as it could. Indeed, the ECB proclaimed its belief that the stabilization of government-bond prices brought about by such purchases would be only temporary.

It is difficult to think of a more self-defeating way to implement a bond-purchase program. By making it clear from the outset that it did not trust its own policy, the ECB practically guaranteed its failure. If it so evidently lacked confidence in the very bonds that it was buying, why should investors feel any differently?

The ECB continues to believe that financial stability is not part of its core business. As its outgoing president, Jean-Claude Trichet, put it, the ECB has “only one needle on [its] compass, and that is inflation.” The ECB’s refusal to be a lender of last resort forced the creation of a surrogate institution, the European Financial Stability Mechanism. But everyone in the financial markets knows that the EFSF has insufficient firepower to undertake that task – and that it has an unworkable governance structure to boot.

More

Credibility is not everything

by Paolo Manasse

Vox

October 31, 2011

Many have argued in recent months that the Eurozone’s emergency meetings should be about restoring credibility, with a ‘big bazooka’ or otherwise. This column looks at Italy, a country financiers are fast turning their back on. It argues however that the problem is Italy’s fundamentals – not its credibility.


Many observers of the European debt crisis have embraced the idea that ​the dangers, in particular the risk of default of Italy, lie in the possibility of ‘multiple equilibria’. According to this view, when economic fundamentals, such as the debt/GDP ratio and the primary balance, are not quite ‘as good’ as to guarantee solvency but not quite ‘as bad’ as to make the country plainly insolvent, then the equilibrium outcome depends on market expectations (see for example Alesina et al 1989). In other words, self-fulfilling prophecies may generate opposite and unpredictable outcomes, for the same level of fundamentals. If the market assigns a high probability to a default, it will require a very high risk premium in order to buy governments bonds, making it convenient (or unavoidable) for the government to default, rather than risk strangling the economy in order to generate the surplus required to repay the loan (bad equilibrium). Whereas, if markets are confident in the government’s ability and/or willingness to repay, the low yields will generate the right incentives for the government to fulfil the market expectations (good equilibrium). This gives rise to the idea that ‘credibility is everything’.

One corollary of this approach, at the European level, is that unless the EFSF has sufficient firepower to fight off a speculative attack, say €3 trillion, it may not prevent a rollover crisis stemming from a shift in market expectations. Another corollary, relating to the Italian case, is that a sufficient condition for saving Italy is for Mr Berlusconi, who has lost international credibility, to step back. I argue here that this latter condition, while possibly being necessary at this stage, is unlikely to prove sufficient. Market fundamentals are, unfortunately, still decisive.

More

See an updated version here

Interview with Finance Minister Schäuble: 'Germany Does Not Want to Rule Europe'

Spiegel
October 31, 2011

The European Union reached agreement last week on the way forward in the euro crisis. But will it be enough? SPIEGEL spoke with German Finance Minister Wolfgang Schäuble about the deal to cut Greek debt, the dangers posed by Italy and Germany's newly strengthened leadership role in the European Union.


SPIEGEL: Mr. Schäuble, politicians and economists around the world are hailing the recent European Union summit as a success. Has the euro now been saved?

Schäuble: The summit last week moved us forward considerably. But it won't be the last meeting on this issue. It was another important step. This incidentally also appears to be the initial assessment made by the markets.

SPIEGEL: Using market reactions as a guide, one could easily arrive at the conclusion that all problems have been solved.

Schäuble: To repeat what the chancellor has said on this topic on several occasions: There will be no single solution during this process. We are building a new institutional architecture for the euro zone, which will result in more Europe and more stability. We still have a long way to go before all problems are solved, but our chances of success have increased since last week.

SPIEGEL: We are not so sure. If the resolutions are implemented as planned, Greece's debt ratio will only drop to 120 percent of gross domestic product (GDP), which is precisely as high as financially troubled Italy. Do you really believe that this will allow the Greek economy to get back on its feet?

Schäuble: Yes. Debt sustainability is achieved when you have access to the market -- and Italy has that. The troika (eds. note: made up of the International Monetary Fund, the European Central Bank and the European Commission) tells us that this will also be the case for Greece when it has reached this level of debt and improved its competitiveness.

More

Ο κ. Βενιζέλος και τα Ασφαλιστικά Ταμεία

του Στέφανου Μάνου

Το Βήμα

31 Οκτωβρίου 2011

Ένα από τα θύματα της κατά 50% πτώχευσης της Ελλάδας είναι τα Ταμεία. Το 2010, με αφορμή το θέμα που δημιουργήθηκε με τα δομημένα ομόλογα, αποφασίστηκε ότι η Τράπεζα της Ελλάδας θα διαχειριζόταν τα αποθεματικά των Ταμείων. Ο συλλογισμός ήταν ότι η Τράπεζα της Ελλάδας θα φρόντιζε για σωστές τοποθετήσεις που δεν θα έθεταν σε κίνδυνο τα αποθεματικά. Είχε δηλώσει τότε ο κ. Λοβέρδος: «Μια τέτοια διαχείριση είναι απολύτως ασφαλής και συνεπώς απολύτως επικερδής για τους φορείς κοινωνικής ασφάλισης».

Από ό,τι φαίνεται η Τράπεζα της Ελλάδας επέλεξε να τοποθετήσει τα αποθεματικά σε ομόλογα του Ελληνικού Δημοσίου και μετοχές Ελληνικών τραπεζών. Αν τα είχε τοποθετήσει σε ασφαλέστερα ομόλογα - με κάπως μικρότερη απόδοση - τα αποθεματικά σήμερα θα ήσαν ανέπαφα.

Ο Υπουργός Οικονομικών εμφανίστηκε ευτυχής με την κατά 50% πτώχευση του Ελληνικού Δημοσίου επειδή τη φόρτωσε στις τράπεζες και τους 500.000 μετόχους τους. Για τα Ταμεία όμως έδειξε …ευαισθησία. Δήλωσε ότι εξ αιτίας της πτώχευσης δεν θα θιγούν οι συντάξεις, και τα Ασφαλιστικά Ταμεία θα στηριχθούν με τη μεταφορά περιουσίας του Δημοσίου σε αυτά, χωρίς αυτό να επηρεάσει το μέγεθος του δημοσίου χρέους. Ο κ. Βενιζέλος εξήγησε ότι θα δημιουργηθεί εταιρεία ειδικού σκοπού (SPV), με μετόχους τα Ασφαλιστικά Ταμεία, στην οποία θα μεταφερθούν περιουσιακά στοιχεία του Δημοσίου, ώστε να αναπληρωθούν οποιεσδήποτε απώλειες.

Περισσότερα

Fast cars and loose fiscal morals: there are more Porsches in Greece than taxpayers declaring 50,000 euro incomes

by Ian Cowie

Daily Telegraph

October 31, 2011

Jubilation about the German deal to save the euro could prove short-lived if fresh news of Greek tax evasion gains wider currency. There are more Porsche Cayennes registered in Greece than taxpayers declaring an income of 50,000 euros (£43,800) or more, according to research by Professor Herakles Polemarchakis, former head of the Greek prime minister’s economic department.

While German car workers may take pride in this evidence of their export success, German taxpayers may be less keen to bail out a nation whose population appears to take such a cavalier approach to paying its fiscal dues. Never mind all that macroeconomic talk about deficit distress, many Greeks are still plainly riding high on the hog.

Something can’t be right when the modest city of Larisa, capital of the agricultural region of Thessaly with 250,000 inhabitants, has more Porsches per head of the population than New York or London.

Perhaps the penny – or the euro – is already dropping, because Professor Polemarchakis writes that Larissa “is the talk of the town in Stuttgart, the cradle of the German automobile industry, and, particularly, in the Porsche headquarters there”, since it “tops the list, world-wide, for the per-capita ownership of Porsche Cayennes”.

More

See also

Πώς κερδίζεται (και πάλι) η νομιμοποίηση

του Αριστείδη Χατζή

Τα Νέα

31 Οκτωβρίου 2011

Δεν νομίζω να εξεπλάγη πραγματικά κανείς με όσα έγιναν στη Θεσσαλονίκη και αλλού. Το ότι κάποιοι θα εκμεταλλεύονταν την περίσταση για να δημιουργήσουν άλλο ένα επεισόδιο εναντίον πολιτικών ήταν απολύτως βέβαιο. Αυτό που θα πρέπει όμως να προσέξουμε δεν είναι τόσο οι εκ των προτέρων οργανωμένοι τραμπουκισμοί, αλλά οι αντιδράσεις των πολιτών που μπροστά τους έγιναν τα επεισόδια. Η ανοχή και κυρίως η σιωπηρή ή και ρητή επιδοκιμασία τους είναι παραπάνω από ηχηρή.

Ας μην κρυβόμαστε πίσω από το δάκτυλό μας. Η κυβέρνηση έχει χάσει τη νομιμοποίησή της για δύο λόγους. Κατ' αρχάς έχει εκλεγεί με εντελώς διαφορετικό πρόγραμμα από αυτό που εφαρμόζει. Αυτό όμως δεν αποτελεί θανάσιμο πολιτικό αμάρτημα. Το χειρότερο από όλα είναι η αποτυχία στην εφαρμογή του. Η κυβέρνηση εφάρμοσε τρομακτικής σκληρότητας εισπρακτικά μέτρα με την ανοχή του ελληνικού λαού, αλλά υποχώρησε κατά κράτος μπροστά σε όλες σχεδόν τις ομάδες πίεσης που αποτελούν το ελληνικό βαθύ κράτος και παρακράτος. Ο ελληνικός λαός μπορεί προφανώς να συγχωρήσει πολλά αλλά όχι την αναποτελεσματικότητα και την άνιση μεταχείριση.

Τη νομιμοποίηση όμως δεν την έχει χάσει μόνο η κυβέρνηση αλλά και το σύνολο σχεδόν του πολιτικού κόσμου καθώς είναι υπεύθυνος για τη σημερινή κατάσταση. Η τρομακτική ανευθυνότητα της μείζονος και της ελάσσονος αντιπολίτευσης ταιριάζουν απόλυτα με την αναποτελεσματική και άδικη κυβέρνηση στο κυρίαρχο πλέον λαϊκό αφήγημα. Η απουσία λοιπόν εναλλακτικής εκδοχής και ο φόβος για επικείμενη κατάρρευση του ελληνικού κράτους γεννούν την οργή και την απελπισία.

Διαβάστε τη συνέχεια του άρθρου εδώ

Εδώ θα βρείτε το άρθρο (και άλλα τρία σχετικά άρθρα) όπως δημοσιεύθηκαν σήμερα στα Νέα (PDF)

The Eurozone needs exit rules

by Christian Fahrholz and Cezary Wójcik

Vox

October 31, 2011

With the sovereign debt crisis spreading across Europe, there is no shortage of suggestions on how to save the Eurozone. This column says exit rules are the silver bullet. It argues that exit rules would decrease the probability of a breakup of the Eurozone by enhancing market discipline, increasing the political bargaining power of EZ members vis-à-vis the profligate countries, enhancing internal discipline in the profligate countries, and reducing market uncertainty.

With the sovereign debt crisis spreading across Europe and in the run-up to the next EU Summit there is no shortage of suggestions on how to save the Eurozone. Unfortunately, the majority of these suggestions have one of the following flaws. Either they address the long-term challenges without dealing with the short-term stabilisation problems (for example, Cooley and Marimon 2011) or they address the short-term stabilisation issues at the cost of the Eurozone’s long-term sustainability (de Grauwe 2011, and Delpa and Weizsaecker 2011).

But there is one solution that would achieve both and would also provide added benefits. The Eurozone needs Treaty provisions on ‘exit rules’.

Not – we emphasise – because Greece or some other member state should be thrown out, but because such exit rules would strengthen the Eurozone. They will strengthen it through four channels: i) improved external market discipline, ii) strengthened internal macroeconomic discipline, iii) increased enforcement power of the Eurozone over profligate members, and iv) reduced uncertainty. As such, such exit rules would decrease (and not increase!) the probability of an exit, or the breakup of the Eurozone. Why?

The notion supported by EU officials and currently embedded in the EU legal framework that leaving the Eurozone is impossible may speak to political aspirations, but economically they are harmful. This has been a key source of the imbalances within the Eurozone and is now at the core of today’s difficulties in resolving the crisis.

More

Interview with an ECB president

with Stephanie Flanders

BBC News

October 31, 2011

There are not many who have played a more central role in the financial dramas in Europe over the past few years than Jean-Claude Trichet - criticised by some for doing too little to support the European single currency, by others for doing too much.

You'll be interested to hear that Mr Trichet thinks he has got it just right.

In an extended interview, timed to coincide with his last day in office, the man who has led the European Central Bank for the past eight years told me the institution had done its job well - both before and during the recent turmoil. After all, inflation had been stable, and so had the value of the currency.

I asked him whether he regretted saying the euro had been "an anchor of stability during the financial crisis"' in December 2008. Not at all, he said. "It still is."

More

Big Euro-Crisis Question Has Still to Be Answered

by Simon Nixon

Wall Street Journal

October 31, 2011

Euro-zone leaders inevitably proclaimed their latest summit deal a triumph—as they had after each of the previous 13 crisis meetings—but one wonders whether their hearts are truly in it any more. Gone is the idealism that inspired the creation of the single currency. Ask senior European policy makers today whether the euro can be saved and the answer is invariably yes—because the consequences of failing to do so are too dreadful to contemplate. German Chancellor Angela Merkel didn't exaggerate when she said 60 years of peace and prosperity in Europe are at stake.

Enthusiasm for the European Project is evaporating. If there were an easy way to exit the euro, Athens would have taken it by now, with the enthusiastic encouragement of the other 16 members. The French president, Nicolas Sarkozy, now says Greece should never have been allowed to join. The Italian prime minister, Silvio Berlusconi, last week called the euro a "strange currency" that had "convinced nobody." Parties hostile to the EU, such as Finland's True Finns, are gaining electoral support across the Continent. In Germany, 30% of voters now want the return of the deutschmark. Fear of the consequences of a euro break-up is all that is holding it together.

But is it enough? The best that can be said of last week's deal is that for the first time, euro-zone leaders did at least try to come up with a plan that addressed all the major areas of strain: Greece, the banks, the size of the bailout fund and the euro zone's future governance arrangements. Progress was made on all four fronts even if important details were lacking. At a political level, the leaders took another step toward closer integration, rather than drifting farther apart. The prospect of a disorderly Greek default was at least taken off the table—for now.

But scratch the surface and there are aspects of this deal that make a messy end to the euro crisis look more, rather than less, likely.

More

Growth Key for Euro-Zone Deal

by Sudeep Reddy

Wall Street Journal

October 31, 2011

Despite all the cheering about Europe's latest debt deal, worries are mounting that it won't succeed without stronger economic growth.

At the current pace of expansion, unemployment will stay high and incomes will stall. Debt-saddled governments will have an even tougher time generating revenue to pay bills. That could spark more default fears or higher interest rates in Greece, Italy and others under pressure.

Projections for global growth have been falling. The forecasting firm IHS Global Insight now expects the world economy to expand just 3% this year and next, down from 4.2% in 2010. The U.S. is forecast to grow just 1.4% next year, a pace that could push the 9.1% jobless rate higher. The 17-nation euro zone, meanwhile, will flirt with recession in 2012 with projected growth slightly above zero.

More

For Europe Bailout Fund, Next Stop Is Japan

Wall Street Journal
October 31, 2011

The head of Europe's bailout fund, Klaus Regling, takes his tour of potential Asian investors to Japan next, after Beijing proved unwilling to open its checkbook until European leaders could offer more details about their plan to save the euro zone.

Japan has shown itself to be a willing buyer of bonds issued by Mr. Regling's European Financial Stability Facility, and Japanese Finance Minister Jun Azumi said last week that the country stands ready to buy more. Mr. Regling said Monday after a meeting with Takehiko Nakao, Japan's top financial diplomat, that Tokyo would continue to buy EFSF bonds.

But with the Europeans now asking foreigners to put up cash for a more risky fund, without the guarantees of EFSF bonds, Japan might also grow wary of committing too soon.

But with the Europeans now asking foreigners to put up cash for a much more risky fund, without the guarantees of EFSF bonds, Japan might grow equally wary of committing too soon.

More

Crisis provides opportunity for ‘fiscal union’

Financial Times
October 30, 2011

For Wolfgang Schäuble, Germany’s hugely experienced and passionately pro-European finance minister, the financial crisis in the eurozone is not just a threat, but an opportunity.

He believes that the pressure of the financial markets will force the most debt-laden members of the 17-nation currency union to curb their budget deficits and increase their competitiveness. It will also drive them to take the next big steps towards a “fiscal union” to underpin their monetary union.

Last week’s EU and eurozone summits saw agreement on setting up continuous surveillance of Greece’s austerity programme by the European Commission, the European Central Bank and the International Monetary Fund. It also called on the Commission to monitor the reform programme in Italy, the country with the largest debt in the eurozone – although Rome has not asked for any rescue programme.

More

Europe Might Have Blown Last Chance to End Its Crisis

Bloomberg
Editorial
October 31, 2011


The euphoria over Europe’s latest rescue package faded quickly. Now the question is whether European leaders will ever agree on measures needed to end the sovereign debt crisis, and whether they will get another chance.

After an initial bounce, markets demonstrated a lack of confidence in Europe’s resolve to protect solvent governments from the financial malaise afflicting its weakest member nations. At a bond auction Oct. 28, the euro area’s third- largest economy, Italy, had to pay investors a yield of 4.93 percent -- a euro-era high -- to take the risk of lending it 3 billion euros ($1.8 trillion) for three years.

At least European leaders got the pieces right this time. They have recognized that a credible plan must include big writedowns of sovereign debt, a recapitalization of the banking system and guarantees for newly issued government bonds -- and that all these elements are inextricably linked.

But the magnitude is all wrong. Even if put in place, the plan would reduce Greece’s debt by less than 50 percent, raise about 100 billion euros in new capital and boost the guarantee capacity of the European Financial Stability Facility to about 1 trillion euros. As Bloomberg View has pointed out, sovereign writedowns should be much steeper. And Europe needs a war chest of at least 3 trillion euros to ensure recapitalizations and cover the financing needs of euro-area governments.

More

Sunday, October 30, 2011

Greeks threatened with power cuts if they fail to pay property tax

Guardian
October 30, 2011

The Greek authorities are bracing for a broader campaign of civil disobedience as a nation infuriated by austerity and incensed at the engagement of EU and IMF "monitors" takes matters into its own hands.

Sales of generators have shot up as households, resisting further belt-tightening, have sought to bypass a new property tax that the beleaguered government will collect through electricity bills.

Announcing the measure in a desperate attempt to plug a budget black hole, the finance ministry warned that failure to pay the tax would automatically result in power supplies being disconnected.

"But when 70% of Greek households don't pay it what are they going to do, cut off the whole lot?" asked Giorgos Zisimos, a shopowner-cum-driver.

More

EU Urges G-20 to Act on Imbalances

Wall Street Journal
October 30, 2011

This week's summit of the Group of 20 industrial and developing nations in Cannes must match Europe's crisis-resolution efforts and address long-standing issues that hamper the global economy, key European leaders said in a letter to their G-20 partners late Saturday.

European Council President Herman Van Rompuy and European Commission President José Manuel Barroso cited the decisions made at last week's euro-crisis summit—including the write-down of 50% for Greek bond holders, the leveraging of the European bailout fund and longer-term plans to strengthen economic governance in the European Union—as the kind of coordinated action needed to help revive the world economy.

"The EU's contribution to Cannes is the above-mentioned package to ensure the stability of the euro area. But more needs to be done at the global level," Messrs. Van Rompuy and Barroso wrote.

More

Europe's new debt crisis agreement: the good, the bad, the ugly

by Michael Schuman

Time

October 27, 2011

Sometimes I think the euro zone debt crisis is like watching a remake of the Bill Murray classic Groundhog Day, with the screenplay written by Financial Times correspondents. I wake up and read the news coming from Europe: worries mount about a Greek default, contagion spreads across the continent, the euro zone leaders are lost in befuddled bickering, and then a new pact to fix the problems emerges, hailed as historic. Then I get up the next day to find we're in exactly the same place we were before, with the cycle just repeating itself. Again and again. The only difference is that Groundhog Day made me laugh. The euro crisis version makes me want to cry.

So today, again, we find ourselves with yet another supposedly historic agreement, the one that will finally, really, once-and-for-all put an end the debt crisis, the most dangerous threat to global financial stability today. But is this the big one? Or will I wake up tomorrow listening to the same euro zone version of “I Got You Babe,” sung by Nicolas Sarkozy and Angela Merkel?

This latest pact, reached after all-night, hard-fought negotiations Thursday morning, is still short on details and has a long way to go before it can be called actual policy. But looking at the general outlines, I see some good aspects, some bad, and some truly ugly.

More

Θεωρία συνωμοσίας

του Τάκη Μίχα

Protagon.gr

30 Οκτωβρίου 2011

Ας υποθέσουμε ότι πρωταρχικός στόχος της κυβέρνησης και των πολιτικών είναι να διατηρηθεί εν ζωή το πελατειακό σύστημα με όσο το δυνατόν λιγότερες αλλαγές. Αυτό σημαίνει στην ουσία όχι στις ιδιωτικοποιήσεις, όχι στην απόλυση των αργόμισθων, όχι σε διώξεις εναντίον του πιο διεφθαρμένου δημόσιου τομέα της Ευρώπης, όχι στο κλείσιμο διαφόρων κρατικών οργανισμών, όχι στην κατάργηση των σκληρύνσεων στις αγορές εργασίας και προϊόντων. Σημαίνει επίσης την συνεχιζόμενη χρηματοδότηση του συστήματος από τις τσέπες των Ευρωπαίων φορολογουμένων.

Αυτή η υπόθεση εργασίας είναι ασφαλώς εύλογη αν λάβουμε υπ’ όψη μας το γεγονός ότι στους τομείς των διαρθρωτικών αλλαγών η κυβέρνηση δεν έκανε τίποτα απολύτως τα δυο τελευταία έτη ενώ παράλληλα ο πρωθυπουργός εμφανίζεται απόλυτα ικανοποιημένος με αυτό το «τίποτα» δηλώνοντας επανειλημμένως «εμείς κάναμε ότι έπρεπε» (!)

Όμως από την προαναφερθείσα εξίσωση απουσιάζει το τρίτο κομβικό σκέλος: H διασφάλιση της χρηματοδότησης από τους Φράγκους. Πως μπορεί να διασφαλισθεί αυτό ενώ παράλληλα θα διατηρείται το πελατειακό κράτος; Πολύ απλά. Με το να οργανώνεις συνέχεια ταραχές στην Ελλάδα έτσι ώστε να δίνεται ότι ο λαός «αντιστέκεται» στις αλλαγές.

Περισσότερα

Is the recent bank stress really driven by the sovereign debt crisis?

by Guntram Wolff

Vox

October 30, 2011

Stress in the interbank market has increased dramatically since July 2011, and bank stock market valuations have fallen by 22% on average for 60 of the most important banks subject to stress tests. This column argues that bank stock valuation has been affected by the banks’ exposure to Greek debt and that Greek banks were particularly affected. Holdings of debt of the other four periphery countries does not, however, appear to be a strong determinant of stock price movements.

Stress in the interbank market has increased significantly since July. There is now a significant debate on why this is the case and what would be the best way to address it (Financial Times 2011).1 Many have argued that the sovereign debt crisis isthe most important driver of banking stress in the Eurozone. If that view is correct, then the right approach to solving Europe’s banking problem is to solve the sovereign debt crisis. Recapitalising banks instead would be far too costly, in particular if one wanted to cater for a haircut in Italy.

More

Can Super Mario Save the Day for Europe?

New York Times
October 29, 2011

Mario Draghi was working the room as only Mario Draghi can.

The occasion was a gala at the Old Opera House here in honor of Jean-Claude Trichet, the most powerful central banker in Europe. But in some ways, the evening belonged as much to Mr. Draghi, the Italian who will succeed Mr. Trichet on Tuesday as the president of the European Central Bank in the midst of an economic maelstrom that threatens to tear apart the euro, if not Europe itself.

European leaders took a step toward resolving the crisis last Thursday, with an agreement from banks to take a 50 percent loss on the face value of their Greek debt. Far from heralding an end to the problems, however, the plan ushered in a crucial new phrase in the battle to avert financial disaster.

But despite the challenges awaiting him, Mr. Draghi was in fine form that night earlier this month. Over here, he chatted quietly with Angela Merkel, the chancellor of Germany and a main ally. Over there, he met with Christine LaGarde, the managing director of the International Monetary Fund. And everywhere, Mr. Draghi vowed that there would be no surprises on his watch.

More

Τράπεζες: Κοινωνικά ζητήματα

του Τάσου Τέλλογλου

Protagοn.gr

30 Οκτωβρίου 2011

Πολλοί τραπεζίτες αντέδρασαν τις προηγούμενες μέρες στο «κούρεμα» του χρέους, πιστεύοντας ότι καταστρέφει τις περιουσίες που έχουν δημιουργήσει σε μετοχές των τραπεζών «τους».

Όμως εδώ και μερικές εβδομάδες, ένας διεθνής οίκος η Blackrock ελέγχει τις ελληνικές τράπεζες καταγράφοντας κινδύνους που δεν αποτυπώνονταν ως τέτοιοι στα βιβλία τους. Σε απλά ελληνικά, επισφαλή δάνεια είτε δεν φαινόταν ότι δεν έχουν πληρωθεί είτε δεν καλύπτονταν από επαρκείς εγγυήσεις. Ο έλεγχος αυτός αφορά και δάνεια που έχουν δοθεί σε υπεράκτιες εταιρείες εφ όσον τα δάνεια που πήραν αποτελούν εσωτερικό ελληνικό πιστωτικό κίνδυνο. Έτσι τουλάχιστον διευκρινίζεται από την Τράπεζα της Ελλάδος. Εκεί λένε ότι το πλαίσιο της εντολής του ελέγχου συγκαθορίστηκε από την τρόικα και την ΤτΕ. Από την πλευρά της η ίδια η τρόικα –ειδικά το ΔΝΤ– επισημαίνει ότι χωρίς αλλαγές στο σημερινό τραπεζικό σύστημα θα συνεχίζει να υφίσταται το ιδιότυπο καθεστώς τραπεζών που μοιράζουν δάνεια σε φιλικούς τους εκδότες, πολιτικούς και επιχειρηματίες.

Περισσότερα

Saturday, October 29, 2011

Luo Jie

Greek deal may imperil sovereign CDS market

Reuters
October 29, 2011

The future of the Credit Default Swap (CDS) market -- used to hedge against the risk of a country defaulting -- may be at risk if these derivative instruments do not pay out after this week's rescue deal for Greece.

An implosion of the sovereign CDS market could lead investors to buy fewer government bonds because they feel they cannot protect themselves, and risks pushing up borrowing costs for governments, especially in the euro zone.

Private sector creditors such as insurers, banks and funds will take losses of 100 billion euros on their Greek debt holdings under a new bailout pact struck this week, sharing the burden of the costly rescue with taxpayers.

But the International Swaps and Derivatives Association (ISDA) -- a bank lobby that also decides whether an event triggers the CDS -- has said it's not likely that the restructuring would lead to a pay-out.

"The CDS market is being keelhauled. This certainly isn't going to help, because why would you buy a CDS if there will never be a payout?" said one well-placed industry source, referring to the Greek situation.

He projected the sovereign CDS market -- a small corner of the $25 trillion overall market -- could die out in the next year, echoing some bankers' fears.

More

Ανασύνταξη δυνάμεων μετά την ήττα

του Ναπολέοντος Μαραβέγια

Ελευθεροτυπία

29 Οκτωβρίου 2011

Η ελληνική οικονομία μέσα στον ανελέητο πόλεμο του διεθνούς ανταγωνισμού έχασε τη μεγάλη μάχη, που είχε αρχίσει με την ένταξη της χώρας μας στην Ευρωπαϊκή Ενωση το 1981.

Ο αγώνας κορυφώθηκε με την ένταξη στην ευρωζώνη το 2001, μετά από μια υπερπροσπάθεια στη δεκαετία του '90 να εκπληρωθούν τα κριτήρια της Συνθήκης του Μάαστριχτ για τον πληθωρισμό, το έλλειμμα και το χρέος.

Σήμερα, δέκα χρόνια μετά βρισκόμαστε στη φάση της οπισθοχώρησης μετά την ήττα, με όλα τα βασικά μεγέθη να ακολουθούν φθίνουσα πορεία. Το ΑΕΠ μειώθηκε κατά 12% τα τρία τελευταία χρόνια, το μέσο πραγματικό εισόδημα των εργαζομένων μειώθηκε κατά τουλάχιστον 20% (10% τα ονομαστικά εισοδήματα και 10% ο πληθωρισμός) στην ίδια περίοδο, δηλαδή από το 2009 μέχρι σήμερα, σε μια απελπισμένη προσπάθεια αποπληρωμής του συσσωρευμένου χρέους μας που φθάνει σήμερα τα 360 δισ. ευρώ ή το 160% περίπου του ΑΕΠ.

Περισσότερα

China to the rescue?

Economist
October 29, 2011

It was only a matter of time before China was heralded as Europe’s escape route from its debt crisis. News that Nicolas Sarkozy, the French president, called Hu Jintao, his opposite number in China, after the crisis summit on October 27th sparked speculation that China might put substantial amounts of money into the debt of troubled euro-zone borrowers. The chatter grew louder when Klaus Regling, the head of the European Financial Stability Facility (EFSF), the euro area’s bail-out fund, visited Beijing a day later. And a poor post-summit Italian bond auction has made the need for a deus ex machina seem even greater.

China certainly has lots of money to invest. its foreign-exchange reserves are reckoned at $3.2 trillion. It trades more with the EU than any other partner. It has exposure to the euro already. How much is not known, but currency analysts suspect that about a quarter of those reserves are already euro-denominated, giving it an incentive to keep the currency strong. It also suits China to play the part of a constructive economic actor.

Then again, we have been here many times before during the euro-zone saga. You can trace the growing seriousness of the crisis by the list of countries that have had talks with the Chinese about investments: first Greece, then Portugal, Spain and now countries at the very core of the euro zone. The pattern to date has always been the same: lots of encouraging rhetoric, perhaps even a little cash, but not enough to meet initial expectations.

More

Riber Hansson

Most Greeks negative on EU summit deal, poll says

Reuters
October 29, 2011

Most Greeks have responded negatively toward an EU agreement which slashed the country's debt because they believe it harms their national sovereignty, according to a poll Saturday.

The survey published by newspaper To Vima and conducted immediately after Thursday's summit agreement on a new 130 billion euro bailout package for debt-stricken Greece, showed that nearly 60 percent of Greeks viewed the deal as negative or probably negative.

The package involves banks, pension funds and insurers -- which hold more than 200 billion euros of Greek debt -- accepting a 50 percent writedown to make Greece's colossal debt mountain more sustainable.

Greece's total debt of more than 350 billion euros is predicted to top 160 percent of gross domestic product (GDP) this year.

Around half of those surveyed said the agreement signed in Brussels was a blow to Greece's sovereignty, handing more control over economic affairs to the European Union and the International Monetary Fund.

Only 36 percent of the 1,009 people questioned in the telephone poll said the package was positive or probably positive for Greece.

More

Το «µέτωπο του Ζαλόγγου»

του Ι.Κ. Πρετεντέρη

Το Βήμα

29 Οκτωβρίου 2011

Βασικό ζήτηµα αρχής: αποκλείεται ποτέ να βρούµε τη λύση αν δεν συµφωνήσουµε ποιο είναι το πρόβληµα. Και, αν µου επιτραπεί το ευφυολόγηµα, το πρόβληµα είναι ότι το πρόβληµα έχει αρχίσει να µπερδεύεται.

Ερωτώ λοιπόν. Τι αντιµετωπίζει η χώρα; Πρόβληµα χρεοκοπίας ή πρόβληµα κυριαρχίας;

Κι αν κάποιος θεωρεί ότι συντρέχουν και τα δύο, θα πρέπει να µας ξεκαθαρίσει ποιο από τα δύο καθορίζει το άλλο. Η χρεοκοπία είναι αυτή που οδήγησε στην απώλεια κυριαρχίας ή το αντίστροφο;

Τα ερωτήµατα δεν είναι ρητορικά. ∆ιότι τον τελευταίο καιρό καλλιεργείται (σκοπίµως, πιστεύω…) µια πολιτική σύγχυση.

Ως τώρα ξέραµε ότι η χώρα αντιµετωπίζει πρόβληµα χρεοκοπίας, δεν µπορεί να πληρώσει µισθούς και συντάξεις, κινδυνεύει να µας µείνει στα χέρια. Το πρόβληµα είναι τόσο προφανές, αυτονόητο και επικίνδυνο ώστε ολόκληρη η υφήλιος να ασχολείται εδώ και µήνες µε την αφεντιά µας.

Περισσότερα

EU May Struggle to Keep Euphoria as Post-Summit Scrutiny Deepens

Bloomberg
October 29, 2011

European leaders may struggle to maintain the euphoria that drove the euro to its biggest one-day gain in more than a year as scrutiny deepens on their latest attempt to stem the region’s turmoil.

European Central Bank President Jean-Claude Trichet called for “swift implementation” if financial stability is to be restored, Germany’s Bild Zeitung reported in an extract of an interview to be published tomorrow.

The weaknesses of Europe’s common currency area, ranging from its design to a persisting dearth of bank funding and anemic economic growth, weren’t properly addressed in this week’s accord to stem investor panic, said Harvard University economist Kenneth Rogoff and Jonathan Loynes at Capital Economics Ltd. in London.

“My read of this is that the markets are cheered that they’re still alive,” Rogoff, a former International Monetary Fund chief economist, said as a compensated speaker at the Bloomberg FX11 Summit in New York Oct. 27. “Even in a fairly short period, doubts will start to grow again.”

Ten hours of bargaining by European leaders at the 14th crisis summit in 21 months culminated in an early-morning agreement Oct. 27 to bolster the region’s crisis-combat toolbox by boosting their rescue fund to 1 trillion euros ($1.4 trillion) and persuading bondholders to take 50 percent losses on Greek debt. Measures also included a recapitalization of European banks and a potentially bigger role for the International Monetary Fund.

More

Animal Spirits Rising

by Alan Abelson

Barron's

October 29, 2011

As Marie Antoinette discovered, it's tough to keep your head when all about you are losing theirs. A giant wave of euphoria swept through global markets last Thursday, in giddy response to the communiqué out of Brussels that the 17 nations in the euro zone—after an extraordinary, and extraordinarily long, confab, some 10 hours, 'til the wee hours of the morning—had cobbled together a financial care package to rescue Greece and stave off a widely dreaded contagion of downgrades and defaults that threatened to engulf a good chunk of the Continent.

As we wrote last week, the market seemed primed for a big bolt upward, but concerns over the state of the European Union effectively tethered the bulls. Well, those concerns were seemingly made to disappear by the wizardry of that odd couple, Merkel and Sarkozy, and touched off a roaring rally that extended the snazzy October recovery from September's sad-sack performance, a rally that now seems destined to post the biggest monthly gain by the Standard & Poor's 500 since 1974.

But as we also confessed last week, we were skeptical that anything enduring would emerge from the 14th summit meeting in the last 21 months. And we still are.

More

For Ordinary Greeks, Big Bailout Adds Up to Years of Hardship

Wall Street Journal
October 29, 2011

In the fading light of a fall evening, Amarillis Visvardis waits for the day's first customer at her clothing store in this city's tony Kolonaki district. She passes the time reading a novel set in 1930s China. No one comes.

Across town, in a neighborhood scarred by drugs, a free health clinic that serves needy illegal immigrants has plenty of clients. Doctors notice something unusual about them: Many are Greeks.

Greece was promised a heap of debt relief at this week's summit of European leaders. But there is little that looks like salvation. The debt crisis has spurred searing austerity measures that will continue for years, and are likely to prolong the country's recession. Bit by bit, Greek society is being stretched, and it is popping at the seams.

The small businesses that form the core of the Greek economy—and the bedrock of the Greek middle class—are closing. The poor are becoming poorer. The fiery street protests are turning nastier. Friday, demonstrators in Thessaloniki, Greece's second city, blocked an annual military parade and jeered the Greek president, who left the scene.

"There is a feeling that things can only get worse, that we will have to live with half the money we had," says Spiros Papadopoulos, a young blogger. "What is at stake is our quality of life, and, for some, their subsistence."

Greece is the canary in the euro zone's coal mine. The bloc's prescription for a crisis spurred by overborrowing and overspending is a dose of radical fiscal rectitude, delivered fast. To regain the confidence of skittish investors, countries are being asked to rip up paternalistic policies that provided stability and comfort to legions of citizens but left the state reeling from the bill. The question is, can it be done without igniting society into revolt?

The outcome will reverberate beyond Greece's borders. A societal collapse would further distance Greece from other countries in the European Union, threatening to unravel Europe's grand postwar project of an ever-closer federation.

More

Aρρωστα µυαλά

του Ι.Κ. Πρετεντέρη

Το Βήμα

29 Οκτωβρίου 2011

Θέλετε να µιλήσουµε µε αριθµούς; Να µιλήσουµε, λοιπόν.

– Η Ελλάδα πήρε πέρυσι ένα πρώτο δάνειο 110 δισ. ευρώ από την Ευρώπη και το ∆ΝΤ.

– Θα πάρει τώρα ένα δεύτερο δάνειο 100 δισ., συµπεριλαµβανοµένων των χρηµάτων για την κεφαλαιοποίηση των τραπεζών...

– Και θα της χαρίσουν άλλα περίπου 100 δισ. ευρώ από παλαιότερα δάνεια.

Μιλάµε για ένα συνολικό πακέτο στήριξης ύψους 310 δισ. ευρώ – περίπου το 140% του ΑΕΠ. Νοµίζω ότι ποτέ άλλοτε ο πλανήτης δεν φέρθηκε τόσο γενναιόδωρα σε µια χώρα 11 εκατοµµυρίων κατοίκων.

Προφανώς µια τέτοια στήριξη έχει και κόστος και αντιπαροχές. Περιέχει δεσµεύσεις και υποχρεώσεις.

∆εν µας αρέσει; Μας ενοχλεί; Κοστίζει; Να το δεχτώ.

Ενδεχοµένως κάποιοι να διαφωνούν ή να δυσφορούν µε το αντίτιµο.

Ασφαλώς υπάρχουν ορισµένοι που θα προτιµούσαν να χρεοκοπήσει η χώρα και να φύγει από το ευρώ για να ωφεληθούν οι ίδιοι – οικονοµικά ή/και πολιτικά...

Αλλά όποια ένσταση και αν διατυπωθεί, οι αριθµοί είναι αµείλικτοι – και µόνο κάποια αρρωστηµένα µυαλά µπορούν να τους προσπερνούν...

Περισσότερα

Doubts Rise on EU Deal

Wall Street Journal
October 29, 2011

Initial relief over Europe's latest attempt to end its debt crisis faded on Friday as investors fretted about the plan's lack of detail and grew more skeptical about Italy's turnaround effort.

One day after European leaders announced a series of measures aimed in part at enticing investors back to the region's debt markets, bond buyers demanded higher yields on Italian and Spanish debt. An auction of new Italian bonds was met with weak demand, forcing the nation to pay higher interest rates than in previous sales.

The wan response from bond markets underscores how challenging it will be for European leaders to convince financial markets that Thursday's broad agreement is sweeping enough to enable troubled countries such as Italy and Spain to work their way out from mountains of debt. The plan calls for beefing up the region's bailout fund, recapitalizing banks and reducing Greece's debt burden.

More

Πέτρος Ζερβός

Ελευθεροτυπία
29 Οκτωβρίου 2011

Next Act—The Plan Is Put to Test

Wall Street Journal
October 29, 2011

Will it work?

The deal euro-zone leaders hammered out in the early hours of Thursday sparked a world-wide stock rally. But the market moves belied widespread caution about the accord among economists and analysts—and even some of the decision-makers in the debt crisis.

Many pointed out the summit announcements lacked critical details that must be hashed out in the weeks and months ahead, and then put into effect. "The implementation challenge is as high, if not higher, than the design challenge," Mohamed El-Erian, chief executive of Pimco, which runs the world's largest bond fund, warned in an interview.

Others were pessimistic on the fundamentals, arguing that neither the deal to cut Greece's debt by 50% nor the plan to boost the firepower of the euro zone's bailout fund, known as the European Financial Stability Facility, or EFSF, would be enough to quell Europe's torrid debt crisis.

Only the European Central Bank's continued support of the region's bond markets can prevent an eventual further downward lurch in confidence, many argued. Some analysts saw the deal's lack of measures to boost economic growth as an Achilles' heel.

More

Europe Tries to Lure Chinese Cash to Back Rescue of Euro

New York Times
October 28, 2011

A day after European leaders unveiled their latest plan to save the euro, top officials opened talks with China in an effort to lure tens of billions of dollars in additional cash, giving China perhaps its biggest opportunity yet to exercise financial clout in the Western world.

China is expected to demand significant concessions, including financial guarantees and limits on what Beijing sees as discriminatory trade policies, in exchange for any investment in Europe’s emergency stability fund. The head of the rescue fund, Klaus Regling, got a cautious reply from Chinese officials Friday during a visit to Beijing, where he said he did not expect to reach an investment deal with China anytime soon.

A senior Chinese official, Vice Finance Minister Zhu Guangyao, said China — like the rest of the world — was still waiting for the Europeans to deliver crucial details on how the rescue fund, the European Financial Stability Facility, would operate and be profitable before deciding on whether to participate.

That Europe would turn so openly to China to help stabilize the debt crisis shows how quickly the Chinese economic juggernaut has risen on the world stage. Indeed, if China comes to Europe’s aid, it will signal a new international order, with China beginning to rival the role long played by the United States as the world’s pivotal financial power.

“This would be a tectonic shift,” said Pieter P. Bottelier, an expert on China who teaches at the School of Advanced International Studies at Johns Hopkins University. “It would be so important economically and politically.”

More

No Joy in Greece Over the E.U.'s New Deal

by Joanna Kakissis

Time

October 28, 2011

The parade on Friday was supposed to commemorate Greece's resistance during World War II. Seventy-one years ago on this day, Greece refused to let Italy's fascist ruler, Benito Mussolini, bring his troops into the country. Greeks took to the streets chanting "Ohi!" — "No!" — to show that they wouldn't give up their sovereignty to anyone.

But this year many Greeks came to the parade to say "no" to austerity. As schoolchildren in navy-blue and white uniforms walked passed parliament in Athens, waving Greek flags to marching-band music, anti-austerity protesters booed riot police and told off their politicians. "We want freedom, not another dictatorship!" they chanted.

"We have got to stop the corruption," said Silia Vitoratou, a 35-year-old statistician at the demonstration on Friday. "We no longer feel like we're represented by our politicians, [we feel] that the bond between citizen and state has been irrevocably damaged. We've got to make ourselves heard because, as the old folks say, if you're not part of the answer, then you're part of the problem."

The protesters are clearly not impressed with the landmark deal made early Thursday between European leaders and international lenders to write off half of the face value of Greek debt and give the country another $140 billion in bailout loans. Under the deal, Greece must still implement the austerity measures that parliament has already passed, which include job and wage cuts in the public sector, tax hikes, a controversial new property tax and privatization of state assets.

More

A Greek Politician Who Pushed Back Against Perks

New York Times
October 28, 2011

In her tiny office here, Hara Kefalidou rolled her eyes remembering the days just after her letter was first published in the conservative daily Kathimerini.

In that letter, Ms. Kefalidou, a newly elected member of Parliament, called on her fellow legislators to give up some of their vaunted perks, including free cars, the $425 fee for attending committee meetings and double pensions.

It was not an idea they immediately embraced. She soon found herself being lectured by party leaders about her lack of judgment. “I was so alone,” she said. “People that I really admired called and said in private in a paternalistic way: ‘O.K., you said what you had to say. Now, move on.’ ”

The letter — and her eventual decision to give up some of her own perks, including her free Mercedes — catapulted her into the headlines here, some praising her for her boldness. But it has also unleashed a torrent of criticism from fellow politicians who have called her an opportunist and a hypocrite.

More

U.S. Still at Risk From Europe Despite Debt Deal

Wall Street Journal
October 28, 2011

With European leaders finally hammering out a deal on the region's debt crisis, David Wessel on The News Hub looks at the risks that remain and why they can spillover to the U.S. economy and markets.


More

Greeks Direct Anger at Germany and European Union

New York Times
October 28, 2011

Every Oct. 28 Greece celebrates “Oxi Day,” or “ ‘No’ Day,” a national holiday commemorating Greek resistance to the Axis powers during World War II. On Friday, those celebrations took on a greater weight. As Greeks suffer from harsh austerity measures, there is growing popular sentiment here that the country has ceded key parts of its sovereignty, and its pride, to its foreign lenders.

Here in Greece, anger is running so high — especially toward Germany, whose Nazi occupation still leaves deep scars here and who now dominates the European Union’s bailout of debt-ridden Greece — that National Day celebrations were called off on Friday in the northern city of Thessaloniki for the first time ever after crowds shouted “traitor” to the Greek president, Karolos Papoulias.

“I was the one fighting the Germans,” Mr. Papoulias, 82, said on national television. “I am sorry for those who cursed at me. They should be ashamed of themselves. We fought for Greece. I was an insurgent from the age of 15. I fought the Nazis and the Germans, and now they call me a traitor?”

More

Friday, October 28, 2011

European Debt Crisis, Greek Writedown

Bloomberg
October 28, 2011

Nicholas Economides, a professor at New York University, talks about the European debt crisis and Greece's political leadership. Economides, speaking with Tom Keene on Bloomberg Television's "Surveillance Midday," also talks about the U.S. economy.



More

How historians will look back on Euroland’s demise

by Norman Davies

Financial Times

October 28, 2011

If Sparta and Rome perished”, asked Rousseau in his Social Contract, “how can any state hope to live for ever? The Body Politick, like the body of a man, begins to die as soon as it is born; it contains the seeds of its own destruction.” The histories of Europe’s numerous extinct states testify to this truth. Early examples come from the five Kingdoms of Burgundy or the Crown of Aragon, a recent one from the Soviet Union, which evaporated in 1991.

Yet states continue to vanish; sooner or later, all human institutions fall apart. The German Democratic Republic merged with West Germany. Czechoslovakia broke up when Czechs and Slovaks agreed their velvet divorce. The federation of Yugoslavia was torn asunder between 1991 and 2006. The map of Europe has repeatedly been transformed by state dissolution and EU expansion. Speculation spreads about which state will be the next to fall. Some say Belgium, others Italy.

Most recently, the demise of Euroland came into view. It is not a sovereign state, but it is a body politick of sorts and subject to the same vagaries of fortune afflicting everything else. Launched only a dozen years ago, it may join the long list of organisations that have died young. It lacks viable organs of fiscal management and political governance; by general consent, it must reconstruct itself rapidly or break up. “The eurozone is doomed”, its critics argue. Britain’s Foreign Secretary describes it as “a burning building with no exits”. George Soros warns of possible “meltdown”.

More

Martin Sutovec

Deal widens Paris-Berlin divisions

Financial Times
October 28, 2011

The struggle between France and Germany that made this week’s eurozone rescue plan so difficult to finalise is often portrayed as a personal tussle between a cautious Angela Merkel and a hyperkinetic Nicolas Sarkozy.

But the differences between the two countries go far deeper than the personal antagonism between the German chancellor and the French president that occasionally flared during the drawn-out negotiations leading up to Wednesday’s summit.

Officials say the difficulty in reaching a final deal is a product of sharp differences in economic and political cultures that have only become more intense as the crisis worsened, with both sides losing room to manoeuvre or compromise.

“It is not about the day-to-day things,” said one senior European official. “There is a political and economic structure behind the two countries that is just too different.”

More

Liaisons plus dangéreuses

Financial Times
Editorial
October 28, 2011


After the latest “comprehensive solution” to the eurozone sovereign debt crisis, the eyes of the world remain on the debt markets. Judging by Friday’s adverse movements, there is scepticism about the financing. Observers should pay equal attention to the political consequences of the deal. The remorseless logic of the monetary union is starting to bite. As member countries embrace each other ever more tightly, the issue of political legitimacy risks becoming ever more explosive.

The first signs of these new tensions have already become visible. The press conference in which the Merkozy diarchy of the French and German leaders publicly dismissed Silvio Berlusconi’s credibility with a telling smirk amounted to a slap in Italy’s face. In a further humbling move, the government of the eurozone’s third-largest economy was later forced to draft a letter of intent, outlining the reforms it would enact and a timeline to deliver them.

Whether Mr Berlusconi is able and willing to deliver remains highly uncertain. But Italy was not alone in the dock. As part of the deal to solve the Greek debt crisis, a permanent on-the-ground surveillance presence will oversee the country’s progress in its structural adjustment programme. This means far more intrusive oversight over its fiscal matters. To preserve the members’ fiscal discipline, it was further agreed that all countries should enshrine in their constitution a German-style balanced budget rule.

More

Making Dinner Plans, European Bailout Style: Details to Follow. Maybe.

by Vincent Cignarella

Wall Street Journal

October 28, 2011

An old friend of mine, the president of a well-respected think tank, and I made a steak dinner bet yesterday on whether Greece would be back to the table and default again by the end of June 2012. I took the side that they would be back. We have not decided what constitutes a second Greek default, nor have we decided which restaurant we will choose.

My friend and I get together now and again similar to the way a certain European chancellor and president do, although no one has mashed our names together just yet.

If push comes to shove, we can call ISDA for a suggestion. I am sure they know a good steak restaurant. They certainly are not sure on what a default is. We have not decided on any other details yet either, such as appetizers, side dishes or who gets to pick the wine. There will be wine and it will be red. I can give you that detail right now. But no other details are yet available.

More

Europe Gets a Deal

New York Times
Editorial
October 27, 2011


Europe’s leaders did better than expected, but expectations were low to start. After Wednesday’s all-night summit meeting, they announced a greatly strengthened financial rescue plan that includes bigger write-downs of Greek debt and new injections of capital into weakened European banks. Still, far too many of the crucial details have been left to work out over the days, weeks and months ahead.

Until those are known, it will not be clear if Europe has finally mobilized enough cash and political will to stop the unraveling that now also threatens Italy, Spain and even France. And Europe is still only grappling with the financial symptoms of the crisis, not the underlying causes.

One of the biggest of those is that while Europe has a unified currency, and independent central bank, it has no lender of last resort — like the Federal Reserve — that can supply unlimited emergency funds to governments and banks that need them. And Europe’s continued insistence on imposing punitive austerity in exchange for bailouts, which will make it impossible for weaker economies to generate enough growth to pay down debts.

More

Olle Johansson

Super EFSF Gets AAA Rating Affirmed, With Some Catches

by Mark Gongloff

Wall Street Journal
October 28, 2011

Great news everybody, S&P has affirmed the AAA rating of the EFSF. As we all know, those AAA ratings are iron-clad, and they never go away.

Ah, but there’s a catch. A few catches, really.

S&P says the borrowing capacity of the soon-to-be steroidally enhanced EFSF will be constrained by the guarantees of its AAA backers. And the EFSF had for darned sure better flip the script in the eurozone for good, or that AAA rating could be at risk:

On Oct. 26, 2011, EFSF members agreed to leverage the resources of the EFSF through investments, partly in special purpose vehicles (SPVs), which will provide risk insurance and/or conditional direct financing or investment in member states. We do not expect this will affect the ratings on the EFSF as long as EFSF’s liability is limited to its equity-at-risk and not associated with the assets and operations of the SPVs. In our view, the EFSF’s borrowing capacity will remain constrained, at EUR452 billion, by the amount of guarantees made by ‘AAA’ rated members.

However, if EFSF-funded financial support programs do not improve market confidence in the eurozone, and contagion puts ‘AAA’ rated members’ ratings under pressure, this could indirectly affect EFSF’s creditworthiness.

More

China Plays Down Expectations on Europe Bailout

Wall Street Journal
October 28, 2011

Chinese and European officials sought to play down expectations about when and how China may deploy its vast financial resources to help bail out indebted countries in Europe.

A Chinese Vice Finance Minister said China must first see the details of a new European bailout fund before making any commitments. "We of course must wait until its structure is extremely clear," Zhu Guangyao told a press briefing. "And moreover, this investment must be decided on after serious, technical discussions."

Klaus Regling, the chief executive of the European Financial Stability Facility, flew into Beijing on Friday on the first stop of a tour around Asia to drum up support for Europe. He told reporters he doesn't expect "any precise outcome" from his visit to China and said "it's too early to say what kind of amounts might be envisioned."

More

Cameron Cardow

Fitch: Greek Debt Deal a Default

Wall Street Journal
October 28, 2011

Fitch Ratings became the first major credit ratings agency to pass judgment on the European Union's anticrisis plans Friday, saying that the proposed Greek debt exchange would constitute a default and that none of the plans remove the risk of further downgrades for other sovereigns.

Fitch said that after the default, the country's rating would probably be in the B category or lower.

All three major ratings agencies previously said such a plan would push Greece into a default-rating category.

The comments followed EU's agreement reached on Thursday to stem the region's debt crisis by dealing with Greece's debt, recapitalizing European banks and enhancing the capabilities of the euro-zone bailout fund.

More

Tom Janssen