recession we had to have

The Greece [and European] Crisis thread

2924 posts in this topic

Perhaps a thread on the situation in Greece is in order?

Linket

Greek PM in unity call as parliament debate crisis budget

December 20, 2009 - 7:14AM Greek Prime Minister Georges Papandreou appealed for national unity Saturday to tackle the financial crisis sparked by the country's crushing debt, as parliament began debating the 2010 budget.

Addressing lawmakers from his ruling socialist PASOK party ahead of the debate, Papandreou called for "a national mobilisation, of our political parties, unions, the forces of business and labour, and all citizens."

"We have to put our house in order," he said, defending the unpopular austerity measures planned to rein in the 300-billion-euro (435-billion-dollar) debt, which has roiled credit markets and pushed down the euro currency.

Credit rating agency Standard and Poor's Friday downgraded two Greek banks and put two others on negative watch, the latest in a series of blows delivered to Greece by international ratings agencies in recent weeks.

The draft budget for 2010 aims to rein in the public deficit by 3.6 percentage points, from 12.7 percent of gross domestic product to 9.1 percent.

But the government's announced austerity measures were met this week by union protests and an arson attack on the ruling party's offices.

Papandreou repeated a pledge that the government will not increase the tax burden for low- and middle-income households.

He said half of the eight-billion-euro deficit reduction would come from spending cuts and the trimming of waste, and half from more effective taxation of the wealthy and a crackdown on tax evasion.

Greece is determined "to rebuild the credibility we have lost," he said, "to radically change direction, to put a stop to the practices and mentalities that have set us years behind."

"We cannot afford to delay tackling the deep structural problems that are choking us," he told lawmakers.

Greece is mired in recession and had an unemployment rate of 9.3 percent in the third quarter, up from 7.2 percent in the same period of 2008.

After the debate, the budget will be put to a vote in the 300-seat chamber late on Wednesday. The governing party has a 10-seat parliamentary majority and is expected to carry the vote.

[MOD: title amended for mega merge]

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No EU bailout for Greece.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6942680/Euro-brinkmanship-escalates-as-ECB-shuts-door-on-Greek-bail-out.html

The European Central Bank has given its clearest warning to date that there will be no EU bail-out for Greece if it fails to control its spiralling deficit, raising the stakes in a game of brinkmanship over the future of the euro.

These debts are large. The Greek central bank said gross debt to foreign creditors has reached €403bn (£362bn), or 168pc of GDP. The treasury will have to raise €56bn from the bond markets this year, heavily concentrated in the second quarter. The peak danger moment for the Greek debt office is from May to June.

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168pc of GDP, cmon on aussie we can do better than that.

Classic Gooseman! ROFLMAO.

If I ever get back to Adel before WW3 I'll give you a freebie at the Crazy Horse.

Classic.

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http://www.zerohedge.com/article/skyrockets-flight-no-just-greek-cds-longs-delight-greek-default-risk-surges-another-all-time

Greek CDS hits another all time record at 342.50 bps. Greece is now trading nearly 5 times as risky as the entire universe of investment grade US corporates. In other news, Greek Prime Minister Papanderou repeats for the third time (and fourth, and fifth) that the country will not, repeat not, repeat not, repeat not, repeat not, need a bail out from the EU, and will not (etc) drop the euro or leave the eurozone. If only anyone believed the man.

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More Greece at Zerohedge...

http://www.zerohedge.com/article/greece-cds-hits-fresh-record-funding-crisis-now-official

The economic situation in Greece is getting worse by the day. Despite PM Papandreou's promises to the contrary, it is probably safe to say that the country is now in a full blown funding crisis; this is reflected in the country's fresh new record in its default risk as seen by credit traders. At 346 bps, it is just a matter of time before all hedges cover positions and this number explodes. Now it is the Eurozone's turn to promise it will not expel Greece from the monetary union: we think the likelihood of this action is increasing proportional to the number of times this possibility is refuted.

Comparisons between Greece and California...

http://www.zerohedge.com/article/california-and-greece-technical-comparison-catastrophe-risk

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a good sum up situation on greec in Roubini newsletter:

Greetings from RGE!

This week we address an issue that puts the credibility of the euro and European institutional arrangements on the line: Greece’s sovereign debt crisis. At their January 18, 2009, meeting, eurozone finance ministers kept pressure on Greece to fulfill its commitment to cut its budget deficit below 3% of GDP by 2012. In February, the eurozone finance ministers will more fully evaluate the country's spending plans and recommend a timetable for Greece to trim its deficit, estimated at close to 13% of GDP in 2009. Because the eurozone is a monetary union with a no-bail-out clause, rather than a political or fiscal union with the associated fiscal federalism, budget cuts to contain the explosion of Greek public debt are urgently needed. In 2010, a sustainable fiscal adjustment must be delivered to restore policy credibility, market confidence and ECB/EU member-state solidarity. In RGE Analysis available to clients, we discuss possibilities for such an adjustment in greater depth.

Three coinciding events—Greece’s sharp budget deficit revisions from as low as 3.7% of GDP to 12.7% in October, the announcement of the beginning of the ECB’s exit strategies and the Dubai default—have triggered renewed risk aversion in the sovereign bond markets of developed countries. While in March spreads were broadly driven by a common systemic risk factor, the latest spike bringing Greek yields and CDS spreads to new highs is mostly a country-specific story, brought to light by a change of government and the revelation of far larger budget deficits than previously known and a severe cyclical and structural deterioration in public finances.

In tackling the deficit, Greece faces a Hobson’s Choice: whether to accept social pain with financial and economic stability, or instability. Whatever it chooses, Greece will face economic pain and difficult socio-political fallout. More aggressive spending cuts or tax hikes than initially envisaged in the stability program Greece presented in December could curb or even derail recovery, perhaps inciting social unrest. But if the debt becomes unfinanceable in the primary market or if Greece elects to exit the euro and devalue and redenominate its liabilities (a la Argentina), this could render its banking system insolvent and tip it into economic and financial isolation and decline, also with dire socio-political consequences.

While a buyers’ strike has been averted for now with Greece’s successful auction of five-year government debt at 6.2%, the additional yield investors requested was substantial. The possibility of a buyers’ strike in the primary market in the future may further test Greece’s political commitment to fiscal adjustment and economic stability, as demanded by its treaty obligations and the strictures of a currency union.

Going forward, once Greece has delivered what the EU Commission, ratings agencies and stakeholders in the markets judge to be an adequate pound of flesh, we expect the ECB to take on a more constructive stance, especially in view of the stricter collateral requirements that will be put in place by the end of 2010. The risks of not doing so would entail a judgment that Greece could, in theory, be surgically removed from the eurozone without starting a domino effect in other countries with high or escalating public debt burdens, some of which are far larger economies and hence could have an impact on the regional and global financial and economic systems. Alternatively, a sovereign upgrade to A- by two ratings agencies after the budget effort meets approval could also be part of the solution.

The endgame we expect is the extraction of a pound of flesh and a bit of a fiscal compromise that together restore debt sustainability. This will require a combination of further sharp fiscal adjustment, a la Ireland (which has committed to cut public spending in 2010 by €4 billion, or about 20% of the 2009 deficit), and a signal of support from the ECB. In response, improved signals from the ratings agencies will bring cash bond yield spreads back down to earth. Over the longer term, of course, there is no alternative to tackling the competitiveness deficit in Greece and in other member countries as well.

also a link to the latest news of surging bond yield in greece and more risky european countries (to put it in comparison with australia the AUS 10 year gov bond is 5.46% this morning)

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The Greek default risk rises...

http://www.zerohedge...lation-lehman-d

At this point using the words "Greece" and "record" in the same sentence is starting to get uncool. Alas, today, it has to be said one more time. The country's CDS is now at 387 bps, another all time wide, while the spread to Bunds is just getting plain silly. Of course, the chorus of voices begging for calm is increasing, with Spain's prime minister the latest to claim that "nobody will be leaving the euro." It is unclear at this point if he is referring to Greece or Spain. This is coupled with Papandreou saying that he is "seeing speculation in world financial markets" regarding his country's risk, and the ever ubiquitous "rumors can create problems." Dick Fuld surely can sympathize.

The comments underneath the post are interesting to say the least. Such as...

Does anyone know how Greece came to today? A refresher they have a current account deficit 15% of GDP reliant upon external funding due to no home bias.

...does that remind you of any large island nations between the Indian and Pacific oceans?

EDIT: Greek Credit Default Swaps now parabolic...

http://www.zerohedge.com/article/greece-400

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The french prime minister basically came out and said goodbye greece no help from Euro, good night greece their crdit rating will get socked and if they dont kick greece out the euro will plummet.

Edited by PrintCash

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I doubt 5% of Australians are even aware of the severity of this situation. This is a wildfire. I don't understand that the dire situation of Greece is not used as an example for the second-in-line defaulter to take aciton now and the third-in-line and so on...to prevent them falling into this hole. Money keeps being thrown around.

Edited by sydney3000

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http://www.theaustra...o-1225824547571

Papandreou accuses speculators of targeting Greece as the euro's weak link

  • Carl Mortished
  • From: The Times
  • January 29, 2010 8:04AM

THE Greek Prime Minister accused speculators of targeting the country as a "weak link" in the euro yesterday, as the value of Greek bonds plunged on financial markets.

The risk premium on the yield of Greek government debt rose to a new record of 4.05 per cent above the yield on the benchmark German bund.

Speaking at the World Economic Forum in Davos, George Papandreou said: "This is an attack on the eurozone by certain other interests, political or financial, and often countries are being used as the weak link, if you like, of the eurozone."

Greece's ten-year bonds were yielding 7.14 per cent yesterday, pushing up the difference with equivalent German bonds from 3.5 per cent on Wednesday, as nervousness increased among bond investors that Greece might be unable to pay the interest bill on its mounting debts.

The country is hamstrung by its need to borrow heavily to finance extravagant government spending, in a recession that has crimped its tax revenues.

The gap between spending and income ballooned to 13 per cent of its GDP last year and the European Commission has accused the Government of massaging economic statistics.

Nervousness over Greece's problems increased amid talk that a bailout was being orchestrated.

A report in Le Monde, the French newspaper, that France and Germany were discussing a rescue package for Greece, including accelerated payment of structural funds from the EU budget, was denied by both governments.

Earlier in the day, Greece denied reports that it was arranging a big sale of government debt to China.

Anxiety is growing in Germany, where Rainer Bruderle, the Economy Minister, said: "Some euro states are showing dangerous weakness. This may have fatal effects on all states in the eurozone."

Confusion about the country's predicament cast a shadow over the sale by Greece of €8 billion of five-year notes.

The bonds were hammered by the market yesterday, with the premium on the notes rising from an issue yield premium on Tuesday of 3.5 per cent, to 4.09 per cent.

Mr Papandreou insisted that Greece would not quit the eurozone and would reduce spending in line with its commitment to cut the public sector deficit to 8.7 per cent of GDP this year.

Greece's problems have reopened speculation about the threat to the euro from rising public deficits across the eurozone, notably Ireland, Portugal and Spain.

Jose Manuel Barroso, President of the European Commission, said: "It is quite clear economic policy is not just a matter of national concern but of European concern."

In response to questions about action by other member states, the German Finance Ministry insisted that Greece could expect no special assistance: "It is incumbent upon Greece to face up to its responsibility for the stability of the eurozone by its own efforts."

Credit rating agencies threatened to downgrade Portugal unless it produced a plan to cut its budget deficit.

The Government has promised it will bring the deficit to within 3 per cent of GDP by 2013, from last year's estimated of 9.3 per cent. But the pledge drew a sceptical response from the agencies, including Moody's, which called for a "transparent and credible plan".

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http://www.zerohedge.com/article/why-bond-market-ignoring-all-rosy-greek-rhetoric-and-has-been-plan-all-along

A Greek bailout is rapidly becoming an extreme likelihood. The implication is that coupled with the newly emerging austerity measures in Portugal, Europe, but mostly Germany, will run out of options very quickly.

On one hand Trichet and Merkel have stuck themselves in a corner with all the recent anti-moral hazard talk (and the question of whether Europe's strapped public sources can accumulate enough bailout capital in time is still open), and on the other, as Lehman so well demonstrated, a colossal event such as a eurozone member defaulting, would likely have the exact same unpredictable domino consequences that everyone has long been warning about.

The silver lining - an imminent drop in the euro, and a boost to European exports. Perhaps this is the agenda all along - Greece will be the sacrificial lamb which will satisfy the bloodthirst of French and German unions, and prevent political landslides in all of Western Europe. And the kicker - they can't tell Bernanke and the U.S. they did not go along with the G-20 plan of keeping the euro artificially high: after all this will be spun as an "exogenous" event...Ironically, the bitter medicine for the rescue of both Spain, Portugal and the other PIIGS may just the transformation of PIIGS to PIIS.

I'm trying to find a short entry for the Euro but the f*cker just keeps on falling!

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http://www.zerohedge...-plan-all-along

I'm trying to find a short entry for the Euro but the f*cker just keeps on falling!

you have to be carefull in shorting the euro as it is already oversold by speculator and forex trader (as you can see for example in the future COT weekly report).

Also europe don't have foreign debt and there is a risk that huge amount of money will head back into europe back to the money owners.

I don't agree with zerohedge in comparing lehman with greece, i agree that they have many similarity and implication but the difference is that we all know what is the debt greece has got and we all know who and how much own that debt, with lehman none at that time knew exactly the implication of its default and impact to other entity.

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Yes Boz it appears oversold (Day Chart RH one below) hence my dillemma...

I'm trying to find a short entry for the Euro but the f*cker just keeps on falling!

I'd like a nice rally to the falling trendline top. I don't sell at bottoms or buy at tops (thats just Australian property speculators).

post-103-12647508039366_thumb.gif

post-103-12647509407535_thumb.gif

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I wonder how long before the UK officially joins the PIIGS?

PIIGSUK?

I wish the non-Greeks would have the balls to stand up and shout: "Cut your social welfare expenses and tax the rich, morons!"

Edited by sydney3000

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PIIGSUK?

I wish the non-Greeks would have the balls to stand up and shout: "Cut your social welfare expenses and tax the rich, morons!"

I don't think the non-greek would have much to lose, if any rescue of greece from EU kicks in there will be strong budget condition on it, a bit like the IMF has done in the past, on the other hand it is very hard for greece and many country to cut budget as unemployment is soaring and tax revenue are falling, any tax increase or welfare reduction, in the short term, would just increase unemployment by reducing consuming, that would reduce further tax revenue. You could end up with people in greece striking and start revolting like burning cars in streets and shops etc...

It reminds me of argentina 10 years ago, but it could be worse

Edited by boz

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Linket

January 31, 2010

EU sets tough targets for Greece rescue

Iain Dey

EUROPEAN officials will this week set the Greek government a four-month deadline to impose a stringent regime of budget cuts and financial reforms.

Leaked documents have revealed Brussels will publish a plan for Greece this week, under the headline “Urgent measures to be taken by May 15, 2010”.

The package includes demands to “cut average nominal wages, including in central government, local governments, state agencies and other public institutions”. It also suggests new taxes on luxury goods and proposals to speed up tax payments by the self-employed.

Greece has been under pressure from international investors over fears it will default on its debts, precipitating an unprecedented strain on the euro. Fears of a Greek debt default have spread concerns that other EU countries could face problems — including Ireland, Spain, Portugal or Italy.

Richer eurozone countries such as Germany and France would be expected to bail out Greece in the worst-case scenario, to prevent a disastrous crash in the value of the single currency.

Officials in both countries have been attempting to play down such speculation, heaping further pressure on Greece to resolve its problems itself.

Greece has already presented its own package of austerity measures to the EU for approval, which it claimed would reduce its budget deficit to below 3% of GDP by 2012. The deficit currently stands at 12.7%.

The crisis of confidence over Greek public finances began last October after the government said its budget deficit was twice as big as previously thought. Greek shares have crashed while the yields on the country’s government bonds have spiked, reflecting the perception of an increased risk of default.

The Greek finance ministry has said that there is no question of the EU rejecting its proposed measures. However, the leaked documents suggest Brussels is looking for more savage cuts than those envisioned by Athens.

George Papandreou, the Greek prime minister, came to power last year promising to tax the rich to get the country out of recession. He has announced wage freezes for all civil servants on more than €2,000 (£1,700) a month — but promised increases in line with inflation to everyone else.

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George Papandreou, the Greek prime minister, has announced wage freezes for all civil servants on more than €2,000 (£1,700) a month — but promised increases in line with inflation to everyone else.

I like George Papandreou. He has balls. I like balls.

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Reducing deficits involves raising taxes and cutting spending*. Weak leaders equate this to wage freezes.

So you like weak interventionist policies with a likelihood of deflation AND scrotums?

Anyone here remember the attempted 'wage freezes' of the 70s?

What did they achieve? Industrial stoppages, strikes and f*ck all.

George Papandreou is the President of Socialist International . This should be interesting - watching a commie balance a budget.

*on discretionary capital items and wasteful non-productive departments/operations.

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I like George Papandreou. He has balls. I like balls.

With a 12% deficit, unemployment soaring and gdp shrinking the wage freeze is far from enough to contain costs. Also I am pretty sure prices are or will drop in greece and that will make those wage freeze not that unpopular. But the good thing is that they have to stand up against the unions in revising previos signed contracts, the real alternative is just no money and more unemployment.

In the 70's was different as inflation was much higher then

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