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This web site is about Athens and Greece in general: the current focus is on the economic plight of the country.
The struggle in Greece to handle out-of-control public debt and the destruction it is causing is making headlines throughout the world. Many see the Greek dilemma as a template for most of the West as the pattern of financing the activities of government through borrowing has had a terrible boomerang effect on productivity and stability. The implications for the world's nations which manage their finances after this model is severe.
The Imminent Crisis - : Greek Debt and the Collapse of the European Monetary Union by Grant Wonder
Eyewitness Greece - Athens and the Mainland - 352 Pages
Financial markets and economic growth in Greece, 1986-1999 [An article from: Journal of International Financial Markets, Institutions & Money]
LINKS
NEWS
Living in Greece Blog (this is probably the most important english language "Greece" blog there is.)
Athen News
Perennial english language Athens paper online with classifieds, etc.
Greek news Online
From out of Astoria New York, includes wire news reporting
Phantis
Aggregate site collecting Greek news from many sources
Proto Thema
"The Lead Story" news site (in Greek)
Greek Reporter
Enlgish langauge news about events about and in Greece
Neo Kosmos is Australia's largest circulation Greek newspaper
Greece Topix
Updated regularly with Greek news. Their discussion forum is mostly an ongoing war between macodonian/albanian/greek
partisans.
INFORMATION
US Embassy Athens
Downtown Athens.
LIVE CAM VIEWS
pireas.org looks out at Athens from across the Pireas bay twenty-four hours a day. Weather station with up to the minute reporting.
nifada.org Has an excellent view of about half of Athens all the way to Pireas - page also has weather reports.
Akropolis Live View 24/7 view looking up at the walls and temple mount - Hellenic Foundation
Adrian's Gate live cam of the traffic flying by 24/7 - Hellenic Foundation
Athens Demographics:
The population count for Athens was 10,964,020 in 2001. According to eurostat, in 2008 Greece had a total estimated population of 11,262,000. Of this, some 695,979 are estimated to be non-Greek.
View of the University of Athens, Greece: View Enlargement
Greece and the economic crisis
July 27, 2010
Poison medicine
Nick Skrekas at his blog at Wall Street Journal rains on the ATEBank idea for creating a kind fo super bank to spur growth in Greece:
"The chairman of state-controlled ATEBank — now the subject of a takeover bid by a private rival — is one of them. He thinks better than falling into private hands, the government should beef up ATEBank and create a publicly-owned mega lender that would hold sway over Greece’s finance sector. Greece’s Socialist government, elected last October, thinks that may not be such a bad idea. In fact, it promised to do just that during its pre-election campaign.
If there’s one thing the Greek crisis has shown, it is that politicians are not much good at running state budgets, so does anyone expect they can run a banking champion more effectively? Does the country need more of the poisonous medicine that got it into this fix?"
And what was that medicine?
"While no one would advocate a fire sale of the state’s holdings in banks, there is no rationale other than blind ideology that would suggest Greece requires an amalgamated large public bank entity.
...Local banks cannot and should no longer be a tool for social policy because all that means is that they are being forced to make loans that will fail since there is no solid basis for the lending–-and the tax payer again will have to bail them out. The country can longer afford politically favored financing of certain sectors, certain government leaning businesses or entrepreneurial mates."
€4 billion saved
Reuters has a shoping list of Greek financial news, but one in particular stood out:
"The Greek government has saved up to 4 billion euros from expenditure containment, which could be used to cover any unforeseen spending overruns, financial daily Naftemporiki reported, citing a top Finance Ministry official. Greece's GDP contraction is expected at 3-3.2 percent this year, compared to a 4 percent drop estimated in the EU/IMF memorandum, the paper added citing Finance Ministry sources."
This indicates Papandreou has been able to hold back on spending and created savings marginally better than expected: €4 billion is a minor amount compared to the overall problems plaguing Greek finances, but is still an amount a desperate government would not have been able to set aside.
Jewish Museum in Athens vandalized
JTA reports on anti-Jewish attacks in Greece:
"Vandals painted red swastikas on the walls of the Jewish Museum of Greece in Athens.
The July 22 attack marked the first time that the museum has been the target of anti-Semitic expression, according to an Athens community news release.
Greece has been beset by a chain of anti-Semitic events this year, including twin arson attacks on the Synagogue of Hania, vandalism against Jewish cemeteries in Ioannina and Thessaloniki, and an attack against the Holocaust memorial in Rhodes."
The JTA has a many articles vis-avis the Jewish community of Greece (approximately 5,000 people) and about the often problematic relations beween israel and Greece.
July 26, 2010
Visiting delegation to investigate future of €110 billion bailout
Wall Street Journal details the situation in Athens with IMF and eurozone officials now on the ground looking at conditions and the future of the €110 billion bailout plan:
"A delegation of European and International Monetary Fund officials began a two-week visit to Greece on Monday to determine whether to continue funding under a €110 billion ($141 billion) loan deal.
The interim review by the European Commission, European Central Bank and IMF officials comes as reforms demanded by this so-called troika were met with protests from air-traffic controllers and truck drivers.
At Athens International Airport, thousands of travelers and dozens of flights were delayed Sunday after air-traffic controllers staged a "work to rule" protest. The controllers are due to decide later today whether to proceed with a strike, a move many fear will hurt Greece's vital summer tourist season.
Meanwhile, on the streets of Athens, motorists formed long lines at local gasoline stations to fill up their tanks, amid fears that an open-ended truckers strike would lead to fuel shortages around the country. "
View of Athens from live cam July 14, 2010, Greece. Source: Nifada 'panorama' live cam
July 20, 2010
Greek journalist murdered
New York Times with report on the killing of Sokratis Giolias by Rebel Sect (also called "Sect of Revolutionaries") , a group that seems to be filling the void left by the destruction of the November 17 group. As if Greece didn't already have enough bad publicity with the economic upheaval:
" A Greek reporter was shot dead on Monday by leftist urban guerrillas outside his home in an Athens suburb, the first murder of a journalist in Greece in more than 20 years, the police said.
The reporter, Sokratis Giolias, 37, the news director at a radio station, was shot several times at close range. No one claimed responsibility for the killing, but a ballistics investigation showed that the guns used had been used in earlier attacks by the Rebel Sect, one of Greece’s deadliest militant guerrilla groups, according to a police statement."
More from an article by Harry Papachristou at The Scotsman:
"Giolias' murder was the first killing of a journalist in Greece since the mid-1980s, when left-wing guerrilla group November 17 assassinated a conservative newspaper publisher.
The Rebel Sect, which has said that journalists are among its targets, opened fire last year on the headquarters of private Alter TV, without causing any injuries.
Rebel Sect is one of Greece's deadliest militant guerrilla groups. In June 2009, it claimed responsibility for the killing of a Greek anti-terrorism policeman in Athens. He was shot several times at close range."
From the Kathimerini editorial on the murder:
"Just like the bomb that exploded last month at the offices of Citizens’ Protection Minister Michalis Chrysochoidis, killing one of his close aides, yesterday’s attack is a clear message to the Socialist government that it must intensify investigations into the these violent undercurrents.
Greece has enough credibility problems already. This country cannot afford to project to the world the image of an underdeveloped country in which terrorists and organized crime can take human lives wherever and whenever they feel like it."
BBC Reports with other info:
"Sokratis Giolias, 37, was shot more than 15 times in the Athens neighbourhood of Ilioupoli.
According to colleagues, he had been about to publish the results of an investigation into corruption.
Police said ballistics tests tied the killers' guns to previous attacks by the Sect of Revolutionaries.
They had initially discounted the idea that leftist militants might have killed Mr Giolias.
The Sect of Revolutionaries (SR) has threatened members of the media in the past. Last year they attacked the headquarters of private broadcaster Alter TV, without causing any injuries."
"Railroaded"
United Press International on how Hellenic Railways was used as an accounting sleight-of-hand to keep $13 billion hidden:
"Debt-burdened Hellenic Railways in Greece has given the government a cover for billions of dollars of debt, a former chief executive officer said.
The railway, $13 billion in debt, "was an accounting trick, another good way for the government to hide its debt," The New York Times quoted former railway CEO John Mourmouris as saying.
The railroad is one of several state-owned businesses that have allowed Greece to keep a total of $33 billion of debt off of its own books, although it agreed to count these as debt with the European Union and the International Monetary Fund when negotiating for emergency loans, the newspaper said."
This week: Greece set to auction 13-week bonds to the amount of 1.5 billion euros - Reuters brief note
July 19, 2010
Some optimism amid the caution
Despite the success of the Greek bond auction last week, this Michael Casey article at Wall Street Journal still pleads for caution. However, I cannot help but see optimism in this article's looking ahead to credit expansion sometime following the three-year austerity programs many of the eurozone members are now putting themselves through:
"...with the euro 8% higher than its early June lows as markets prepare for Friday's much-anticipated release of European bank stress-test results, investors should remember that the euro zone's debt problems haven't become less serious. German Chancellor Angela Merkel didn't call it Europe's "existential crisis" for nothing.
RBS Capital Markets estimates that financial institutions hold €2 trillion in private- and public-sector debt issued by the troubled countries of Greece, Spain and Portugal, a figure worth 22% of euro-area gross domestic product.
Whether a default actually plays out, the systemic risks associated with that enormous debt overhang should keep investors in a cautious mood. RBS believes it justifies a yield as low as 2.75% on 10-year Treasury notes for some time--almost a quarter point below its current level.
In recent weeks, markets have ignored ratings downgrades and willingly lent to Spain, Portugal and Greece. But a few successful debt auctions doesn't get them out of the woods. And, in any case, Greece's debt sales were merely short-dated benchmarking issues; the bulk of its financing needs are covered by the EU and the IMF.
...All these countries are embarking on aggressive fiscal austerity programs to cut their deficits by a third in three years. That will shrink their revenue base and for some time make it even harder to repay debt.
The European Union must go through with this. Recapitalizing banks will better prepare them for future credit expansion and make them more competitive. Meanwhile, more cross-border cooperation among governments, coupled with fiscal housecleaning, will give the euro zone more institutional ballast.
Still, political differences and fragmented policies will make the process a tough one, not least because the struggling peripheral countries can't devalue their way out of the crisis.”
July 16, 2010
13-week bills next for Greece on July 20
There's no time to waste: after their success with the 26-week bonds on July 13, Papendreou is moving fast to put up $2 billion USD worth of 13-week securities next week. The July 13th bond sale went at 5% interest. Bloomberg Businessweek has more:
" “It’s pretty likely that they will be able to raise more than the size they announced, just like what happened this week,” said Christoph Rieger, co-head of fixed-income strategy at Commerzbank AG in Frankfurt. “Perhaps it’s their strategy to announce a small amount, and pleasantly surprise the market once they manage to raise more.”
Next week’s sale will be the second since the country accepted a EU-led bailout in May. The 26-week auction signaled that confidence among banks in Greece, which purchased 80 percent of the bills sold, is growing after Prime Minister George Papandreou’s government cut wages, postponed retirements and raised taxes to trim the euro-region’s second-highest budget deficit and restore investor confidence.
The debt agency sold the 26-week bills at a yield of 4.65 percent. About 4.5 billion euros of short-term securities come due from July 10 to July 23 and the rollover isn’t fully funded by the 110 billion-euro lifeline received in May to avoid default, according to an International Monetary Fund document."
Bank mergers on the horizon
Kathimerini on the coming wave of buyouts, sellouts and mergers in the banking sphere:
"If a state-controlled bank is being sold off, then all the parameters, beyond the price of its shares on the stock market, have to be taken into account. In the case of the Hellenic Postbank, for example, one must bear in mind its ample liquidity. If strict rules are not followed, the inevitable wave of mergers will result in either wiping out healthy state-controlled banks or in covering up the financial black holes at poorly managed private lenders."
The problem they are talking about also afflicts the general European banking system. It's hard enough telling which banks are healthy and which are not since the rather opaque reporting regulations allow for plenty of space to manipulate the balance sheets. The same problem is in the United States.
July 15, 2010
July 13th Bond Auction a success
There were a lot of doubts about what would happen if Greece went back to the well for new water too soon, but the fears were for naught. The Economists reports on the success in Athens with issuing more paper debt (26-week securities) and the plans for another go around on July 20th:
"... Greece’s auction of six-month treasury bills on July 13th turned inferiority into a cause for celebration. The beleaguered country managed to raise €1.6 billion ($2 billion) at a yield of 4.65% in its first venture into the markets since a €110 billion rescue package from the European Union and the IMF was secured in May.
...The auction was nevertheless a relief. The yield was lower than the 5% interest rate Greece pays when it taps into the EU support package. The auction was 3.64 times oversubscribed. Although it was mostly a domestic affair, Petros Christodoulou, the debt agency’s director, says he was “pleasantly surprised by foreign investors’ demand”. Greece will try to raise up to €2.5 billion in an issue of three-month paper on July 20th. "
The Economist story was titled "an uneasy calm" but something more like relief seemed to be in the reactions to the news.
Meanwhile at Bloomberg, Greece managed to pull ahead of Canada in the bond sweepstakes:
Canadian bonds are the world’s worst performing sovereign debt in July, lagging behind the embattled securities of Greece, Spain and Portugal, as investors bet policy makers will raise interest rates next week for a second time in less than two months.
Government debt maturing in more than one year has lost 0.96 percent since June 30, the worst returns among the 26 countries according to Bloomberg data. That compares to a 1.6 percent return for Greek bonds..."
Strikes on July 15 bring air traffic to a stop
Voice of America on the Thursday strikes that stopped air transport in Athens:
"Greek public sector workers staged another strike against the government's austerity measures Thursday.
Hundreds of workers demonstrated outside parliament in Athens as lawmakers prepared to vote on pension reforms for public servants that include raising the age of retirement.
Air traffic controllers joined the walkout, halting flights at all Greek airports for at least four hours.
The strike also shut down government offices across the country."
July 14, 2010
Greece is a "Basket Case"
But apparently a great place for brass music players
Gary Shilling at Money Show has a list of reasons why Greece is a 'basket case.' The reverse on some of these points gives you a good look at what the Greeks had going for them in a system that had been warped to better benefit at least some Greeks (especially, apparently, tuba players):
"In the Club Med set, tax avoidance is a honed skill, labor rigidity is legendary, and public and private labor unions exert immense economic power.
The European Commission estimates that bureaucracy in Greece—the cost of work devoted to dealing with government officials—equals 7% of [gross domestic product], twice the [European Union’s] average.
Permanent government employees have lifetime jobs. Bribery, patronage, and other forms of corruption also reduce GDP by 8% in Greece, according to a Brookings Institution study, [which] also finds a close correlation between corruption and government deficits.
The World Bank ranks Greece the most corrupt among the 16 eurozone countries, and also the worst among the EU 27, along with Bulgaria and Romania, according to Transparency International. Estimates are that one-fourth of all taxes in Greece aren’t paid, a third of that due to bribes. Greeks also retire much earlier than most, at 58, even though they live as long as the Germans.
Furthermore, in Greece, brass instrument players, masseurs in steam baths, pastry chefs, and hairdressers who use hair dyes can [retire] at age 50 because their working environments may cause breathing problems later."
Probably Shilling's main point is the scary one:
"Financially, [even though in terms of economic size, Greece is a pigmy, accounting for 2.6% of euro zone GDP,] Greece is important to the eurozone and, indeed, the world. If she defaults on her government debt or restructures it, the effects will spread quickly and painfully. "
Lament for Elliniko
A Kathimerini commentary much in the mold of previous complaints about how Greece manages problems, but in that paternalistic tone Greek newspaper especially take that are markedly different from (say) media organizations in the United States which try for more disinterested distance. Elliniko was once the travel hub for Greece, with tourists pouring in through the airport nearby, and the United States, and then a Greek/US military installation there.
"[Elliniko]...is a wasteland of weeds, derelict buildings and huge disused runways.
There has never been a shortage of plans for Elliniko nor any lack of ambitions. As in many other major projects, huge amounts of time and effort go into drawing up plans that are announced with great fanfare and then abandoned, until the next one. The prevalent idea is for the creation of “the biggest metropolitan park in Europe,” with all 500 hectares of the site being covered in trees, ponds and fields. Consider that Manhattan’s Central Park is a mere 340 hectares and you get an idea of the size of Greeks’ ambitions. Once again, we see that our expectations are unrealistic, that they exceed our capabilities by far. We have neither the money nor the water to create and maintain such a park. But that has never stopped us from dreaming.
This brings us to our next point: We prefer to live with the results of neglect than to take a realistic decision that will force us to abide by its result. "
60,000 businesses in Greece expected to shut doors by end of 2010
Wow: saw this via Living in Greece blog: some 60,000 business to quit in 2010. Article from Ta Nea (via Babelfish English translation):
"According to research of small and medium enterprises, by the end of year roughly 60.000 enterprises with 110.000 workers are expected to close."
Moody’s cuts Portugal to A1
Not much reaction in Europe over Moody's downgrade on Portugal's (read about it at Financial Times) debt from AA2 to A1. Funniest remark about this was "Monty" at the Ace of Spades Blog:
"Here's something I don't understand. When Greece's troubles became widely-known, markets the world over immediately pissed themselves. So yesterday Moody's cuts Portugal's debt rating to A1, and....nothing. What the hell, man? Greece gets kicked in the nuts but Portugal gets a pat on the head? ."
View of the island of Hydra, Greece. Source: Big Stock Photo
July 12, 2010
Consumer spending in Greece drops
Not surprising, CNN Money Fortune reports about the significant drop in consumer spending in greece, and the repercussions felt throughout the economy, from commercial real estate to something as simple as foot socks. Article by Dody Tsiantar
"...for the rest of Greece, the issue is liquidity. In the middle of its first recession since 1993 and at the center of a debt crisis that has roiled the world's financial markets, Greece is out of cash and the mood in Athens is palpably gloomy. Even the arrival of summer isn't managing to lift the spirits of the usually buoyant Greeks..
"Either everyone's away or they don't have any money to spend at all," said a cashier at AB Vasilopoulos, pointing at the nearly empty aisles of the usually bustling supermarket in the Athenian suburb of Neo Psyhiko.
Greeks, it seems, are starting to feel the debt crisis where it counts most: their wallets. After decades of living large and spending beyond their means, there is little doubt in this country, that "the time has come to pay the bill," as Aleksis Papachelas, editor of Greece's largest daily, Kathimerini, put it in February. And Greeks are discovering that paying up hurts.
To satisfy the conditions set by the International Monetary Fund and the European Union for a $140 billion bailout package, the socialist government of prime minister George Papandreou has cut wages by around 20%, raised taxes, frozen hiring -- and last Thursday, July 8, the parliament approved a hotly debated pension reform package, which pushed back the retirement age to 65 and reduced retirement benefits. Greeks now also pay a 23% value-added tax on all goods, with the most recent increase going through on July 1, making goods pricier almost overnight.
"Things are difficult. Everything costs a lot more than it used to," says Maria Konstatopoulos, a resident of Ambelokipos, a middle-income neighborhood in Central Athens. She's right. Consumer prices are up 5% compared to the same time last year -- and unemployment hovers near 12%.
The government has also imposed a 20% tax on gasoline and the ripple effects can be felt on this capital's usually traffic-snarled streets. "It used to take me an hour to get to work," says attorney Roxani Avgerinou, who lives in a northern suburb and drives to her office in the city's center. "Now it takes me 35 minutes." .Gasoline station owners reported in the Sunday edition of Kathimerini that sales are down 25% since the beginning of the year.
The slowdown can be seen too, literally plastered across its walls. "For sale" and "for rent" signs litter almost every neighborhood in the city. Along a major thoroughfare called Vassilis Sofias Ave., for example, three banners hung from balconies and 11 yellow stickers with red lettering were pasted near the door or on gates to advertise apartments available for rent or sale. And that's just counting one side of the street.
Kathimerini: 7 out of 10 Greeks "dissatisfied" and 35% would cast blank ballots
Discontent isn't the same as abandonment of a political party, but the line between the two is becoming blurred as Greece sinks into a severe recession. This Kathimerini article gives the highlights of recent polling which indicates every major political party in Greece is out of favor:
" Seven in 10 Greeks are dissatisfied with their lives and feel let down by the country’s two main political parties while a third would not vote for any of the five parties in Greece’s Parliament, a new poll carried out on behalf of Kathimerini has found.
According to the survey carried by polling firm Public Issue on a sample of 1,006 citizens in the first week of July, 65 percent of respondents said they trusted neither ruling PASOK nor the main conservative opposition New Democracy to run the country. Another 25 percent said they think PASOK is the best party to lead the country while only 4 percent said they would want ND in power.
...In one of the most shocking findings, a third (35.5 percent) of the poll’s respondents said that if elections were held today, they would either boycott the vote or cast a blank ballot."
July 10, 2010
Protests on July 8 were unusually small, but marked by violence
Video at Fox News about the protests on Thursday. Though it has what you would expect (colorful KKE marchers) it also seems to make an unintentional point that the core demonstrators aren't so concerned about the pension overhaul as they are with old-fashioned revolutionary politics:
"While overall numbers at the protest were estimated at around 5,000, one of the lowest turn-outs this year, the number of extremists and radicals remained high, along with the potential for violence they bring.
Nearby the parliament, anarchists pounced on a man they apparently thought was a plainclothes policeman. Instead he was a government worker and was taken away in a comatose state."
July 8, 2010
Pension reform passes Greek parliament
Well, Papandreou did it: a reform of the pension system in Greece passed parliament July 8, and by the Greek political party few would have believed possible to attempt it:
" Greek Prime Minister George Papandreou passed an overhaul of the pension system in a vote that tested the unity of his socialist government and prompted the second national strike in as many weeks.
The plan, which includes lower pension payments and delayed retirements, was carried with 159 votes to 137 against in the Athens parliament. Papandreou, who expelled three members of his Pasok party for defying him in a May vote on austerity measures, managed to secure support from deputies even as some indicated they may oppose various articles that will be voted on individually today. A final vote on the bill will follow today.
“It is not the government or Pasok which will be at risk if things remain the same,” Papandreou told the chamber before the vote. “Those who are at risk are Greek citizens. We are guaranteeing that the 20-year-olds and 30-year-olds of today will get a pension.”
Full article at Bloomberg gives the details.
Strikes shut down country early Thursday
ABC news coverage by Helena Smith from Athens:
"The strike has brought the country to a virtual standstill.
Thousands of tourists are believed to have been affected by the disruption of flights in and out of Greece as air traffic controllers, heeding calls from labour unions, also walked off the job.
The strike, which paralysed Greece for a sixth time in as many months, came ahead of a crucial parliamentary vote on legislation overhauling the pension system.
The pension system is said to be one of the root causes of the debt-ridden country's economic woes.
The reform, demanded by the International Monetary Fund and the European Union, has stirred unprecedented protests and dissent within the ranks of the governing socialist party."
Protesters losing support
Using the head count on the number of protesters in Athens for this recent series of demonstrations and strikes, Wall Street Journal writers Alkman Granitsas and Nick Skrekas is deducing waning support for the efforts to block pension reform now struggling for passage in the Greek parliament:
" Shouting slogans and carrying banners that read: "Enough Is Enough: Together We Can Beat The Austerity Plan" and "Keep Your Hands Off Social Security and Pensions" the demonstrators marched down the main streets in the center of the city as riot police stood by.
According to police estimates, somewhere between 12,000 and 15,000 people took part in three separate demonstrations in Athens, though protest organizers put the number at 20,000. The turnout was low by Greek standards, reflecting flagging participation in protest action, particularly after violence has marred similar demonstrations recently.
In early May, a firebombing of a downtown Athens bank branch killed three workers. Since then, the protests have shrunk in size and the level of violence has been more restrained.
Thursday, demonstrators attacked one man on suspicion that he was an undercover police officer, who then had to be taken away by ambulance. But apart from that incident, there were no reports of violence to mar the protest.
"Until now there has been no incidence of violence and I hope it stays that way," said police spokesperson Panagiotis Papapetropoulos.
For many protesters, the demonstration was also symbolic. Despite widespread unhappiness over pension reform, recent polls show that many Greeks accepts the need for broad reform."
Default needed for Greece (and European Banks): Globe & Mail
Despite the constant denials from the eurozone banks and from Papandreou's government that a default is needed or even possible, this UK Globe and Mail article by Nouriel Roubini continues what seems to be the general opinion among financial experts outside of government and the banks: Greece has no choice.
"...The bitter pill of debt restructuring could be taken with appropriate sweeteners, such as credit enhancements supported by the IMF and EU. Certainly, it would be better to use a small amount of public money to tempt creditors into a pre-emptive deal now than waste €110-billion of it trying to prevent an unavoidable restructuring later. Such public resources would be better used to help ring-fence other embattled eurozone economies – such as Spain – whose debt may come under renewed pressure. "
...Of course, giving nations longer in which to pay and helping with generous rates mean creditors experience losses. But their loss is much less than under an outright default. Since the market value of their existing debt has already fallen sharply, there will be no additional mark-to-market losses either, which is part of the reason why these orderly restructurings saw the vast majority – more than 90 per cent – of creditors sign up.
Indeed, restructuring Greece’s debt should be even easier. In those three emerging market economies, public debt was issued in foreign jurisdictions – namely London and New York – creating a risk that creditors would hold out and sue to regain their assets, as sovereign immunity is limited in foreign courts. But 95 per cent of Greek debt was issued in Greece itself, where domestic sovereign immunity laws greatly reduce the risk of hold-outs and litigation.
Another advantage is that most of the banks holding Greek debt are keeping it in their “to maturity” bucket rather than their “trading book” bucket. So long as the face value of the debt is not reduced they can still pretend – as they are doing now – that it is still worth 100 cents on the dollar when the actual market value is already lower.
I think investors underestimate how badly the core EU system will resist a change like this, because the central tenant of the project is eventual full integration. Obviously, Greece leaving the system is exactly opposite of the goal. Some expect the eurozone to implement stronger monitoring and to try for even deeper presense within the economic mechanisms of member nations, or at least those now vulnerable (like Greece) who are trading some sovereign rights for financial help. But, just as investors underestimate the actual fortitude of the EU managers, the EU seems to underestimate national feelings of individual states. Already smarting from the IMF / eurozone imposed reforms, it would seem likely the Greeks would measure the benefit of hanging onto the eurozone versus getting back into full charge of their own fortunes, and find the latter more appealing.
View of the island of Kos and Pserimos, Greece. Source: Big Stock Photo
Greece and the economic crisis
July 7, 2010
Kathimerini continues hammering Greek unions
My understanding about the Greek unions is that they more or less operate in the way American lobbying groups and associations do: pressure the controlling governmental body for both favors and for protection against competition. When centralized governments hold such massive power to make or break businesses and industries with legislation, those groups have no choice but to fight for influence. In Greece, unions actually go well beyond influence in a number of areas, and can act with some limited impunity to damage the country in their efforts to exact the maximum amount of concessions and control over decisions affecting them. Hence the uproar in Greek unions over the financial plan from the IMF/eurozone which will diminish this power and will ultimately grow the central governments options at truly running the country.
Kathimerini has been consistently striking out at the unions of Greece that have been disrupting the country during the economic crisis, labeling them just about everything negative in the political and social lexicon without going as far as calling them "traitors." But they're not afraid to call them 'blackmailers':
"The Communist Party’s PAME labor movement has chosen well in making Piraeus the setting for its battle of wills with the government.
Greece’s myriad hydra-headed interest groups have always conducted asymmetric warfare against the government and state, trying to cause the most possible damage to the greatest possible number of people so as to extract maximum gains for themselves. Farmers block highways and close borders, harming the interests and trade of both Greece and its neighbors whenever they have a complaint or a new demand. Seamen usually strike during Easter or Christmas, preventing people from getting to their islands for the holidays, while garbage collectors choose the same period to walk off the job, condemning Athenians to weeks of scurrying between the decomposing mountains of their excesses. Even the smallest group will take to the streets of central Athens – blocking traffic for hours and preventing access to shops – to press for its own esoteric demands. This institutionalized and widely tolerated selfishness has been the mark of our democracy since the collapse of the junta in 1974.
If Greece were a living being, Piraeus would be its throat – the small part through which all the vital elements pass and where they are most vulnerable."
Unemployment in Greece to go to 14.3% in 2011: OECD
The Organization for Economic Co-operation and Development (OECD) is predicting 14.3% unemployment for Greece in 2011 (Kathimerini article , translation via babelfish)1:
"Increase of unemployment in Greece was 12.1% this year and will rise to 14.3% in 2011. Unemployment was 9.5% in 2009. Information is from the OECD annual report, which was presented today by Secretary-General of the organization, Mr [Anchel] [Gkoyria] in Paris."
Wall Street Journal: "Not too late for Greece"
Michael Heise at the Wall Street Journal arguing against the "street wisdom" of a sovereign default for Greece:
" Conventional wisdom increasingly has it that the €110 billion European Union/IMF bailout for Greece will only delay a debt restructuring. The Greek economy, so the argument goes, could not possibly pull off the required austerity program.
But back-of-the envelope calculations supposedly showing Greece's inevitable fiscal death are somewhat exaggerated. The slashing of the Greek budget deficit (13.6% of GDP last year) is actually proceeding faster than planned. The consolidation program agreed with the EU and the IMF projects for this year a deficit of 8.1%. In light of the progress in the first five months of this year, Greece might even manage to undershoot this target.
That's partly because the government had already started to curb its spending—particularly on the investment front—before the EU and IMF imposed the current savings program. And if Greece implements the measures in full, more substantial savings will come in the second half of the year.
...Greece's predicament is anything but a lost cause. It does not make sense to rashly evoke an unprecedented sovereign default in the euro area, which would have unforeseeable consequences for other member states and the standing of the euro as an investment currency.
Driving the campaign for debt restructuring is often the desire to ensure that private investors foot some of the bill. But debt waivers would automatically also drag in EU taxpayers, who'd be left with at least a partial write-down on the loans their governments had granted to Greece. "
EU Report: Greece "on track"
Brief report (from AP) from the European Union Executive giving official approval to Greek efforts:
"...Greece is "broadly on track" with budget cuts and economic reforms linked to euro110 billion ($138 billion) in bailout loans from EU nations and the International Monetary Fund.
A Wednesday report by the EU says Greek efforts are "positive" but warned there a number of areas where Greece could run into trouble.
It says inflation is "markedly higher" than the government expects, partly because there is little market competition and major suppliers are easily able to pass on indirect tax increases to customers."
"Greece Unbound"
A short, interesting opinion piece by Alexis Papachelasat Kathimerini with an insight into the dilemma for Greece in the area of neighborly relations with the FYROM (i.e., Republic of Macedonia, a country of 9800 sq miles and about 2 million people) and the even more problematic issue of producing quality education facilities in Greece when the field is dominated by teacher unions that will not yield to improvements.
"A recent visit to a graduation ceremony at an American college in Thessaloniki gave me an unexpected insight into Greece’s mistakes and missed opportunities over the past 20 years.
The college is a serious nonprofit venture in the field of education and one of the few to have survived and prospered despite the obstacles. It bears no comparison to the dozens of other quasi-official colleges that have emerged in Greece without any substantial control. Interestingly, the top prize went to a student from Skopje. He spoke broken Greek and fluent English, explaining how he loves Greece and how the country offered him a unique opportunity to excel. Some professors recalled the difficulties that the first students from the Former Yugoslav Republic of Macedonia (FYROM) had to overcome when they arrived here. Their parents would often find their cars vandalized.
...I cannot help but think that George Papandreou made a big mistake in undermining the change of Article 16 in the Constitution which would have opened the door for the establishment of private, nonprofit universities. The prime minister yielded to vested interests when he could have given the green light to innovative research centers such as those found in Turkey and Cyprus."
July 2, 2010
Greeks pay average of €1,671 per bride for public services: costs nation €800 million a year
Article by Valentina Pop at the eurobserver with some ugly publicity for the Greek public sector:
"...a transparency watchdog has estimated that the cost of bribes paid out by Greek citizens for public and private services is at least €800 million a year.
"Corruption is one of the main reasons why we have this economic crisis in Greece. It's not the only one, but it's a very important one," Aris Syngros, head of Transparency International's office in Greece, said on Thursday (1 July) during a hearing in the European Parliament.
He presented the results of a survey carried out in the second half of 2009 which puts the cost of day-to-day corruption between €717 million and €857 million, an increase by some €40 million compared to results published a year before.
The calculation is based on telephone interviews with a sample of 6,122 individuals, carried out between July and December 2009.
The survey shows that the public sector in Greece is the most prone to corruption, with 9.3 percent of households reporting that they were asked to pay a bribe in order to speed up administrative processes, get fair treatment in hospitals or avoid a penalty for traffic offences. The average bribe paid in 2009 for public services was €1,355."
Corruption throughout the EU is the impetus for creating even more power structures to combat it. That bribery has long been a standard by which many mediterranean countries are able to get anything done has a long history, and having the northern european countries implement a mechanism to fight it will only make it mutate, because it seems hard to believe that it can be forced out of so many cultures where its long been the accepted way of doing business.
"...The EU executive is now looking at ways to extend monitoring of anti-corruption efforts in all member states, as government and private corruption scandals ranging from defence contracts in Portugal to companies such as Siemens and Volkswagen continue to pop up, with Transparency International noting a worsening of the corruption perception in most EU countries."
More strikes set for July 8
Associated Press at Bloomberg on the next coming wave of trouble:
"A union representing Greek public servants says it will join a protest planned by other unions on July 8 -- the sixth general strike this year against economic austerity measures.
The latest strike was prompted by plans by the Socialist government to overhaul the country's pension system and labor rules as part of an effort to heal public finances.
The public servants' ADEDI union called the strike Friday, accusing the government of using the financial crisis as a "pretext to dismantle the welfare state."
Protest marches held during previous strikes have frequently been marred by violence."
The matter is far from decided, regardless of the IMF/eurozone deal, about the implementation of the full austerity program. If forced to bow to union pressure, the Greek government would then be pushed into unknown waters and most likely collapse and then go straight to sovereign default on debt. Released to print drachmas again, the resulting situation would be a disaster, but the unions would retain their power hold, and probably all of the old salary, pension and bonus deals, et al, would be back in force. And the exchange-rate depreciation on the new drachmas might help, or could plunge Greece back to pre-junta days of instability and poverty. It would all depend on what Greece did immediately following default.
More about sovereign debt default
For an over view of sovereign debt and defaults, see this simple primer at forbes.com
Much of the blog-level coverage of the Greek strikes takes the tone that the Greek unions are protesting and rioting against "reality," and that trying to legislate protection for the various perks of unionized public employment is essentially demanding a fairyland world not connected to an actual ability to pay for it all.
Many other countries have used sovereign default as a stepping stone to a better economic position (Russia) or have simply bought themselves more headaches (Argentina) and isolation from world investment money.
"Greece’s membership in the eurozone was also a principal cause of its current large budget deficit. Because Greece has not had its own currency for more than a decade, there has been no market signal to warn Greece that its debt was growing unacceptably large." From article by Martin Feldstein, Professor of Economics at Harvard, was Chairman of President Ronald Reagan's Council of Economic Advisors
Mark Gilbert in an op-ed at Bloomberg:
"There’s a terrifying chart on page 32 of the BIS report (Bank for International Settlements annual report). It suggests the average maturity of bank debt around the world has declined to about 4 1/2 years, down from a 30-year average of more than six years. And those are last year’s figures; the trend would suggest that refunding risks are probably even higher now.
The BIS, which acts as kind of a clearing house for central banking philosophy, reckons debt is coming due at the fastest pace in 30 years, and that 60 percent of what it calls “long- term debt flows” need repaying in the coming three years.
So Europe’s banks have transformed a one-year obligation of 442 billion euros into a three-month burden worth 132 billion euros. That should give pause for thought. "
This seems to indicate a sovereign default decision would happen quickly. In the case of Greece, it is expected by so many and denied so consistently by the Papandreou government and the European banks, no one will be surprised.
Could the coming mid-July T-bill issue of Papandreou test what happens next? If it fails, will that show there's essentially no long term avenue of escape for Greece? Or will they hang in there waiting for a more favorable set of conditions to try again to turnover more immediate debt to later dates?
Charts of Doom
Most news organizations produce financial chart/graphics to help simplify understanding the mounting debt crisis wracking the world, Der Speigel has some very good looking images to explain what's happening:
"Greece is only the beginning. The world's leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it.
Savvas Robolis is one of Greece's most distinguished economics professors. He advises cabinet ministers and union bosses. He is also a successful author and a frequent guest on the country's highest-rated talk shows. But for several days now, it has been clear to Robolis, 64, the elder statesman of Greece's left-wing academia, that he no longer has any influence.
His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was "icy."
Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece's already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. "Don't put Greece on ice!" the professor warned."
The Green is the GDP amounts, and the red is... well, you know what it is. See the chart, enlarged, at the online Der Spiegel site
"Protect tourism"
A general protest from Kathimerini:
"Tourism must be protected...
Athens and a number of other linked destinations are already beginning to feel the brunt of the port closures, as thousands of tourists have canceled their cruise reservations in fear of these actions and the disruptions they can cause to their travel plans.
The impact on tourism, Greece’s biggest industry, should be taken seriously into account by the government the next time it sees a group breaking the law, because the country’s economy simply cannot bear anymore blows.
Kathimerini is very good at stating the obvious. To back up their protest is the letters page at Kathimeri, which includes the kind of letters you would expect to see:
[From a visitor from Florida, USA, After protesting strikes that stopped travel to the islands and the Acropolis] ...Apart from that, the city itself is unwelcoming and hostile to pedestrians. The sidewalks are traveled by mopeds and motorcycles and, if they are not, they are covered by street vendors of all sorts. The Omonia Square area ought to be off-limits to visitors. Filth is everywhere and no wall has been spared of unsightly graffiti or advertising posters. Is this what you inherited from Pheidias, Iktinos and Callicrates? A veritable ghetto. A shame and pity. A gorgeous country inhabited by unpatriotic vandals, assorted barbarians and uncivilized mobs. This is nowhere we wish to spend an extended visit."
I've read letters like that for decades, either at the AthensNews or elsewhere: its a generic complaint, in a way, that Greeks aren't like Americans (or British, or French, or whatever...) and obviously a lot of this is simply the perspective of a visitor to an unfamiliar place. But it certainly isn't the kind of publicity Greek tourism needs.
View of Athens toward the East, Greece. Source: Big Stock Photo
July 1, 2010
Pension reform plan heads for the courts
Brief from Kathimerini sums up the obvious:
"The government faced fresh opposition to its planned pension and labor reforms yesterday, from within its own ranks and beyond, as the Court of Audit said at least five provisions in the proposed changes violate the Constitution and several professional unions and associations said they were planning legal challenges against the changes.
The first appeals are expected to be made over the next few days by the Athens Bar Association (ABA), the civil servants’ union ADEDY and a union representing retired public servants, sources told Kathimerini. According to sources, there are fears that these suits could pave the way for similar challenges from other groups.
...The content of the controversial reforms – drafted on the basis of a memorandum co-signed by Greece and its international creditors – was the focus of vehement debate in Parliament yesterday. Prime Minister George Papandreou clashed with opposition leaders accusing his government of betraying the Greek public. Responding to charges of hypocrisy leveled against him by the leader of main opposition New Democracy, Antonis Samaras, Papandreou said, “You don’t want to erase the memorandum but your memories – of your responsibilities, your actions that have brought us to this deadlock.”
'Proposed changes violate the constitution,' this is an argument probably hinged upon a technical issue, but will none the less will look like a simple refusal to face reality to just about everyone else.
VAT goes to 23% - ouch
Feel the squeeze? Associated Press on the new VAT increases:
"Prices of consumer goods and services have risen overnight in Greece, as a new sales tax hike takes effect in an effort to boost government finances.
The center-left government imposed the increase in Value Added Tax, or VAT, from 21 to 23 percent. The increase took effect Thursday, prompting an immediate rise in gas prices and highway tolls.
It is the second VAT increase this year, following hike from 19 percent in March.
Trading associations say they will try to limit price increases despite the tax hike..”
It will be interesting, to say the least, how this will play out. Consumer spending is a big part of the Greek economy, and this will also be a tight pinch onto tourist organizers and charter groups.
New head of Greek statistical agency from IMF
Another big step toward restoring any confidence in Greek financial handling is the appointment of an independent head of the statistical agency. Wall Street Journal on the new man:
"The finance ministry said Wednesday that it has appointed an International Monetary Fund official to head up the country's statistics service to restore credibility to Greece's problematic public data.
In a statement, the ministry named Andreas Georgiou as chairman of the newly revamped agency. Prior to his appointment, Georgiou, a Greek national, was deputy head of the statistics department at the IMF.
According to a brief biography, he studied at Amherst College in the U.S. and has a doctorate from the University of Michigan.
Greece's newly-elected Socialist government shocked its European partners and financial markets by announcing soon after last October's elections that the country's budget deficit was more than twice the level forecast by the previous government.
...Previously, statistics chiefs have been political appointees who served at the discretion of the finance minister.”
Separating stats from external control of the finance minister should put into place a hedge against all of the manipulation of 'facts' in the past, such that each incoming government would release amended stats to counter the previous government claims about the state of the Greek economy.
More from moneynews.com
"The agency was widely discredited after the new government revealed last year that budget data had been falsified and sharply revised its budget deficit upward. The move was the first step in the country's slide to near-bankruptcy.
...The previous agency head quit shortly after Prime Minister George Papandreou's Socialists took over from the conservative government in October, and revealed that its predecessors had falsified budget data.
Greece shocked international markets and its European Union partners by then sharply revising its budget deficit estimate from 3.7 percent of gross domestic product in early 2009 to 12.7 percent. That figure was later raised to 13.6 percent of annual output. EU officials accused Greece of deliberately misreporting its data, while Economic and Monetary Affairs Commissioner Olli Rehn said last month that Athens "has cheated with its statistics for years and years."
June 29, 2010
New strikes block tourists at Piraeus
Demonstrators demand withdrawal of pension bill
"Militant seamen blocking the gates of Piraeus harbour on Tuesday stopped hundreds of tourists from boarding ferries for the Greek islands, as public and private sector unions staged a 24-hour strike to protest against new pension legislation.
The stand-off at the country’s largest port, the second in less than a week, highlighted opposition by the communist trade union PAME to reforms agreed under Greece’s €110bn bail-out by the European Union and International Monetary Fund.
Port authorities said 18,000 passengers were due to sail from Piraeus on Tuesday, but it was not clear how many would be able to leave.
A few hours later riot police in central Athens fired tear gas against stone-throwing protesters gathered outside parliament, where the pension overhaul is being debated this week.
...Unions reacted strongly to a threat by the government on Monday to legislate a three-year pay freeze for lower-paid workers in the private sector if unions and employers fail to agree on the measure.."
Nifada screen shot of Athens Greece June 29, 2010
June 28, 2010
Greek default contracts hit high of 1,125 on June 25
Though focused on the coming "monster printing binge" expected to happen at the United States Treasury, this UK Telegraph article by Ambrose Evans-Pritchard, has a lot to say about conditions around the world, in particular Greece:
"It is sobering that zero rates, QE a l'outrance, and an $800bn fiscal blitz should should have delivered so little. Just as it is sobering that Club Med bond purchases by the European Central Bank and the creation of the EU's €750bn rescue "shield" have failed to stabilize Europe's debt markets. Greek default contracts reached an all-time high of 1,125 on Friday even though the €110bn EU-IMF rescue is up and running. Are investors questioning EU solvency itself, or making a judgment on German willingness to back pledges with real money?
Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy."
Greece to issue T-Bills mid-July
Market test: could be a "good idea" or could "end in disaster"
From Reuters article by Lefteris Papadimas and Ingrid Melander:
"Greece said on Monday it would issue T-bills in mid-July to cover maturing debt, a bold but risky test of market appetite in its first auction since securing a mammoth EU and IMF bailout last month.
The debt-choked country is not expected to issue longer-term debt before 2012 but is allowed to issue T-bills, which have shorter maturities, under the terms of the 3-year, 110-billion euro ($136.1 billion) emergency funding programme.
"It could prove in the end to be a good idea but it could also end in disaster," Carsten Luedemann, fixed-income strategist at DekaBank, said.
...Analysts said that investors could show interest in T-bills, despite a sell-off of bonds, since they carry less risk. "Buying such short-term debt is relatively safe for investors," said Kornelius Purps, bond analyst at UniCredit. "I think it will be a relatively successful auction, in the sense that Greece will be able to place all its debt volumes."
"Kleftes"
New York Times article by Joanna Kakissis on the shifting fortunes of Greece's old-lion political families. Could the current financial crisis be the beginning of a new era in Athenian politics without a Papandreou or Karamanlis at the helm?
"Dora Bakoyannis knew that voting for the Socialist government’s austerity measures last month meant that she would get kicked out of the conservative party that her father, a former prime minister, helped shape.
Mrs. Bakoyannis, a towering, charismatic former foreign minister and former Athens mayor, is now considering forming a new party. But she acknowledges that her lineage, as well as her years of political exposure, may hurt her at a time when Greeks have lost trust in their political institutions.
“Believe me, there is no DNA which can save any politician, especially now,” Mrs. Bakoyannis, 56, said during a recent interview in her sunny office near the Acropolis. “At the end of the day, you are going to be judged alone.”
Many Greeks, worried about their country’s future, remain cautiously behind the reform efforts of Prime Minister George Papandreou, the scion of Greece’s most influential political family. But recent polls show that Greeks also believe corruption fostered by their politicians has led the country to economic ruin.
As a result, they are questioning their most familiar political brands, said Kostas Ifantis, a political science professor at the University of Athens. “The country’s political families are easy targets,” he said. “They represent the state, which has been so dominant in Greece for so long, and which Greeks have grown used to being responsible for everything.”
In the last half-century, three main families have dominated Greek politics.
The center-left Papandreous have produced three prime ministers: George; his powerful father, Andreas, who founded Pasok, the governing Socialist party; and Andreas’s centrist father, also named George.
The previous prime minister, Kostas Karamanlis, is the nephew of Konstantinos Karamanlis, a four-time prime minister who founded the New Democracy Party and led Greece in 1974 after the fall of the seven-year military dictatorship.
Mrs. Bakoyannis and Kyriakos Mitsotakis, a member of Parliament with New Democracy, are the children of former Prime Minister Konstantinos Mitsotakis, who led New Democracy in the 1980s and early 1990s and who often sparred with Andreas Papandreou.
...A survey this month by the pollster Public Issue showed that 40 percent believed that neither Mr. Papandreou nor the New Democracy leader, Antonis Samaras, was up to the job of dealing with Greece’s problems. Other surveys show that most Greeks do not trust the country’s two main political parties. At dozens of protests outside Parliament, thousands of angry Greeks gather to chant “kleftes,” or “thieves.”
A theme running throughout this quasi-biographical article is that the trust level from the Greeks toward their leadership is at a dangerously low level. The summer season right now is just a run up to the pressure of the austerity measures that will come to the fore this fall, and if the present government has by then fallen into another scandal it could bring about revolutionary changes through the polls.
June 27, 2010
Papandreou: Vote for the pension reform or I will call for a general election
From the English side of the online Kathimerini newspaper:
"A bill aimed at overhauling Greece’s pension system, which will see Greeks retiring later and receiving lower monthly payments, was submitted to Parliament yesterday as Prime Minister George Papandreou gets set to warn his MPs that if they do not vote for the draft law, he will call a general election.
...The changes to the pension system, which will affect anyone who wants to retire as of next year, include an increase in the retirement age to 65. Women had been able to retire at 60 until now. Greeks will also be expected to work a minimum of 40 years rather than the current limit of between 35 and 37 years. This change will be phased in over the next five years but as of 2024, the retirement age will be reviewed every three years and will depend on the average life expectancy in the country.
Anybody seeking early retirement will have their pension cut by 6 percent each month for every year before the new limit that they retire.
...Greece currently spends about 12 percent of its gross domestic product on pensions but this figure is predicted to double by 2050 if no changes are made as there will be roughly one pensioner for every working Greek by that time."
IMF: Greek Austerity plan will succeed
AFP news report via Yahoo.com continues the regular drumbeat of official supportive comments from the IMF and the European banking system.
"Greece will overcome its huge debt crisis with its austerity plan, an IMF official said Sunday as a poll showed a majority of Greeks fear that unpopular pension reforms will be in vain.
Poul Thomsen, the head of the International Monetary Fund mission dealing with Greece, told To Vima daily that Athens is making progress on its "ambitious" programme of cuts.
The cutbacks have caused labour turmoil and a series of protests across Greece, with a new general strike, the fifth since February, due to be held on Tuesday.
"Such an adjustment is not easy and often causes discontent," Thomsen said. "This is understandable as people see things getting worse before they improve."
But he added: "The effort has begun vigorously and I firmly believe that Greece will succeed."
Thomsen also applauded the Greek government's decision not to restructure its debt as this "which would entail a huge cost."
The spokesman makes an important point: the reaction in Athens among pensioners and public union members if their sacrifices are in vain could make the protests of this past spring seem small.
Meteora in Thessely, in Greece. Source: Big Stock Photo
June 25, 2010
Government: rumor of islands for sale not true
Wall Street Journal on Papandreou's response to erroneous reports that certain Aegean islands were being prepped for sale:
The UK Guardian newspaper accelerated the rumors by flatly stating what Papandreou's government denies:"The Greek government Friday flatly denied that the country is seeking to sell some of its islands to slash its budget deficit.
Earlier, U.K. daily The Guardian published an article saying Greece is making it easier for the rich and famous to fulfill their dreams by preparing to sell, or offering long-term leases on, some of its 6,000 sun-kissed islands, in an attempt to repay its mountainous debts.
"The Greek government has no involvement is any sale of land on Greek islands...these transactions occur between private parties which is nothing new," said government spokesman George Petalotis on in a statement.
"The notion that the Greek government is negotiating with Russians and Chinese investors to sell land on the island of Rhodes is also equally misleading," the government spokesman said. "
"Now Greece is making it easier for the rich and famous to fulfill their dreams by preparing to sell, or offering long-term leases on, some of its 6,000 sunkissed islands in a desperate attempt to repay its mountainous debts."
European bank bailout needs €2 Trillion Euros?
Capital to asset reporting 'deeply unreliable'
A blog entry at the Financial Times Alphaville with report by Neil Hume about a talk with Willem Buiter, Professor of European Political Economy, London School of Economics and Political Science:
"Willem Buiter has been looking at the €860bn war chest the EU and the IMF have amassed to tackle the sovereign debt crisis in the eurozone and the unresolved question of what the cash might actually be used for. His big fear is the money, in particular the European Financial Stabilisation Fund, ends up being used as a bank recapitalisation funds, in much the same way the Trouble Asset Relief Programme (TARP) was ultimately used to inject capital in the US banking system, not buy illiquid asset."
...Should the risk of an early restructuring-with-NPV-haircut of the Greek sovereign debt materialise, and should one or more of the other Peripherals end up requiring access to the funds provided by the €440bn EFSF and/or to other parts of the €750bn pot of money put together for EA member states other than Greece, a sharp mark-down (and, in the case of a restructuring, a partial write-off) on the value at which Euro Area banks carry these sovereign debt instruments in their balance sheets looks bound to result. This could weaken the capital positions of many Euro Area banks materially.
...Euro Area banks therefore need additional capital – a lot of it. This may not be apparent from their ratios of regulatory capital to risk-weighted assets but, in our view, both the numerator and the denominator of this ratio are deeply unreliable. Many EA banks include in their definition of tier-one capital things other than tangible common equity – the only unconditional loss absorber, in our view."
"Deeply unreliable" seems to indicate that "triple A rated" debt may in fact be something far worse in reality.
Talks of Greek default refuse to go away
Despite a continuous denial from the Greek government and from the European central banks, inv esters in Europe (and elsewhere) are still of the majority opinion that a default in Athens is likely (Bloomberg article by Kate Haywood):
" The cost of protecting Greek government debt from default surged to a record, signaling a 68.5 percent chance the nation will default within five years, according to CMA DataVision.
The cost of insuring $10 million of Greece’s government debt using credit-default swaps jumped as much as 13 basis points to 1,140, according to CMA. The premium investors demand to hold Greek 10-year government bonds over benchmark German bunds rose 15 basis points to 795 basis points, the widest since May 7.
"...Sovereign debt worries again weighed on risk markets,” Gary Jenkins, head of credit strategy at Evolutions Securities in London Ltd. wrote in a note. “All this and concerns about the direction of economic growth make these very frightening times.”
Greece’s probability of default rose from 48.5 percent on June 15 when its debt was cut to junk by Moody’s Investors Service, which cited the risk to economic growth from austerity measures tied to a 110 billion-euro ($164.7 billion) rescue package."
To get a sense of what this means in other terms: foreign banks hold 338 billion euros of debt from Greece!
Bomb kills one at minister of public order in Athens
Kathimerini on the package-bomb sent to Protection Minister Michalis Chrysochoidis which was opened by assistant Giorgos Vassilakis, killing him instantly:
"In one of the most brazen terrorist attacks to ever take place in Greece, a device exploded last night next to the office of Citizens’ Protection Minister Michalis Chrysochoidis in the ministry building near central Athens, killing his assistant. Initial reports suggest that the explosion was caused by a parcel bomb that the minister’s assistant, 52-year-old Giorgos Vassilakis, a married father of two, opened at around 8.30 p.m., triggering a blast that brought down the wall between his and Chrysochoidis’s office. The minister was not in his office at the time.
The ministry building houses the offices of some of Greece’s top policemen as well as the anti-terrorist squad. The intelligence services also use the building, located off Katehaki Avenue. There were no reports of any other serious injuries as a result of the blast.
Chrysochoidis has earned plaudits recently as, under his leadership, there have been significant breakthroughs in the fight against domestic terrorism."
Notice of bomb attack given brief report at New York Times:
"A powerful bomb sent in a package to the minister of public order exploded near his office in Athens on Thursday, killing his 52-year-old assistant, who opened the package. The minister, Michalis Chrysochoidis, left, who is in charge of the police and counterterrorism, was not in his office at the time. He described the attackers as “cowards” and said their actions would not divert his ministry from its counterterrorism drive. There was no immediate claim of responsibility."
June 23, 2010
Pension plans and holiday pay back under the knife
Kathimerini on the building pressure to go ahead and get it over with on the axing of holiday pay and other pension plan reforms. None of these are popular with anyone in Greece, but foreign creditors and particularly the people holding the strings on the IMF/eurozone bailout package absolutely require it. It seems a fait accompli that the cuts will occur, after much maneuvering by the various politicians to create as much distance between it and them as possible, while simultaneously getting it passed.
"Controversial reforms to the country’s pension system, expected to raise retirement ages and abolish privileges, are to be submitted in Parliament early next week as the debt-ridden government’s international creditors remain unsatisfied with the draft bill as it stands, sources said yesterday.
One of the issues that remains to be resolved relates to the bonus pension payments disbursed in summer and at Easter and Christmas. Sources told Kathimerini that officials from the European Commission and International Monetary Fund want to see these payments abolished.
My question at this point is how quickly holiday pay will show back up in the public budget once the eyes of participants outside of Greece are no longer staring so hard at the accounting books.
Athens trying to stabilize tourism drop to single digits
The Irish Times carries an interview with Culture and Tourism Minister Pavlos Geroulanos
"Athens reckons the outlook for tourism is less gloomy than after anti-austerity riots last month and is shifting to seek visitors from China or Japan who are more interested in Greece's ancient culture than its sunshine.
«I'm not saying it's going to be a good year for Greek tourism but we hope to recover many of the losses,» Culture and Tourism Minister Pavlos Geroulanos told Reuters during a promotion of Greek islands, beaches and temples.
Many foreign visitors canceled trips after the deaths of three people, including a pregnant woman, during riots that started in Athens on May 5 following protest marches against government cuts imposed to secure an EU and IMF bailout worth 110 billion euros ($136.2 billion).
At the height of the crisis, Geroulanos said Athens feared the percentage drop in revenues from tourism - which accounts for almost a fifth of Greece's gross domestic product - «could have been in the double digits» in 2010 from 2009.
«Now we hope to keep it in the low single digits,» he said in an interview late on Monday night. «I'm cautious in mentioning numbers, because the situation is still fluid.» He said Athens was hardest hit by cancellations, while some islands were barely affected. In an incentive, Greece would guarantee hotel costs for tourists stranded, for instance by strikes or flights grounded by ash from an Icelandic volcano.
Greece is expecting a slight drop in the number of tourists visiting the country this year but will try to compensate by attracting more people from Asia.
The tourism industry had hoped to benefit from a weaker euro to stabilize revenues after a 10 percent drop in 2009. "
How to rescue Greece: return to 1897
Op-ed at the New York Times by Michael Strauss on how Greece could recover from the current economic trouble:
"There are plenty of countries that wouldn’t mind securing temporary rights in parts of Greece or in other troubled E.U. nations like Portugal or Spain. Even restricted rights can be attractive, like the ability to exploit a single resource or engage in some other lucrative activity.
Greece itself was the laboratory that showed this can work, back in 1897. It had declared bankruptcy four years earlier, curtailing payments on foreign debts. After long, tough negotiations, an agreement was reached that gave the creditor nations the ability to pay themselves off with future funds generated on Greek territory. They got the right to collect import duties at the port of Piraeus, to keep revenues from state monopolies that sold oil, salt and matches, and to collect taxes on tobacco until the debts were paid off. Greece retained complete policymaking authority in the areas concerned, notably trade.
The process was tightly controlled. A commission created by the creditors would receive the collected funds and invest them in financial instruments abroad. The proceeds replaced Greece’s international debt service payments. Any excess funds generated by the investments would go to Greece, to service its domestic debts."
Pireas and the Acropolis in Greece. Source: Big Stock Photo
June 22, 2010
Moody: Chance of Greek debt restructure "small"
Wall Street Journal reporting. After knocking Greece's credit from A3 to Ba1 ("junk status") last week and causing a lot of trouble for Papandreou in the process (he had wanted to issue new bonds in July), Moody has helpfully propped up the consistent statements from both Greece and the european Central Bank that there would be now Greek default:
"Moody's Investors Service Sovereign Risk Unit Managing Director Bart Oosterveld said Tuesday that it's very unlikely but not inconceivable that Greece would restructure its debt.
Oosterveld said a restructuring in the short term would be "very hard" to expect and in the medium term, it's not inconceivable but the probability is small.
"We think it's a low probability but not inconceivable," said Oosterveld.
400 million euro write-down from Emporiki
From Bloomberg: Emporiki bank stake holder Agricole SA to take $490 (USD) write-down
"Credit Agricole SA, France’s largest bank by branches, said it will take a 400 million-euro ($490 million) writedown on its stake in Emporiki Bank of Greece SA as it expects higher losses at the unit this year.
The lender will book the writedown in the earnings period ending June 30, the Paris-based company said in a statement today. Emporiki’s estimated 2010 after-tax losses may reach about 750 million euros, more than twice as much as estimated in October, according to a presentation on the bank’s website.
“Credit Agricole will support Emporiki,” the lender said, adding that the Greek unit has “good dynamics” in operating profit. Emporiki may get a “potential punctual Tier 1 requirement of approximately 550 million euros” by the end of 2011, it said.
The European Union and the International Monetary Fund agreed on May 2 to provide 110 billion euros in emergency loans to Greece, which is struggling to cut a deficit that swelled to 13.6 percent, more than four times the EU limit. French banks have claims on Greece of $78.8 billion, most than any other country, according to the Bank for International Settlements.
Emporiki, which had a net loss of 583 million euros in 2009, expects to return to profit in 2012, Credit Agricole said."
New police effort to quell rising crime wave in Athens' historic central area
From kathimerini:
"The Greek Police (ELAS) yesterday heralded the creation of a new unit of 300 officers who are to be permanently stationed in the capital’s historic center with the aim of curbing burgeoning crime there.
The initiative, launched yesterday, involves 300 officers deployed in a one-kilometer radius around Omonia Square. The officers’ priority is to curb drug dealing and prostitution, which are rife in the area, and to crack down on rings of robbers and muggers that have been targeting stores and pedestrians in the area with increasing frequency over the past few months.
The new force, created following a redistribution of personnel by Attica’s police headquarters, is to be exclusively responsible for policing the city’s historic center.
...Thousands of migrants are currently living in derelict and run-down buildings in the center with hundreds more detained in police detention centers."
June 21, 2010
Unions to shut down Pireas on Wed June 23
Saw this via the Living in Greece blog: Despite the bag publicity and protests from businesses that depend upon tourism, the unions that work the port are going to close Pireas from midnight Tuesday to midnight Wednesday (news at ent.gr, read via Babelfish translation to english here)
"China is hunting for bargains in some unlikely corners of the world. Earlier this week, it opened its checkbook to make 14 commercial investments inside Greece, which is struggling to avoid defaulting on its mounting debt. China's vice premier Zhang Dejiang signed off on each contract, securing deals in major industries such as telecommunications, real estate and shipping during his four-day visit to Greece, which began on Monday.
Migrants leaving Greece, work 'dried up'
Kathimerini noting the departure of foreign labor from around Athens:
"Most of the migrants leaving Greece are Albanians, with smaller numbers from Bulgaria and the countries of the former Soviet bloc."
Provopoulos: Markets need convincing"
Natalie Weeks and Christos Ziotis at Bloomberg reports on European Central Bank finance minster Provopoulos stating the obvious:
"European Central Bank Governing Council member George Provopoulos said it may take some time until the Greek government will convince markets about its consolidation measures.
“I have no doubt that the government will take whatever measures are needed to attain the fiscal objectives to ensure fiscal stability,” Provopoulos said at a conference held by the Onassis Foundation in Athens today. “It will, however, take some time to convince the markets of the government’s determination to achieve those goals. Decades of fiscal mismanagement and faulty fiscal reporting have caused the markets to adopt Saint Thomas’s dictum: to see is to believe.”
Euro to drop 9% value against dollar on a Greek default: Bloomberg
Bloomberg again:
"Everybody knows the euro will be punished if a country defaults, but nobody knows by how much,” said Mikhail Foux, a credit strategist at Citigroup in New York."
The euro has fallen 13 percent against the dollar this year and dropped to a four-year low of $1.1877 on June 7
Yuan peg to dollar ending after two years
Bloomberg reports on the now free-floating yuan:
"China said it will allow a more flexible yuan, signaling an end to the currency’s two-year-old peg to the dollar a week before a Group of 20 summit. "
The Chinese have been weathering import problems because of the peg, and now that it is loosened, the obverse problem of exports, especially in textiles, will become trouble for them. With a clear intent to get themselves firmly into Europe, China needs the Pireas deal to help facilitate this, which in turn helps their move to avoid collapse for many Chinese companies dependant upon exporting, and the Chinese banks that are holding iffy loans for those companies.
Greenspan sees "analogies to Greece" for USA
Wall Street Journal article via yahoo.com finance:
"With huge deficits currently having no evident effect on either inflation or long-term interest rates, the budget constraints of the past are missing. It is little comfort that the dollar is still the least worst of the major fiat currencies. But the inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat currencies.
... the very severity of the pending crisis and growing analogies to Greece set the stage for a serious response. That response needs to recognize that the range of error of long-term U.S. budget forecasts (especially of Medicare) is, in historic perspective, exceptionally wide. Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis.
...I do not believe that our lawmakers or others are aware of the degree of impairment of our fiscal brakes. If we contained the amount of issuance of Treasury securities, pressures on private capital markets would be eased."
June 20, 2010
Chinese spending in Greece: bargains a plenty
Article by Mary Jo A. Pham at Fortune, via money.com.
"China is hunting for bargains in some unlikely corners of the world. Earlier this week, it opened its checkbook to make 14 commercial investments inside Greece, which is struggling to avoid defaulting on its mounting debt. China's vice premier Zhang Dejiang signed off on each contract, securing deals in major industries such as telecommunications, real estate and shipping during his four-day visit to Greece, which began on Monday.
Among the contracts signed was a $123 million contract between Helios Plaza and BCEGI, a Chinese real estate company intent on developing a hotel and commercial complex for tourism in Piraeus, Athen's largest port town. Huawei Technologies, a Chinese telecom solutions provider, also inked a deal with Hellenic Telecommunications Organization SA. The company will equip the tourism complex BCEGI is financing.
...China has made other market building bargains in otherwise overlooked countries, including Costa Rica, Sudan and Zimbabwe. While the United States is heavily financing the war in Iraq and Afghanistan, China is taking advantage of U.S. security there and negotiating oil field contracts and managing the Anyak copper mine, home to one of the largest deposits of the metal in the world."
For China, part of the motivation in Greece (and elsewhere) is not just the cheap buying opportunities, but the momentum of Chinese economic development is at risk of hitting a brick wall, and must continue to expand or could implode.
Russia to Greece: Go ahead and do a 'mini-default'
News report by Stuart WIlliams at AFP via Yahoo.com
"Russia on Saturday bluntly dissented from Europe's insistence that Greece should avoid default, saying the country will require a restructuring of debts by creditors.
Finance Minister Alexei Kudrin said such a move would be acceptable for the market and insisted it would be wrong to describe the restructuring as a full-scale default by the embattled government in Athens.
"I would allow for a restructuring of Greece's debt, which will be unpleasant," Kudrin told a session of the annual Saint Petersburg economic forum.
"You could call it a mini-default, but I would not say it is a default in the full sense of the word. It will be something more complicated," he said.
"Confusion" reigns over effect of Moody downgrade on Greek bonds
George Matlock at Reuters reports on the trouble with applying the Moody downgrade on Greek bonds to investment portfolios:
"Confusion reigns because of the many ways in which fund managers apply the indices to their portfolios. This in turn will make it harder to gauge how much or little the European Central Bank may need to buy in its efforts to maintain stable Greek bond yield spreads in the euro zone. The spread has meandered at around 500-600 basis points over Bunds since the ECB's operations began on May 10 GR10YT=TWEBDE10YT=TWEB.
Around 200 billion euros worth of Greek government bonds are eligible for the BarCap and Citigroup indices, although not all of them are actually in indices.
"The exact amount is difficult to estimate. According to the Greek debt office, some 33 percent of GGBs have been allocated to fund managers and insurance and pension funds between 2005 and 2009," said Christoph Rieger, a bond strategist at Commerzbank in Frankfurt.
"Applied to the indices, this would add up to 66 billion euros. We believe the number that could actually be affected will be much smaller though as these accounts are likely to have reduced their holdings already significantly of late," he added."
June 19, 2010
Trouble brewing as Papandreou begins push on pension reform
Kathimerini reports on the growing conflicts within the ruling PASOK party, forced to deal with the IMF/eurozone demands for changes in employment and pension plans in Greece:
"Planned changes to labor relations and the pension system, which have provoked an outcry by labor unions and opposition parties, yesterday were also fueling tension within the ranks of ruling PASOK, sources told Kathimerini.
Labor and Social Insurance Minister Andreas Loverdos reportedly received orders yesterday from Prime Minister George Papandreou to discuss with labor unions the content of a presidential decree that would make it easier for employers to dismiss staff and change the way that settlements to dismissed employees are paid. The decree, made public by Loverdos earlier this week, has already prompted the country’s two major unions to call a general strike for June 29."
Rhodes island beach cove, Aegean Sea in Greece. Source: Big Stock Photo
June 15, 2010
Ouch: Moody downgrades Greek debt to junk status
Another scare for europe as Moody pushes Greek debt to junk status, via Wall Street Journal:
" Moody's Investors Service downgraded Greece's debt rating by four notches to Ba1 from A3, after a similar move by Standard & Poor's in April."
This isn't exactly welcome news, but it does help the argument that Greece will ultimately have no way out except default and/or shedding the euro and going back to a currency (the drachma) they can control. But Michele Maatouk also at Wall Street Journal reports it differently:
"...the negative market impact was tempered by the fact that the move by Moody's was partly a catch up to S&P's junk status for Greece whilst Moody's also noted that a debt restructuring could be avoided," said Credit Agricole.
...Traders said the move, while not surprising, served to reignite fears about sovereign debt on a day when investors were beginning to regain confidence in the global economy after better-than-expected euro-zone industrial production data."
The downgrade means the Greek debt is now off limits to various pension funds and investment portfolios with 'stability' requirements.
Greek banks in trouble?
To make matters worse, consider this blog by Joseph Cotterill at the Financial Times. It would appear that Greek banks are on their way to hitting the wall and crashing:
"...Greek banks’ borrowings from the ECB [European Central Bank] are largest in proportion to their balance sheets than any others in Europe’s banking system."
No Default in Greece, says European Central Bank
It looks like a growing number of investors are believing in an eventual default, despite constant denials from the Greek government and elsewhere within the eurozone establishment . Real Time Economics blog (WJS) has this interview with European Central Bank governing council member Athanasios Orphanides:
"...let me please comment on an article in Thursday’s Wall Street Journal that presents survey results about default or restructuring by Greece and other European countries. The article reports that most of the respondents are American economists and I think the results reflect a lack of understanding of how the European Union and the euro area function. There is an element of absurdity in talking about a high probability of default by the Greek government right now [73% according to a survey by The Wall Street Journal]. A European Union support plan is in place. Over the past three months, the Greek government has taken very decisive measures to control public finances. We now have concrete evidence that the Greek government’s fiscal consolidation plan is on track.
The generational divide: old and new Greece can't agree
The Los Angeles Times with an article by Megan K. Stack on how the economic situation is shaping up for young Greeks who cannot get jobs, and wont consider other options:
"The Greeks call it "Generation 700": a mass of highly educated twenty- and early thirtysomethings stuck in amiable insolvency, living with their parents, drifting from coffee shop to coffee shop with companions they can't afford to marry.
...Olga Stefou is 20. She speaks passable English and studies political science. These days she goes into the streets to shout slogans against the government and the International Monetary Fund. She has no choice, she says: She believes that upon graduation she'll be lucky to land a job that pays $500 a month."
Stefou believes that the government is bound to respond to her discontent. And she has suggestions: Greece should make up its budget shortfall by pulling its 122 troops from Afghanistan and levying steep taxes on the Orthodox Church rather than squeezing the workers, she says."
... To hear some critics tell it, the discontented young are a living metaphor for what ails Greece in general: fattened on the indulgences of a doting system, unwilling to make hard sacrifices, lacking in self-starting spirit. "What I'm really worried about is that you have a culture totally bereft of entrepreneurial ideas," said Takis Michas, a prominent Greek journalist and longtime critic of what he has called "the last Marxist state in Europe."
"People, especially young ones, are not taught to love entrepreneurship, but to hate it," he said. Last year, Michas did a study of Greek marriage agencies. He found that the top attribute sought by middle-class young women in a potential mate was a job in the civil service or the military. Government service has long been prized because of the elaborate set of benefits attached to the position.
"This is the mind-set now," Michas said. "It's a culture of dependency, first on parents, and it becomes a dependency on the state."
The upside is all Chinese
News that China would be signing on to a big improvement and upgrade deal at the port of Pireas has come to pass (AP story via yahoo.com):
"Debt-plagued Greece has been seeking to boost investments from China, and Chinese shipping and transport giant Cosco Group has said it is looking to expand its Greek operations. The company already operates two container terminals at Greece's largest port of Piraeus, on a 35-year concession worth $1 billion that was finalized last year."
And why is China interested in Greece?
"Shipping is one of Greece's main industries, with Greeks controlling nearly 20 per cent of the world's merchant fleet."
June 14, 2010
Kathimerini evaluates the government effort
Editorials at Kathimerini have often been angry and severe in their evaluation of Papandreou's government. But this editorial from June 12 is not as strident or as eveloped in dread for the future. After giving a basic summary of past events leading up to the present state of Greek affairs, the unnamed writer has this to say:
" Greece is being set up on new foundations but the ground on which it stands is shaken by doubt, by the habits and partisan divisions of a defunct system and fear of the future. Grading the government’s handling of the issues at the epicenter of this earthquake is an act of faith – an appreciation of what has been achieved and an expression of hope for what remains to be done. The overall assessment: We must try harder."
Karamalis government warned about economy says IMF
Also in the Sunday Kathimerini, it appears that the IMF was already warning the previous Karamanlis government about what was on the verge of happening to the Greek economy:
"The IMF expressed concern about Greece’s plummeting competitiveness and its pronounced fiscal imbalances, even though at that stage the true size of Greece’s deficit was not known. The Fund called on the government to take immediate action to rectify the situation and warned that the Greek bond spreads would soar and the country would pay a high cost to borrow on international markets.
Under the premiership of Costas Karamanlis, the conservative administration did not take any remedial steps."
June 13, 2010
Greek tourism taking a beating: New York Times
This report by Niki Kitsantonis at the New York Times describes a tourist industry struggling to contract without crashing as visitor numbers drop by 20% and competition between hotels and restaurants, already using reduced rates to shore up faltering numbers, is causing many to simply remain closed rather than weather the costs of being open in such a tough market.
"...pristine beaches are sparsely populated, the bars are all but empty and Vassilis Minaidis’s gleaming new five-star hotel is distressingly quiet.
“It’s a difficult time; we really need customers,” said Mr. Minaidis, 74, sitting on the hotel’s terrace, where a few couples picked at Greek salads and appetizers overlooking the turquoise waters of the Aegean Sea. These are new arrivals, attracted by last-minute deals, said Mr. Minaidis, who has cut his prices by 20 percent to fill the 350 rooms in his two hotels. Still, his bookings are down by the same rate. “It’s the battle of Greece,” he said, referring to the country’s debt crisis.
...These are unusual scenes in Rhodes, an island of 117,000 residents that topped a list of favorite European vacation destinations compiled by TripAdvisor, the online travel guide, in 2008. But, after a weak 2009, it is one of countless Greek destinations to see a sharp decline. The Hellenic Chamber of Hotels said bookings were down this year by an average of 30 percent nationwide, and 20 percent in Rhodes."
Perissa Beach on Santorini in Greece. Source: Big Stock Photo
June 10, 2010
Numbers continue to crumble on Greek economy: China may bring in $1 billion in investments
Will Greece slide into economic depression?
David Charter and Robert Lindsay at UK Times Online chronicle the bad news from the Greek government statistical offices:
" The recession in Greece worsened again in the three months to the end of March, official figures showed today.
The country’s economy — currently on life-support after a $146 billion (£100 billion) bailout by the EU and IMF — contracted by 1 per cent compared with the previous quarter.
The decline in the €240 billion (£200 billion) Greek economy compared with the same period last year was recorded at 2.5 per cent, worse than the 2.3 per cent fall predicted by the Greek statistics office.
Industrial output in April showed a year-on-year decline of 5.1 per cent, separate figures from the office revealed.
...Nikos Magginas, an economist at National Bank of Greece, predicted that the fall in industrial output would probably continue “until the end of the year, burdened by doubts on the dynamics of economic recovery in the eurozone and southeaster
China may put $1 billion or more into Piraeus upgrades
Anthony Faiola at the Washington Post on the "modern silk road" of China pulling in the opposite direction of world investment trends:
"Nearly bankrupt and sullied in the eyes of foreign investors, Greece is moving to rebuild its economy by tapping the deep pockets of another ancient civilization: China.
Spurred on by government incentives and bargain-basement prices, the Chinese are planning to pump hundreds of millions -- perhaps billions -- of euros into Greece even as other investors run the other way. The cornerstone of those plans is the transformation of the Mediterranean port of Piraeus into the Rotterdam of the south, creating a modern gateway linking Chinese factories with consumers across Europe and North Africa.
...The Greek government, for its part, is taking on the powerful unions in a bid to ensure that the Chinese can introduce dramatic changes to increase efficiency and productivity. That effort has ironically turned the Greek Communist Party -- which is closely aligned with the labor unions -- into the fiercest critic of China's economic march on Greece.
...Greeks see Chinese investment as nothing short of a gift from the gods. The biggest question facing the troubled European Union is how nations with uncompetitive economies such as Portugal, Spain and Greece can reinvent themselves to be more on par with the successful nations of Northern Europe. Greek officials say Chinese investment is offering a glimpse into how this nation can do just that by building on its expertise in shipping.
New Greek National Tourism Advertisement: Kalimera
Kalimera: "Good morning!" Tourism in Greece accounts for nearly 20% of the overall economy, and it has taken a beating this year to the tune of a 15% to 30% decline over last year, depending upon whose numbers you look at. With union trouble and the general economic collapse, plus the specter of street riots on the international news, visitors to Athens in particular are becoming scarcer.
But nonetheless, Greece will be hosting millions of visitors this year because no matter what the problems on the economic stage, Greece itself has a unique and one of a kind perch on the waters and weather of the Mediterranean.
From the Greek Reporter web site:
“Kalimera” is the slogan for the new advertising campaign of the Ministry of Culture and Tourism, for this year’s tourist season, which will be promoted in markets world wide. In a special event which took place at the Foundation of the Hellenic World, the Deputy Minister of Culture and Tourism, Angela Gerekou emphasised that for this year it was decided to make use of existing material, which was redesigned and a very simple word was added as its motto, the Greek word “Kalimera”, which stands for Good Morning in English.
Special reference must be made to the fact that the creative part of this year’s campaign did not cost anything for the Ministry, a fact which was welcomed by tourism bodies, with the president of SETE (Greek Tourist Enterprises) stressing that for the first time a collaboration between the private sector and political leadership is made in the design of the advertising campaign. The license to use the musical composition “Gioconda’s Smile” was offered by the Manos Hadjidakis’s heir, Mr. G. Hadjidaki, without remuneration.
Mrs. Gerekou, placed emphasis on advertising via the world wide web, making a note that this is where the campaign will mainly focus which will lead to an increase in the presence of Greece on the internet in relation to previous years. As far as the costs for the promotion of the campaign are concerned this year, more than 12 million Euros will be invested.
The campaign will be available through the renewed portal of Hellenic tourism at the web address www.visitgreece.gr. Regarding the debts of the ministry towards foreign media, Mrs. Gerekou stated that payments of over 20 million Euros have already been made on account."
Greek soccer / football team in South Africa robbed
Associated Press at the Washington Post news story of the Greek players hotel rooms being burgled:
" Three Greece players at the World Cup have had money stolen from their hotel rooms, police say.
Lt. Colonel Leon Engelbrecht said Thursday the unidentified players reported $1,921 had been stolen from their rooms on Tuesday night at the Beverly Hills Hotel in the resort of Umhlanga, just north of Durban.
Engelbrecht said the Greek squad has told police it doesn't want a case opened over the theft.
The theft happened only hours before three foreign World Cup journalists were robbed, one at gunpoint, at a hotel in Magaliesburg, in the northwest of the country. The journalists lost money, camera equipment, laptop computers and mobile phones."
June 9, 2010
"...they will chase all of us away with stones" - Papandreou on the results if Greek politicians do not cooperate
First goals for debt reduction being met in Athens
Brief article at Wall Street Journal by Alkman Granitsas on Papandreou's government hitting the pre-defined targets for the first step in implementing the austerity program. Though the politically explosive issue of altering the pension system begins next month, along with some other tough goals of selling state-owned shares in various titillates, railroads, etc., the agreed upon goals with the lenders of the IMF/eurozone is proceeding apace:
"Greek Finance Minister George Papaconstantinou said Wednesday that Greece is on track to meet its 2010 deficit targets, with data showing that the country's budget gap narrowed by around 40% in the first five months of the year.
Revenue in the five months to May was up 8%, while spending was down by more than 10%, Papaconstantinou said at a news conference.
Greece last year reported an estimated budget deficit of 13.6% of gross domestic product, which it aims to reduce to 8.1% of GDP this year.
"In the next few days, we will issue data on the execution of the budget for the first five months," Papaconstantinou said. "We have a decrease in the deficit that is very close to 40%. That's due to a more than 8% increase in revenues, and a decrease in spending that is above 10%."
"To reduce the deficit from 13.6% of GDP to 8.1%, that is a reduction of 40%. So in other words, we are on target," he added. "I am cautiously optimistic that we will succeed in achieving exactly the targets that we have set."
Confidence continues to turn negative with investors
Rich Miller at Bloomberg Businessweek has coverage of an unpleasant survey for the eurozone: 73% of investors polled believe the IMF/eurozone bailout will not succeed, and the collapse of the euro is inevitable. In simple terms, many believe the euro is too strong a currency for some member states, and those countries will be forced to quit the euro to ease internal pressures:
" Global investors have little confidence in Europe’s efforts to contain its debt crisis or in European Central Bank President Jean-Claude Trichet, with 73 percent calling a default by Greece likely.
Only 23 percent say they expect the region’s almost $1 trillion rescue package to both keep the European monetary union together and prevent a debt default by a government, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. More than 40 percent say Greece is likely to abandon the euro.
... Fifteen percent of those polled say it’s likely Spain would be forced to dump the euro as its currency to help ease the pain on its economy. One in five see Portugal making that move.
...Investors in Europe are about evenly split on Trichet’s performance at the central bank. Forty-eight percent give him an unfavorable rating, while 46 percent see him in a positive light. The rest have no opinion."
The article also contains a quick overview of the situation for the United States vis-a-vis the european currency issues.
Various updates:
Kathimerini: Inflation in Greece rises to 5.4% in May - - was rated at 1.8% in March of 2010, and .8% in May of 2009
Kathimerini continues pummeling union boss behavior in Greece, particularly the PNO Greek sailor union "Egotists dressed in union colors"
Papandreou tells the squabbling politicians of PASOK and New Democracy that “If we do not put the country in order, if we do not create a sense of justice, if there is no respect for the law, they will chase all of us away with stones, and rightly so,” he told Parliament. Article at the New York based Greek News
Tension between the Turk and Greek military continues: Turkish military jets have flown dangerously low over a Greek frigate in international waters in the eastern Aegean Sea
A Greek Taverna Restaurant in Greece. Source: Big Stock Photo
June 7, 2010
Greece moves toward major changes
"The great loneliness" of the predicament in Greece
Commentary by Nikos Konstandaras at Kathimerini gives a shopping list of the ailments attacking the Greek psyche as the economic crisis continues:
"The sudden, mass reduction in incomes has created an unprecedented challenge for every Greek and for society as a whole. We all expect tomorrow to be worse than yesterday, whether we be businessmen or employees, students or pensioners. Because the pressure does not come from some foreign cause but from the bankruptcy of our economic and political model itself, we can look only to our own resources for a way out of the crisis.
...The state owes private companies more than 10 billion euros, is withholding value-added tax returns and demanding extra taxes, strangling the market further as banks have slashed their loans. The only government proposal aimed at helping companies is to make dismissals easier.
...Fear of the future, fear of our fellow citizens, is everywhere. Beyond our borders, we see that we are more isolated than ever, having no competitive advantage over other countries in the region (as when Greece was the richest country in the neighborhood and the only member of both NATO and the EU). Furthermore, our economic disaster has made Greeks the laughing stock and whipping boy of the international community.
Kathimerini takes another swipe at union behavior
Kathimerini has been blunt about its appraisal of the PNO sailors union blocking tourist ships at Piraeus, accusing the union leadership of using blackmail. They've gone a bit further now with the June 7 editorial, saying the union leadership is determined to destroy the country:
"How much longer will those who are determined to destroy the country continue to enjoy immunity from prosecution?
...while they pretend to be about defending workers’ rights, in fact thousands of jobs are being jeopardized by one union and a handful of its proteges.
Small euro 'recovery'
Reuters brief on slight improvement on the euro after it took a beating of -1.5% on June 4.
“Paul Robson at Royal Bank of Scotland: "Euro/dollar is heading lower on a combination of the Hungary situation and the U.S. jobs data, though it's come an awfully long way in recent days and it won't head lower in a straight line"
June 6, 2010
Where's the debt hiding?
New York Times tries to sort out who is holding the largest pile of debt that may never be repaid from the sovereign nations of europe: Greece, Portugal, etc. Jack Ewing's article more or less is saying no one knows for sure and the banks don't want to confess to how much bad ink is on their books.
“IT’S a $2.6 trillion mystery.
That’s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume that a significant portion of that mountain of debt may never be repaid.
The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another.
...“The marketplace knows very little about where the real risks are parked,” says Nicolas Véron, an economist at Bruegel, a research organization in Brussels. “That is exactly the problem. As long as there is no semblance of clarity, trust will not return to the banking system.”
The big problem here is one of information. Without actual true numbers to work with, banks that may be perfectly healthy will be mistaken or thrown in with banks that are hanging by a thread. An absence of true information will allow rumour and misinformation to have more weight with investors and other financial institutions.
"...Analysts at the Royal Bank of Scotland estimate that of the 2.2 trillion euros that European banks and other institutions outside Greece, Spain and Portugal may have lent to those countries, about 567 billion euros is government debt, about 534 billion euros are loans to nonbanking companies in the private sector, and about 1 trillion euros are loans to other banks. While the crisis originated in Greece, much more was borrowed by Spain and its private sector — 1.5 trillion euros, compared with Greece’s 338 billion."
A natural consequence of this hide-and-seek situation is the cost of debt insurance has skyrocketed in europe (Wall Street Journal):
" ...the derivatives market is growing concerned regardless as European debt jitters persist. It now costs $290,000 a year to insure $10 million of Italian government bonds against default for five years, up from $237,000 on Thursday, according to data provider Markit.
The extra interest Italy has to pay investors to buy its bonds instead of Germany's also has jumped. That is painful because Italy tends to visit the market more often to raise cash, having the world's third-biggest bond market, after the U.S. and Japan."
"Fire Sale" shopping list
The Greek government is moving forward on privatization requirements of the bailout plan, putting together a list of shares in state controlled businesses. Original list via Reuters:
- Public OSE railways: 49 percent stake (has losses of about 1 billion euros a year and estimated debts of about 10 billion euros)
- Athens and Thessaloniki water utilities: both turn profits and are considered highly attractive to foreign buyers
- Greek shipping ports: Piraeus is controlled 74% by the government, and Thessaloniki and peripheral ports are mostly state owned too. The plan is to retain majority control of the ports but to attract 'strategic investment' to get upgrades made. China is already involved at Piraeus with a 35-year deal.
- Athens Airport: German company Hochtief already has a 40% stake and a 30 year deal from 1995. Greece wants to extend the existing deal.
- Casinos: the state will sell off its ownership in the Mount Parnes and Corfu facilities. It wants to expand its control over the nominally illegal internet betting, and to change the royalty and licensing system to gain more in fees.
- Real Estate: The greek government is involved in a myriad of real estate operations and will move to pool them together into two main companies and put them onto the stock exchange to attract investment.
Obviously the Greek government is trying to retain advantages in the investment partnerships. Will what they're offering be enough to attract money? What kind of concerns about volatility (let alone longevity) with the current PASOK government will play with potential partners? And how much of this involvement with foreign governments and companies raise the ire of Greek citizens that already are complaining the government has sold-out too much to foreign interests already?
The "new breed" of unionist
Kathimerini continues to hammer at the leadership of Greek unions who seem blind to current economic realities:
"...many of these “professional” unionists have blatantly flouted the right of workers to choose whether or not they will participate in strikes over issues that may or may not have any direct impact on them. They have also insisted on taking an extreme position on outlandish demands that can only ensure more problems for businesses and, by extension, further cutbacks in staff."
Can the Drachma save Greece?
A Kathimerini article (read in english via Babelfish) about German economist Gioakim Starmpati, and the potential pluses for Greece if the Drachma is returned (I paraphrased the text heavily to make it easier to read):
"The only way to save Greece is for the country to become competitive. In order to accomplish this there must be a consideration of the benefits of returning to the Drachma. In particular this would benefit tourism.
Starmpati: "Foreign tourism would be increased with the Drachma, and the effect has been underestimated by those considering the ramifications of leaving the euro."
"...Greece does not follow her own policy anymore, but policies imposed by Washington DC and Brussels. I love the Greeks. They are proud and sincere and should stand on their own and be Greek."
June 5, 2010
Greek state assets to be sold
Greek military spending to halt
New York Times reports how the Papandreou government is proceeding with plans for privatizing a number of the state assets:
“...The government will sell 49 percent of the state railroad, list ports and airports on the stock market, and privatize the country’s casinos, the Finance Ministry said after a cabinet meeting in Athens. The government will also sell minority stakes in water utilities serving Athens and Thessaloniki, sell 39 percent of the post office, and combine its vast real estate assets into a holding company to be listed on the stock market.
The sales are intended to help raise 3 billion euros, or about $3.7 billion, from 2011 to 2013. The government agreed to raise a billion euros a year over that time as a condition of the 110 billion euro aid program it received from the European Union.
...An official, who asked not to be identified because he was not authorized to speak publicly on the matter, said Greek ministers had “laid out a general framework for the government’s privatization goals, but the timing has been left unclear.”
An interesting side note in the NYT article is a reference to the situation with the Greek military: spending is shown to be statistically higher than any other european country. The Greek dilemma with Turkey is a long one and entails not only the aggressive tone in recent Turk governments, but the unending arguments over Cyprus, Aegean islands and mineral rights therein.
"Panos Beglitis, the Defense Ministry official in charge of military procurement, told The Associated Press that the government would also end or slow purchases of military equipment.
Mr. Beglitis said some of the deals under review included the purchase of warships, fighting vehicles and fighter jets, The A.P. reported.
NATO figures show that Greece spent 2.8 percent of G.D.P. on its armed forces in 2008, or about 6.9 billion euros. That makes it the most expensive military budget in Europe in per capita terms, and second only to the United States in the alliance. Athens has justified such spending as necessary to keep up with its regional rival, Turkey, also a NATO member."
I noticed that the term "fire sale" was used in this article on Greece by the news site RTT News. That reminded me of how that same term was used some 65 years ago in news reports of the post-world war II era to describe how cheap goods became in Europe in the economic collapse from the war and how desperate governments and businesses were to get goods and money moving again.
June 4, 2010
Strikes continue: Hungary looking like the "next Greece"
Roubini: Greece must restructure
Businessweek report by Elena Logutenkova on Nouriel Roubini's comments on the immediate Greek future:
“What we need to do to avoid having massive losses for the financial system is an orderly restructuring of the public debt of Greece,” Roubini said in an interview at the Zermatt Summit in Switzerland today. A disorderly default would lead to “much worse” damage to the European economy and risk global contagion, he said.
Greece’s public finances began rattling investors late last year, when the country more than tripled its budget deficit forecast for 2009. The European Union and International Monetary Fund cobbled together a 110 billion-euro ($134.2 billion) rescue package last month to prevent a Greek default and stem a contagion to other countries.
Greece could restructure its debt by stretching out its maturities by five to 10 years and cutting interest payments, while keeping the face value of bonds at par, said Roubini, who predicted the global financial crisis. Greece also needs to cut its debt-to-gross domestic product ratio further than the levels prescribed in the EU rescue package, he said.
“Stabilizing your public debt-to-GDP ratio at 145 percent is not stability,” Roubini said. “Calling it stability is a bit of a joke.”
EU bailout plan under investigation
EU Observer article by Andrew Willis on the 'undemocratic' ways in which the bailout plan was put together so quickly in May:
"An influential member of the European Parliament has questioned the way in which EU leaders and finance minster's rapidly cobbled together a €750 billion eurozone rescue mechanism at the beginning of last month, referring to the process as "highly undemocratic".
...Sources say EU leaders meeting in Brussels on the fateful Friday, 7 May, were presented with a doomsday scenario, with analysts predicting skyrocketing borrowing rates for several peripheral eurozone states the following week.
As part of the resulting deal to protect these states and the eurozone as a whole, the European Central Bank was also forced to throw standard practices."
On top of this, the euro takes a pounding (euro hits 4-year low below $1.20 USD) as focus on sovereign debt moves to Hungary which appears to be on the verge of a meltdown. Wall Street Journal article by Ishaq Siddiqi and Andrea Tryphonides examines the problems pushing the euro down:
"European shares fell Friday, hit on two fronts after Hungary re ignited concerns about debt in Europe and the U.S. reported a disappointing reading on the job market. The euro sank, with traders citing official comments on Hungary's woes and rumors of derivative problems at Societies General.
... HSBC Bank caused jitters with a research note to clients in which it downgraded Europe excluding the U.K. to "underweight" from "neutral."
Young Greeks edging toward emigration
Like other troubled episodes in Greek history, young people are looking at going abroad to find job. Article by Maria Petrakis at Bloomberg:
"Many younger Greeks may abandon the country as austerity measures crimp incomes and reduce career prospects, according to an opinion poll. Forty-two percent of 800 men and women aged between 18 and 35 said they were considering emigrating, with that percentage rising to more than 50 percent for those aged 23 to 27...
...More than seven in 10 said they didn’t believe there would be any change in meritocracy or corruption in Greece."
Greek sailor union to press forward with blocking Piraeus tour ships
Although heavily criticized for essentially kicking the Greek economy when its down, the PNO (Panhellenic Seamen’s Federation) is planning a new campaign to block cruise ships from unloading tourists on June 7. Previous efforts had resulted with some tour companies threatening to drop mainland Piraeus from their Mediterranean schedules. The sailors are protesting the Greek government allowing non-Greek flagged ships to carry tours in the Aegean, previously a right guaranteed to the PNO. Brief story at Kathimerini:
‘...The PNO administration examined developments regarding the Malta-flagged cruise ship Zenith, and decided to proceed with worker action against the vessel on Monday, June 7, 2010 during its arrival at the port of Piraeus. This union activity is the continuation of previous action by the federation in order to protect the fundamental rights of Greek naval workers, with securing their jobs being first and foremost.’
Kathimerini attacks the PNO in an online editorial:
"Tourism is Greece’s strongest industry; many people rely on it for a living and the state relies on it for public revenue. Neither society nor the state can allow a small group of blackmailers to threaten strikes and, even more damaging, port blockades. These actions cause Greece to lose money and also drag the country’s international reputation through the mud."
June 3, 2010
Olympics in Athens the surge point toward Greek insolvency?
Washington Post article by Derek Gatopoulos on what some people are calling the starting mark for the current Greek incapacitate crisis:
"Governments in the Greek capital of Athens haven't balanced a budget in nearly 40 years, and the country narrowly averted bankruptcy in May before panicky European partners grudgingly put up massive rescue loans.
While many factors are behind the crippling debt crisis, the 2004 Summer Olympics in Athens has drawn particular attention.
If not the sole reason for this nation's financial mess, some point to the games as at least an illustration of what's gone wrong in Greece.
Their argument starts with more than a dozen Olympic venues - now vacant, fenced off and patrolled by private security guards. Stella Alfieri, an outspoken anti-Games campaigner, says they marked the start of Greece's irresponsible spending binge. "
Village of Oia on Santorini in Greece. Source: Big Stock Photo
June 2, 2010
More bad news
Manufacturing contracts even faster in May
Reuters reports:
"Greece's manufacturing industry weakened further in May, with output, orders and employment contracting at a faster pace, indicating that the country's recession is deepening as austerity measures bite."
For more on the poor outlook, read Alen Mattich's short piece at WSJ on how eurozone policy will inadvertently push Greece from recession into depression.
Greece issuing new bonds
Associated Press at Bloomberg covers the story that Papandreou's government is about to issue new bonds to cover the $4.86 billion euro bonds coming due in July. Another infusion of IMF/eurozone bailout money is not due until mid-September.
"[finance minister] George Papaconstantinou says Greece has short-term debt issues expiring and due for renewal in July. "We will be there in the market for these" treasury bills, he said, according to a transcript of an interview released Tuesday.
...Unable to borrow directly from international markets because of high interest rates, Greece avoided bankruptcy last month with the first installment of a euro110 billion rescue package from the European Union and the International Monetary Fund."
In the campaign to rebuild confidence in the Greek future, as far as defaulting on existing and the new debts the Papandreou government is creating, Nick Skrekas at the Dow Jones Newswire via WSJ:
"Papaconstantinou insisted there was no question of an exit from the euro zone, or of the budget deficit not being reduced on time.
The Minister said that Greece will likely test the international debt markets next month, probably with a short-term Treasury bill auctions "and the issue will be the yield that emerges in these fragile and volatile markets."
"The Greek government can absolutely be relied on, and debt restructuring or default is absolutely unthinkable, because it would have such serious ramifications for citizens and would lead the country into decades of recession," the finance minister add."
Forbes: Government employee unions bar the path out of the Greek mess
Thomas F. Cooley at Forbes gives a simple summary of the history of the Greek money crisis and looks into a dark future of massive contraction for the Greek state:
"Greece's economy has been hugely uncompetitive and burdened by a bloated public sector that accounts for 40% of GDP. The projected fiscal deficit at the end of 2009 was 12.7% of GDP, and its outstanding debt is 124.9% of GDP. About 80% of the debt is external, meaning it is held by non-residents. Interest payments on the debt account for nearly 40% of the projected fiscal deficit--nearly all money that will flow out of the country.
Greece is notable for its tax evasion, lack of transparency and large inefficient bureaucracy. Its pension system encourages early retirement with generous benefits.
... The E.U. stretched its rules to allow Greece to join the currency union in 2001, a year before euro notes and coins went into circulation. Greece had every incentive to make it work. The stable currency meant low inflation and low interest rates for most of the euro's first decade. There was a very strong incentive to compete in the eurozone and instill fiscal discipline. Instead Greek politicians used it as a reason to borrow, creating a mess they won't easily escape.
... They can't afford to have the level of tax evasion they now have; they can't afford the bloated public sector; they can't afford their pension system. That will have to change. The logic of improving the efficiency of their labor markets is inescapable. Whether they have the political will to do what is needed is another matter entirely. They have been beset by a series of nationwide strikes led by government employee unions since the austerity measures were announced."
Austerity measures not producing results yet; vow to not leave eurozone
Nick Skrekas at the Wall Street Journal details the June 1 press conference with finance minister George Papaconstantinou:
"So far, the IMF and EU are requiring the socialist government to cut pensions and public-sector wages, as well as raise the value-added and excise taxes. But the revenue-raising measures don't seem to be producing the anticipated results as the economy slips further into recession, with GDP expected to contract 4% in 2010.
"In Greece we have a lot of tax evasion, and we hope to capture some of this to help our revenue raising efforts," the finance minister explained.
"We will restructure tax collection and auditing services to put them in a modern framework, and we expect to collect a good deal, if not all, of back taxes owed," said Papaconstantinou.
The minister stressed that Greece had lost its credibility, limiting its policy options. As a result, the government was forced to take a raft of bitter and unpopular austerity measures, "because we were on the brink of bankruptcy."
June 1, 2010
Learning the lessons about sovereign debt
Vahan Janjigian at his blog at Forbes on the lessons learned from the Greek debt crisis, especially for the United States:
" The events in Greece have brought the risks of sovereign debt to the forefront. At the CFA Institute’s annual conference in mid-May, several speakers focused on the dire consequences of too much sovereign debt. Niall Ferguson’s remarks were the most sobering. He suggested that the situation in Greece pales in comparison to what could happen in many larger economies--including the U.S. He said that focusing on debt as a percentage of GDP can be misleading. A more relevant metric is the percentage of tax revenues that must service the debt. In the U.S., interest on the federal debt already eats up more than 9% of our revenues. Yet at a time when rates are at historic lows, the government continues to rely on short-term financing, taking on tremendous rollover risk. Ferguson says that if rates were to rise just slightly,we could soon be spending 20% of our tax revenues on interest payments, a situation that would be untenable."
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Below: Two images from the live cam at pireas.org
Below: Image from the nifada.org live cam of Athens
