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Dusk on the Acropolis Athens Greece

Dusk on the Acropolis Athens Greece. Photo

June 30, 2011

"Troika" Austerity Plan #2 passes implementation vote

The successful vote on implementing the austerity package backed (vigorously, to say the least) by the 'Troika' of IMF/EU/ECB releases the next batch of eurozone/IMF money, a €12 billion installment that will help headoff what was a looming disaster as Greek bonds mature with values of nearly €12 billion in July and August (for a summary of what's coming due, see this June 27th item).

Reuters reported that both the value of the euro and world stocks in general all surged to their highest showing in over a month on news of the successful vote success for austerity forces in Athens. Consequently US bonds dropped, values between the euro and dollar had been see-sawing for some time based upon news out of Athens.

Probably the big question now that Greece has been voted full-strength into the 'Troika' plan is how long until the same issues come back to haunt? Now fastened to a plan that will give back 100% to the bond holders but must be paid (with varying interest levels) by Greece both short-term and long, the amount of debt just keeps climbing. It would all seem tricky but manageable if Greece was experiencing growth, but instead the economic condition is one of continual contraction. Are the politicians(all across europe, not just in Greece) betting on a rejuvenated Greece once reforms have worked their way through the economy? Or is hanging on by the fingernails better than dropping into an unknown chasm of default?

"Secret wishes of international media"

I saw this at the LIving in Greece blog:

"... riots are caused by small groups of hooded youth hanging on the fringe of an otherwise peaceful protest. They come armed with sledgehammers, gas masks, Molotov cocktails and intent; and riot police lay in wait. These disturbances last only minutes, just long enough for international media to get the footage and photos they secretly wish for."

June 29, 2011

Of Violence and Petrol Bombs

The protest effort around Syntagma Square in the lead up to the vote on the "Troika" bailout plan in the Hellenic Parliament has become a series of international images of flames and tear gas attacks, punctuated with masked young men swinging makeshift clubs at Greek riot police. The headline " Violence mars protest" has become a cliche in the international press coverage of the Greek street actions around Syntagma Square.

Screen SHot Greek Riots

Screenshot images above: The Washington Post, the UK Times, and Le Monde (France)

Chants of 'We don't owe! We don't sell! We don't pay!' from the Greek Civil Servant Trade Union was combined with various other organizations, along with the more violent efforts of anarchists.

"Midterm" Package passes in Hellenic Parliament: 155 votes to 138.

Article has moved here.

Christine Legarde is new IMF Chief

The 55 year old Legarde replaces Dominique Strauss-Kahn, who is under arrest for rape in New York City. She is French and so keeps leadership of the IMF in European hands (which has been the case for 55 years). The position empowers her to manage the 187-member organization, which manages a $326 billion fund. Her initial task will be to maneuver the IMF in negotiations with Greece. To take over the IMF, she is leaving her position as French Finance Minister.

Arriana Huffington: demonstrators are re-inventing democracy

A piece by Arriana Huffington about her visit last week to Greece, her observation of the protestors, and her dinner meeting with Papandreou to discuss the events swirling around the country. Much of what she says is applause for the protestors and a lament that western media focuses so easily on the minor violence that has occurred.

"What happens in Greece might very well tell us whether democracy will recover from the crisis of legitimacy exacerbated by the financial crisis or whether it will shrink -- undermined by the very forces that brought on the crisis in the first place."

Sunset over Athens Greece

June 28, 2011

EU's Olli Rehn "Approve the austerity plan or immediate default"

"No 'Plan B'"

With protests and pressure within Greece to block the "Troika Austerity Plan" building, the EU is adding pressure to the matter for their side, which is either approve it or face going over the cliff. With major spending cuts, privatizations of many large state-owned companies, and tax increases across the board, the plan is a tough sell to a country already reeling from the amount of austerity that has been executed, not to mention an economy that has slid into a phantom-depression. READ MORE HERE

Smashing Windows in Athens

Saw this on the twitter account for Carl Quintanilla, CNBC newsman:

"The kids in black smashing windows in Greece are largely anarchists, with little or no interest in sovereign debt issues."

June 27, 2011

"Moment of truth" approaching with June 29 austerity vote Almost €12 billion in Greek bonds coming due

EU has another card to play if Greek parliament says "No"

If the revised austerity plan gets stopped in the Hellenic parliament, the EU has a secret plan to get upwards of €12 billion in euro liquidity into Greece to prevent default.

With a "plan B" in the wings (if it truly is: many seem to doubt it is a legitimate alternative), maybe this takes some of the pressure off Papandreou temporarily, but a continuous bout of 'kicking the can' down the road can only go on for so long. But eurozone has a vested interest (to say the least) of keeping the problem of default in Greece, because it would quickly spread to Ireland, Spain and further once lender banks started to get smashed by a default.

Prime Minster of Britain David Cameron has already kept his country out of the austerity-loan program, and has followed up with the advice that european banks should prepare themselves for what happens next, implying a default has to be considered seriously.

"Greece must restore its international reputation"

An opinion piece by Kevin Featherstone at the New York TImes predicts Papandreou is going to pull enough of the Hellenic Parliament together to forestall disaster with expensive bond repayments looming over their heads, but Featherstone also says flatly that talk of default is not going away:

[A] parliamentary victory should be enough to abate the immediate crisis. But Greece’s vulnerability on the financial markets will continue and the talk of default will not go away. In the meantime, an uncertain, divided and weak country must implement the new austerity measures, undertake parallel institutional reforms and restore its international reputation. No euro zone or E.U. state has faced this kind of challenge in recent memory.

Featherstone ticks off the oft-repeated items on the list of Greek dysfunction: obsolete bureaucracies, political favors used to build up public payrolls with people not qualified for the technical work they're to perform, bloated this-and that. It could be a description of more governments than just the Greek, though, and the turmoil in Athens is a problem many other capitol cities fear.

Sarkozy holds up a 30-year bond rollover as part of Greek rescue

It is being called the "French Model" and no, it doesn't mean a gallic woman wearing haute couture. Rather, it is a combination of French banks rolling maturing Greek bonds into 30-year notes, European Rescue Fund (EFSF) money, and the cashing out of some principal. The breakdown is:

  • 50% of maturing notes to roll into 30-year notes with a corresponding coupon rate equal to the eurozone lending rate to Athens.
  • 20% of notes to be zero-coupon AAA bonds guaranteed by the EFSF (which pay approx. 3%)
  • The remaining 30% would be cashed out.

According to Reuters, the Germans are looking at the "French Model" as a possible basis for what they might attempt with their mass of Greek bonds.

The Hellenic Parliament Building in Athens Greece

The Hellenic Parliament Building in Athens, Greece

June 24, 2011

New Fiscal Plan to be voted on next week: A revision of the existing "5-year fiscal plan' has been agreed to by Greece and the EU/IMF/eurozone 'troika' to manage the ongoing Greek debt crisis and to avoid default.

World Stocks rally over Greece

Article item is now moved here

Greek bankruptcy can be like "G.M.," instead of Lehman Brothers

Speculative article from NYT moved here.

Hurdles Greek private companies face inside and outside of Greece

Greek private sector dilemmas in Greece, item moved here.

June 21, 2011

CNBC: Greek Streets 'Explosive' as PM Faces Confidence Vote

Fitch Ratings: rollover of Greek bonds will constitute default

Brief article at eKathimerini (english language side of their web site):

"Fitch Ratings warned it would treat a voluntary rollover of Greece's sovereign bonds in any rescue package as a default and would cut the credit rating, keeping pressure on EU policymakers who intend to outline a new plan by mid July."

June 17, 2011

Papaconstantinou out; Venizelos takes Finance Minister hot seat

Also at the Financial Times, news of the announced Papandreou cabinet shuffle:

"George Papandreou, prime minister of Greece, has replaced his finance minister in a broad cabinet reshuffle to counter widespread anger over tough new austerity measures essential to prevent Greece from a disastrous default.

Former defence minister Evangelos Venizelos, who challenged Mr Papandreou for the party leadership four years ago, will become finance minister, replacing George Papaconstantinou, who takes over the energy portfolio.

Mr Papaconstantinou had become unpopular with the socialist party over his refusal to dilute EU-IMF mandated reforms and was seen by Greek voters as the harsh face of austerity."

Venizelos now Finance Minster: "The country must be saved"

Report at Reuters on the cabinet changes under Papandreou:

"The country must be saved and will be saved," Venizelos told reporters after he was appointed to replace outgoing Finance Minister George Papaconstantinou in a reshuffle.

He added that he had harboured doubts about taking the post.

"I did it with much thought and not without doubts. I did it because I consider it my patriotic duty," he said."

The new government list under Papandreou
Greenspan:"...chances of Greece not defaulting are very small"

"...a default by Greece is “almost certain” and could help drive the U.S. economy into recession. "

Germany touts 'voluntary' rollover on Greek government bonds

Article at the Financial Times by Quentin Peel in Berlin

The leaders of Germany and France have agreed that private creditors should participate in a new rescue programme for Greece by voluntarily agreeing to roll over their holdings of Greek government bonds.

Details of such an arrangement still have to be finalised by eurozone finance ministers, but the agreement in principle on a rollover – rather than a fully fledged bond exchange including longer maturities, favoured by Germany – was announced in Berlin on Friday by Angela Merkel, German chancellor, and President Nicolas Sarkozy of France.

It amounts to a retreat by the German government, in the face of fierce resistance by the European Central Bank, as well as the French government.

...Ms Merkel also stressed repeatedly that the deal should be “voluntary”, which has long been the official German position. However the financial market rating agencies have argued that a bond-exchange would contain clear elements of coercion, and therefore be classifiable as a default.

“The central principle is voluntary contribution,” she said. “That is an important message to the banks. There are concerns that we want to trigger a credit event. We do not want that. We cannot run such a risk.”

What if Greece decides to not be 'rescued'? Alen Mattich at the Wall Street Journal

If Greece goes, who's next?

Article at the Sydney Morning Herald by Michael Pascoe with a not-too hidden, and hopeless, contempt:

"Greece itself remains an insignificant, hopelessly corrupt and inefficient economy that shows no sign of changing any time soon.

...Including its bloated, overly-generous pension liabilities, the Greek government owes US$1.2 trillion ($1.14 trillion) – more than a quarter of a million dollars for every working Greek. No, it's not sustainable, there has to be a default, or a euphemistic “restructuring”. The bond market is already priced for it.

So why is there so much market excitement about an ending that is already known? Maybe the excitement is only in the parts of the market that hadn't read the synopsis before the play started.

The big fear, a fear that feeds upon itself, is that there could be a contagion effect. If Greece goes, then who's next. "

Pascoe quotes from the Michael Lewis October 2010 Vanity Fair magazine article on Greece for background.

Papandreou has "run out of road"

A defense of Papandreou from the editorial writers - Read More

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June 16, 2011

"Debt-laden Greece mired in anger and humiliation"

"The euro has proved a disaster for Greece."

Gavin Hewitt article at the BBC about the futility of the Greek protests as long as the eurozone/IMF bail out plan continues apace:

"The Greeks are being humiliated. Their frequent protests have an air of futility about them. Their fate is being decided elsewhere, by unelected officials from the EU or the IMF.

...The IMF and EU send in accountants and economists who occupy space in the finance ministry. When it comes to selling off state assets - intended to raise 50bn euros (£44bn; $72bn) - there is debate as to whether this should be overseen by a non-Greek body. It would have been the final humbling.

There were suggestions, too, that foreigners should run Greek tax collection. Those ideas may have been sidelined but the resentment has not gone away.

...The Greek Prime Minister, George Papandreou, flies off to meetings to learn the terms of his surrender. He had promised no more cuts, but in return for Greek Bail-out II he will have to take the axe to public sector jobs.

Further spending cuts of 6.4bn euros - that was the condition set by the EU and IMF in exchange for more aid.

State assets are being sold off. The crowds shout "we won't sell!" - but that's precisely what the government has been told to do.

...Default looms. Maybe not this year, but almost certainly in 2015. For European officials the hope is that by then the banks will be more resilient to take a hit. Certainly well-respected German economists don't expect to get their money back. "

Food products being purchased less

"Six in ten households reduced their consumption of beef, pork and fish, while 20% do not buy any meats "

Story at (I saw this via the Living in Greece blog) about the big reductions in some food staples:

"According to the survey, consumers are looking for several products like the lowest price a fact 57% of households has reduced even the olive oil market, while 26% do not buy olives. For milk, cheese, pasta, fruit, bread, rice, ie food commodities, consumers are looking for similar products with lower price, turning more to private label products promoted by the major supermarket chains in order not to decrease the quantities purchased. It is worth noting that research conducted in the first months of implementation of the Memorandum.

The greatest reduction in the purchase of products recorded in Karditsa and Trikala follow, while less affected than those two cities Volos and Larissa."

June 15, 2011

Violence at protest effort outside Syntagma Square

eKathimerini on the protests which have made world-wide news reports:

"Following three weeks of peaceful protests in the capital, Athenians on Wednesday witnessed the familiar scene of demonstrators clashing with police in Syntagma Square amid a major security operation to stop those who wanted to prevent MPs from entering Parliament.

Some 4,000 police officers lined the central square and the streets around it in an attempt to thwart protesters’ plans to form a human chain around Parliament. The so-called Indignant, who have been peacefully occupying the area in front of the House every evening for the last three weeks, had wanted to prevent MPs from entering Parliament to discuss the medium-term fiscal plan, which introduces new austerity measures.

The protest coincided with a general strike and rallies by the private and public sector unions GSEE and ADEDY. It also appeared to give license to more extreme anti-establishment elements, who have been absent from protests for the last few weeks, to join the crowds. This led to scuffles outside of Parliament, where police had erected a mobile fence to obstruct demonstrators, and at other points in the city center, including near the Finance Ministry.

... People aligned with the peaceful Indignant movement attempted to stop both extreme right- and left-wing groups from disrupting the demonstrations. This led to fighting between those taking part in the protest. Some also threw missiles at the police. "

World media presented the protests as containing violence without explanations that the Kathimerini newspaper provided. For example the Christian Science Monitor"

"Wave of anger blankets Athens as Greece weighs new austerity measures

Tens of thousands of protesters crossed police lines as Greece's parliament prepared to vote on new austerity measures to avoid what could be a devastating default. "

The CSC on the future of Greece under present circumstances:

“...The best scenario is you don’t talk about restructuring and you do it quickly over a weekend,” says Sony Kapoor, director of “Re-define,” a Brussels think tank. “The worst is you talk about restructuring a lot and then do nothing. That’s sort of where we are. For Greece, today, it cannot honor its obligations. Most of the damage has already been inflicted.”

Greece holds some $400 billion in bond debt. Of this, $123 billion matures and must be paid off by 2014."

The outcome this week has been positive across the Atlantic: a stronger dollar and more people buying into US treasuries (See Wall Street Journal article). President Obama has recently pledged to help the effort to keep Greece above water (and the European banks all tied up in loans to Greece) but this has hardly met with encouragement in the United States press:

"Why Should the U.S. Bail Out Greece? Another rescue package will only reward profligate spending and prop up a corrupt government." (Wall Street Journal)

World markets feel turmoil over downgrade effects

Reuters on the turmoil around the world all hinged upon the situation in Greece:

"World stocks and the euro slumped on Wednesday as upheaval in highly indebted Greece and indecision among Europe's leaders about helping the nation fed fears the euro zone member is edging closer to default.

The euro tumbled 2 percent against the dollar and government debt of the United States and Germany rallied on a safety bid after euro zone finance ministers failed to agree on how to involve private investors in a second financial rescue for Greece.

...Greece is seeking 120 billion euros in fresh aid.

The onus has now shifted to the leaders of Germany and France to forge a deal later this week.

Prime Minister George Papandreou offered to quit and make way for a national unity government.."

The Economic Times on the growing predicament in Athens:

"Greek prospects darkened as European bickering risked delaying the next rescue payment and defections from allies weakened Prime Minister George Papandreou.

An emergency session of euro-area finance chiefs in Brussels on Tuesday failed to break a deadlock on how to enrol investors in a second bailout without triggering a default, casting doubt on funds due from the International Monetary Fund next month.

...Europe's financial leaders must hammer out a revised Greek package to persuade the IMF to pay its share of the 12 billion-euro ($17.3 billion) tranche originally due in June. The IMF had indicated that it would withhold its 3.3 billion-euro piece unless the EU comes up with a plan to close Greece's funding gap for 2012."

Greek credit downgrade has implications beyond Greece

Forbes blog post by Steve Shaefer on the auxiliary results of the S&P downgrade that hit Greece on June 13, 2011:

"Ratings agency have been aggressively lowering Greece’s credit ratings of late, and on Wednesday Moody’s Investors Services took the first step in signaling the potential next domino to fall, putting the ratings of three French banks on review for possible downgrade."

The S & P downgrade is speeding up the whole process of whether Papandreou can keep Greece on the IMF/eurozone path, or if the process has been so suffocated by pressures from inside Greece (and outside, too: European banks refusing to consider restructuring, for example) there's no place to go for the official participants except into an unknown future. "Over-control" may lead to "no control" quite soon."

As Shaefer mentions, French banks may be first, but they won't be the last.

June 14, 2011

"World's Lowest Rating" Greek Credit plummets

June 13, 2011

S&P Knocks Greek Rating again "restructuring more likely than not"
Are Greek banks being emptied?

Papandreou planning cabinet changes

eKathirmerini (English language side) on the Greek Prime Minister's plans to make alterations in early July, with focus on Finance Minister Giorgos Papaconstantinou, who will likely be replaced.

"In an interview with Sunday’s To Vima newspaper, Papandreou said he was open to the idea of bringing people with “wide appeal” into the government, suggesting that he may look to recruit ministers from outside of his party. "

The (Greek language) To Vima paper is here.

Greece’s financial meltdown sounds all too familiar to Russia’s experience in 1998 - Comparison

June 9, 2011

Who is holding Greek debt?

Organized protests in Athens may yield call for elections

Wall Street Journal: Dissent increasing throughout Greece while Papandreou readies new push for further austerity implementations:

"Greek Prime Minister George Papandreou will seek cabinet approval Thursday for a new austerity crackdown, despite increasing popular resistance and signs of wavering support inside his own party.

The new spending cuts and a planned acceleration in the sale of state assets, which could cost thousands more jobs, were set by the European Union and International Monetary Fund as a condition for more aid.

The latest moves are turning up the heat on Greece's politics as Athens complies with conditions set for a second bailout, set to include banks voluntarily offering to extend the maturities on the Greek bonds they own.

The specter of political risk amplifies concerns voiced by the European Central Bank, which warned that rescheduling Greek debt is fraught with danger and could cause investor flight that would shake the European banking system.

..."Faced with the country's big financial difficulties and these protests on the streets, many Socialists may not follow the party line, and that risk grows with every day that goes by," said George Kyrtsos, political commentator and editor of the City Press newspaper. "At some point, the government is going to call early elections."

June 7, 2011

"Greek crisis is first and foremost about the German and French banks"

From Forbes ["The Next Financial Crisis Will Be Hellish And It’s On Its Way" by Addison Wiggin] comes a prediction of even more trouble behind the next wave of bailout money:

"The Greek crisis is first and foremost about the German and French banks that were foolish enough to lend money to Greece in the first place. What sort of derivative contracts tied to Greek debt are they sitting on? What worldwide mayhem would ensue if Greece didn’t pay back 100 centimes on the euro?

That’s a rhetorical question, since the balance sheets of European banks are even more opaque than American ones. Whatever the actual answer, it’s scary enough that the European Central Bank has refused to entertain any talk about the holders of Greek sovereign debt taking a haircut, even in the form of Greece stretching out its payments.

That was the preferred solution among German leaders. But it seems the ECB is about to get its way. Greece will likely get another bailout – 30 billion euros on top of the 110 billion euro bailout it got a year ago.

It will accomplish nothing. Going deeper into hock is never a good way to get out of debt. And at some point, this exercise in kicking the can has to stop. When it does, you get your next financial crisis. "

The United States President Obama, commenting on the Greek crisis, had this to say (Washington Post article by Howard Schneider and Scott Wilson):

"We think that America’s economic growth depends on a sensible resolution of this issue. We think it would be disastrous for us to see an uncontrolled spiral and default in Europe, because that could trigger a whole range of other events,” Obama said.

A Greek default could undermine the health of the banks and other institutions that hold the country’s bonds — including some of Europe’s most important financial institutions and the European Central Bank itself. "

Meanwhile, at Wall Street Journal: "private-sector debt rollover as part of an agreement to provide financing to Greece would likely be considered a default by Moody's Investors Service..." THis is a about-face fromt he June 2010 opinion of Moody's which said 'default chance was small'

June 6, 2011

Referendum on austerity becoming likely

Papandreou may be turning to a referendum vote to settle the matter over whether to continue with the IMF/eurozone/ECB plan - READ MORE

"Greece mustn't waste its second chance" - Reuters

Commentary piece by Hugo Dixon at Reuters:

"Greece mustn't waste its second chance. Athens looks like it will receive enough bailout cash to see it through to end-2013. But if it veers off track again, as is all too possible, any third chance might come with such extreme conditions that a messy default and a humiliating exit from the euro wouldn't be far away.

...although George Papandreou is likeable and honest, the Greek prime minister hasn't yet put in place a team able to wrestle effectively with a monstrously inefficient public sector. He needs to do this immediately.

... The next instalment, equivalent to 2.8 percent of GDP, will be crammed into the second half of this year. That's 5.6 percent of GDP on an annualised basis. Exports are already picking up as unit labour costs fall; and there are high hopes for tourism, partly because people are being diverted by the Arab Spring from North Africa to the Mediterranean's other coast for their holidays.

...The governor of the Greek central bank, George Provopoulos, recently said that the government should over-deliver on its promises. Papandreou should heed his advice. If he falls behind the curve again, history will damn him."

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June 3, 2011

New bailout package would run until 2014: and new taxes on the way

The financial picture for Greece is that it has a € 340 billion euro debt load, a privatization program that hasn't raised any funds, and no path back to selling more bonds when both Standard and Poors and Moodys have downgraded the Greek credit rating (Moody's just moved Greece to just above Ecuador and even with Cuba. (Moody had previously viewed a Greek restructuring unlikely)

With the European Union in fear about a default (and possible domino effect into other countries) the 'troika' of the IMF, ECB (European Central Bank) and the EU itself is prepping a new bailout package to replace the incompleted original plan from May 2010.

Reuters report:

"Greece is set to impose a deeper bout of austerity on its struggling economy and promise to speed up a privatisation drive in return for a new international bailout to avoid a debt default.

Prime Minister George Papandreou on Friday will present his side of the deal, a medium-term budget plan, when he meets the chairman of euro zone finance ministers -- the people who must stump up much of the planned new funding along with the IMF.

Senior euro zone officials meeting in Vienna agreed in principle to a new three-year programme for Greece to run until mid-2014, a source close to the negotiations said.

This would effectively supersede a 110 billion euro rescue Greece agreed with the European Union and IMF a year ago."

The UK Independent reports that the final decision lies with the investors already holding Greek debt:

"Greece's international lenders will pass judgement today on the country's austerity measures in an attempt to avert a sovereign debt default that is now said to be a 50:50 possibility.

The Greek government is also set to present new budget proposals to the chairman of eurozone finance ministers, including more than £5bn of extra tax rises and cuts as well as faster privatisation measures."

Financial Times on the deliberations which have taken more time than previously thought possible:

"Greece has come under pressure to accept international involvement in both tax collection and privatisation of state assets – areas where it has failed to meet EU-IMF targets – in return for €60bn-€70bn of fresh financing over the next two and a half years.

“There is no problem with having more IMF tax experts to help boost revenues, but there is an issue of sovereignty on the privatisation proposal that has to be settled at the political level,” said a Greek economist who has been following the negotiations."

Dissenting PASOK deputies are trying to pressure Papandreou for more time to debate the evolving austerity plan. From eKathimerini:

"The rifts within the ruling PASOK party, caused by the government’s handling of the debt crisis, were laid bare on Thursday when 16 Socialist deputies sent a letter to Prime Minister George Papandreou demanding that Parliament be given time to properly debate the new set of austerity measures Greece is about to agree with the troika.

Papandreou looks set to reveal the measures on Friday, when he will meet with Eurogroup chief Jean Claude-Juncker, but the Socialist deputies expressed concern about the midterm fiscal package and the government’s privatization plan not being subject to the usual democratic process."

But it doesn't look like that extra time will be forthcoming: the ekathimerini report says the vote will likely be put to the Greek parliament in such a way that the entire program must be voted up or down without debate on individual aspects.

University of Athens Greece

View of the University of Athens, Greece: View Enlargement

June 2, 2011

Optimism evaporates: tough decisions ahead

Writer Howard Schneider at the Washington Post on the changing fortunes of Greece slipping further into a wrestling match with the IMF/eurozone:

"There is no secret about the tab coming due — Greece will need more than $40 billion over the next year or so to keep itself afloat and avoid what European officials consider their nightmare scenario, a default by one of the countries that use the euro.

But deciding who will pay has left European, International Monetary Fund and Greek officials locked in another round of crisis talks as they try to figure out a series of tough issues.

...In a presentation at the IMF last week, Mark Cliffe, chief economist for the ING Group, outlined the stakes if Greece were forced to leave the 17-member euro currency union. He projected a quick loss of about 10 percent of the country’s economic output and a broad shock to the financial system that would leave the rest of the euro area and the United States in a new recession.”

Moody's downgrades Greece to Caa

Moody's downgraded Greece's credit from B1 to Caa on Wednesday, and are basically saying the odds are 50/50 that Greece will default (see Bloomberg for the whole report). With Greek debt expected to hit 157% of GDP in 2011, they've got a point - - the EU is traveling into an area they've never been in before, and Greek resistance to increased austerity measures has been stiffening.

The IMF is saying they'll not let the next $4.5 billion still planned for Greece to even arrive unless additional budget cuts and asset sales occur. The IMF (which led off the bailout with an original stack of $40 billion in 2010) want current bondholders of Greek debt to absorb some of the pain, too. This is a tough sell when many who bought into newer Greek bonds based the decision upon the assurances that the IMF/eurozone bailout would travel all the way to the end of the proposed $150 billion bailout plan.

With pressure on Greece to allow international involvement in tax collection and asset sales, the opposition forces in the Greek political body have fresh ammunition to combat Papandreou who is supposed to somehow keep the whole master-plan together, even though very little seems to be working out they way it was intended by all the powers involved.

The eKathimerini news site has been long on the side of straightening out Greece's fortunes with whatever international help was necessary, and their writer Alexis Papachelas asked some obvious questions in a recent commentary:

"Greece is sinking because its politicians demolished the state so that they could govern as they willed and with impunity, together with the labor union leaders, party officials and entangled businessmen. It suited them that tax offices didn’t work because that allowed them to erase fines, order audits and enjoy a perfect relationship with the deep party- and union-driven state.

The absence of structure and professionalism shielded all the shenanigans and jobberies. So, who and what exactly is threatened by the arrival of technocrats from abroad whose task will be to help rebuild these state services? What large and small interests are so concerned about our sovereignty? Or do they want to keep doing business as they always had done in the future as well?"

In June 2010, Moody had previously viewed a Greek restructuring unlikely.

Meanwhile, Globe and Mail "EU kicking Greece while it’s down"

Writer Eric Reguly is basically saying the Europeans are too frightened to restructure on Greek debt. Obviously, this may end up with them getting exactly what they didn't want and with terms they cannot control (UK Globe and Mail news site):

"While the budget deficit is coming down a bit, the national debt load is rising relentlessly and will reach an astounding 150 per cent, or more, of gross domestic product this year. (Germany’s will be about 80 per cent, Spain’s even less.) Greece is still in deep recession – Deutsche Bank predicts a 2.9 per cent contraction this year – and everything from household consumption to industrial production is on the wane. With Greece unable to devalue its currency and business confidence shattered, the export-led recovery and private investment boom that was supposed to drag the country out of the economic quicksand has been a non-starter.

The jobs picture is dire. The Organization for Economic Co-operation and Development predicted that the unemployment rate would reach 12.1 per cent in 2010. It was off by a wide margin. The official Hellenic Statistical Authority put the figure at 14.2 per cent in the last quarter of 2010...

...What Greece needs is big, fat debt reduction. But the ECB, Germany and other countries that are footing the Greek bill refuse to consider a debt restructuring, for fear that it would trigger a fresh banking crisis with attendant financial and economic horrors. A variation on the theme would be the extension of debt maturities and lower interest rates."

"Military coup possible" in Greece if government collapses

It sounds crazy, but familiar: from the Turkish Hurriyet English daily:

"The U.S. Central Intelligence Agency warned in a report that the tough austerity measures and the dire situation could escalate and even lead to a military coup, according to a report by Germany’s popular daily Bild.

According to the CIA report, ongoing street protests in crisis-hit Greece could turn into escalated violence and a rebellion and the Greek government could lose control, said Bild. The newspaper said the CIA report talks of a possible military coup if the situation becomes more serious and uncontrolled."

With the traditions that have grown up around the rule of the military junta of 1967-1974, it is hard to not imagine a great deal of bloodshed following a military coup in Greece, as memories of the distaste for that era would be reignited. But, it is worth remembering that in the early days of the colonels there was popular support from sections of Greek society who saw the 1967 coup d'etat as a reaction to government corruption, not as a annulment of democracy (that clarity came later!)

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