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More Eurozone Olive-Headed Stepchild Bashing
Poor Greece, and poor Europe: the two are now caught in such an unwinnable tug of war, that the EU is considering unwinding the very fabric of its union (an action, which some say, may not be the worse idea in the here United States) and set the struggling Mediterranean country loose. And if and when that starts, it is game over European Union. Yet posturing will do nothing to change the fact that even as Greek CDS hit an all time high last week, the economic catastrophe in the Ouzo-loving country is accelerating. The latest to join the Greek bashing goon squad is Deutsche Bank, with a note released on Friday, which highlights the key dangers to the country: the ability to finance deficits, capital flights, and an outright default if money does not turn up from under the mattress.
Persistent twin deficits over a multi year period have left Greece heavily indebted from both a public and external perspective. More than ample global liquidity combined with access to ECB liquidity facilities has meant that financing of these deficits has not been problematic in the past but now leaves Greece at risk of a potentially sharp withdrawal of capital at some point in the future.
Probably the most urgent risk emanates from uncertainty on sources of government financing and potential related crowding out issues. While Greece’s fiscal deficits have been wide for some time now, as discussed above, foreigners have been happy to finance these deficits in full and more. Over 2004-08 portfolio inflows from abroad into the domestic debt market, for the most part government debt market, averaged 11.2% of GDP. Over 2005-09 we estimate that foreigners (a combination of banks, insurance/mutual/pension funds, hedge funds and central banks/sovereign wealth funds) on average financed 155% of Greece’s government deficit.
At EUR53bn, Greece’s gross financing requirement in 2010 is below 2009’s which was in excess of EUR60bn. However global financing conditions in 2010 are unlikely to be as favourable for sovereigns as last year. Central banks are beginning to reverse special liquidity facilities while government bond issuance in the developed world remains elevated. Our Euroland strategy team estimates sovereign issuance this year at EUR1005bn (net at EUR484bn), up from EUR907bn (net at EUR373bn) in 2009.
Take home: things are bad and will get much worse unless Greece finds some way to get bailed out or print its way out, which is why more and more are calling for a return of the drachma. Yet with all the great benefits of "globalization" and excel models that crashed if housing prices were projected to go down, who in their right mind would have considered this outcome at the onset of the eurozone. For all intents and purposes, Greece is merely a smaller version of its bigger Keynesian brethren, with the small exception that it has absolutely no access to a printing press. The presence of the latter it appears is the only variable that matters these days: P/E, PEG, EV/EBITDA, these considerations all fade if one only has some cotton paper, some ink and a couple of metal presses.
Full Greece report:
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It is simple, Greece CANNOT leave the Euro - interest rates would shoot to 10% + and the country would be finished.
It is a no win situation, in that the best her fellow Euro members will be able to do is to stick a plaster over the wound.
Those that keep buying the Euro in the hope of some magic bullet solution need their heads examined.
Bullshit. If rates would rise to 10% for a free Greece, that means that the rest of the EUROZONE is subsidizing them now. The best that could happen is that rates would rise to 10% and the Greeks would start living within their means. That's not a bad idea here as well. I am fiscally prudent. I am sick and damn tired of paying for those who aren't. My social mood sucks.
We'll know Wednesday, that is when they present their 'Plan for Prosperity.' Expect the Euro to take a hit and the dollar to leap, gold to fall. To counter this drama, the S&P will jump on Thursday....just cause we need to be reassured.
Greece's contribution to the EU GDP is small at barely 4%.
If push comes to shove, they will be cut loose from the EU. This will not spell doom for the EU, if anything the remaining weak members will soon get their financial house in order.
The EU central bank does not 'bail out' without stringent financial pre-conditions that MUST be met. They are not the Federal Reserve!
Yea. The EU central bank is really tough -- that is why it allowed the fiction of Greece's Moody's AA rating continue....
And what, exactly, is the connection between moody's and ECB?
..None? yes, indeed.
I don't see how cutting off weak spots should hurt the currency, quite the opposite?
SBIF
That's the essential problem with every overly large amalgamation, including the disUnited States.
In the world of cloning it is an accepted fact that one tiny flaw in one of the clones will kill off the entire species.
If ever there was an example of what will eventually happen to "unions" of too large a size, and specifically with republics fascistically controlled by central government of 360,000,000 (imagine 50 years from now at 600,000,000) the disUnited States is it.
No man made institution should be permitted to grow to SBIF.
Time to dismantle it before it topples over taking hundreds of millions with it as our global financial system has alerted us to for the last three years.
Secession NOW!
SBIF
So Big It Fails.
Is California our Greece?
No.
But only because Cali has a much large economy than Greece. A Cali default might be more like Canada or India in scale.
Tom: "Is California our Greece?"
I think Tom means is Calif to the US what Greece is to the EU.
In which case I think the analogy of Calif as Britain... both good sized financial LOSERS (I love my state...) is better.
Though Calif to the US is the size of Germany or France to the EU is better yet.
...."with the small exception that it has absolutely no access to a printing press"...no printing press, no political will to do the right thing, no public support for austerity measures.... the epitaph is written and Diogenes is laughing as he urinates on the tombstone......
Greece may be the pluto of the chart above, but Italy, Portugal and Belgium seem to be spinning out of orbit as well.
ignorance on a subject does not preclude one to voice an opinion on it. really pitiful.
I am from Greece, i' ve switched my savings to gold english pounds instead of the euro since 2006 (and i was called "crazy" at the time, especially when i was arguing that the eurozone would have a lot of trouble in the future). However, in my opinion it is very difficult for countries like Greece to leave the eurozone, and it is very difficult for Germany to accept a devaluation of the euro (Germany stopped ECB's printing press - the ECB had started prιnting euro before Merkel stopped them:
http://www.independent.co.uk/news/business/news/ecb-set-to-push-ahead-wi...
http://www.telegraph.co.uk/finance/economics/5434508/Germanys-Angela-Mer...)
So, what's left:
The most possible way of breaking up the eurozone is not Greece or Spain, etc leaving.
The most possible way of breaking up the eurozone is Germany leaving, because they don't want to keep paying for the weaker vountries indefinitely. They will probably help UP TO A POINT, but not "forever and ever".
If Greece leaves, everyone knows that Greece will devalue their currency (drachma), so noone will support it. ut if Germany leaves, everyone will support their currency, because everyone will know that Germany left because they DO NOT want to devalue their currency.
Buiter (now working for Citigroup, former associate of the Financial Times) is also of this opinion, Germany is probably the one to watch out for, not Greece:
http://www.independent.ie/business/irish/citigrouprsquos-buiter-says-eur...
Goodbye, sorry my not-so-good English and i'll see you on the streets, since i think (hope) that the people will not accept their dissent into middle-age style exploitation
First the piece: "Yet with all the great benefits of 'globalization' and excel models that crashed if housing prices were projected to go down, who in their right mind would have considered this outcome at the onset of the eurozone"
Well quite a few actually eg Ambrose evans-Pritchard from the London Daily Telegraph.
Ciaoant1: Most perceptive and sane comments, IMHO. One astonishing effect of a decade of financial betting has been that commenters seem to have forgotten that when the people speak, the world changes with frightening speed. The REAL economy of Greece would not be adversely affected by exiting the euro. tourism would flourish, other products get more competitive, real lives would improve. Of course Greece is burdened by poor tax collections, rampant cronyism and so on, but these would be less of a burden, not more, outside the euro, as economic pressures bore down on them.
The euro is part and parcel of the great european superstate idea, born idealistically, it must be allowed, from a desire never to replicate the conditions that led to the world wars. Trouble is, the euro itself is now, ironically, producing precisely those pressures...
We will see whether the big states in the euro are willing to pay for the ideal.
@ciaoant1
You are absolutely right with your observation on Germany. There is lot sympathy of Germans for the re-instantiation of the D-Mark. More and more people get aware and become sick of paying for the deficits and poor in other countries. One in three Germans wants the D-Mark back, and this was in May 2008.
http://translate.google.com/translate?js=y&prev=_t&hl=en&ie=UTF-8&layout...
Today it is probably one in two. If it really happens, then it will be the end of the Euro as an alternative reserve currency and boost for the US-Dollar.
Germany and France are the Euro.
Combined these two overshadow every other nation economically.
Greece and Portugal could be cut lose.
Italy and Spain would get help.
If the Club Med countries were actually allowed to have their own fiat, they could be cheapest living paradise on the planet. With the introduction of the Euro, these places are now too expensive for retirement.
Cheapest living paradise on the planet - youre thinking of ocean-bordering country in South America.
That really narrows it down. There is only one country in SA that does border on an ocean (sea).
That really narrows it down. There is only one country in SA that does border on an ocean (sea).
Greece can return to the drachma, but will its citizens be willing to exchange their euros for a currency that will reduce their purchasing power?
It is ridiculous believe the real Greek economy of tourism and olive oil will somehow allow the economy to flourish if they leave the single currency and devalue. If they leave the single currency, they will be bankrupt - the government, banking system and pension system. Most Greek industry is uncompetitive and barely profitable from my experience.
However, the chances of leaving the single currency are pretty low, unless the government is being bribed by the US to try to destabilize the monetary union. In fact, given the role of certain cephalopods in all of this, it is not as daft as it sounds.
Also, let us be really fucking clear. The problems in Greece are nothing to do with the Euro and everything to do with a nation living far beyond its economic means (even compared to say Italy or Spain, which is saying something.) It lied and cheated its way into the single currency, borrowed as much low interest debt as its bullshit GDP data allowed and then carried on partying like they were all mini-Onassises. Since they cannot print their way out of the problem, why should this cause lasting damage to the Euro. The main risk for the ECB is the mountain of sovereign debt posted as collateral, but beyond that what? Anyway, other member nations are quite happy to see the currency weaken off the back of this, so they may make noises, but this has been useful in some ways.
Pretty good analysis of the situation IMO. If anything, Greece will become the "proving ground" for the fledgling Europol as the riots start to break out.
Ego > Euro. Hasta la Vista Baby.
If they cut Greece loose, then we can cut California loose. They already have their own currency. It's called the Eyeoweyou.
Many folks from California and other states for that matter would rather disassociate. You can keep your trillion dollar deficits and we'll keep our billion dollar deficits. Ours are easier to fix.
Wow...in the next decade Japan will implode and Europe will disintegrate-half of world GDP! Sounds good for the dollar!
... and take out probably 25% of the US economy in the process, maybe 50%.
One hangs all hang.
Very silly assumption that it's game over for EU just because they let Greece go. Insane amount of money was spent to converge to a common regime, it's not going anyway anytime in your lifetime. Even if Greece is kicked out, they will still use EUR. Why? Well it seems that they don't have much money and it's very costly for every business to convert to another form of currency.
Since ZH is bearish on Greece, I'm buying stocks. Hellenic Telecom (nyse adr OTE) doesn't look too bad, greek steel service companies are not bad either.
I'm from belgium and we might be high on the chart but 1 out of 10 is à millionaire, real estate grew 8% this year and my salarie went up 4.2%
http://m.tijd.be/art.8284571.art?sid=80063230
If 1 out of 10 of you are millionaires, are the other 9 dirty bums?
Im kidding of course. After visiting Bruxelles and Brugges last summer i can safely say everyone is either a diplomat or works for their companies 'foreign office located in Belgium'.
In the meantime...while you guys were out, Fitch ratings will receive GBP 79500 (2010) and GBP 82000 (2011) plus expenses to rate Greek debt. Published in Greece's official journal, 31.12.2009.
I second omi and think ZH is out to lunch with their comments on Greece. It has to get its fiscal house in order but if you read all the Greek bashing here, you'd think the country is a step above Albania (or worse). Get real with these silly comments. I have travelled and even worked in Greece. Being of Greek descent, I know their faults, their problems and their strengths. When push comes to shove, Greeks will do whatever it takes to remain in the EU. (Remember how the world was pooing on us before the Athens Olympics? They turned out to be one of the best Olympics ever!).
Is'nt a big part of the reason greece in trouble is
because the massive amount of money they borrowed to
pay for those olympics and the ROI has been for the
most part zero...
Smoking gun in Jan 18 news article on Greece:
Greece Finance Minister Papaconstantinou "also signaled the need for Greece to provide more-reliable statistics after the EU said earlier this month that the country’s data contained “severe irregularities.”
“The serious reforms made to their statistics will help detect and avoid more problems like this in the future,” [Germany’s Wolfgang] Schaeuble told reporters."
http://www.businessweek.com/news/2010-01-18/european-ministers-say-greec...
What is the "lesson learned" here: When you are caught cooking the books, promise to provide more reliable statistics.
Makes one wonder what other countries, on both sides of the Atlantic, might have government statistics with "severe irregularities".
"Severe irregularities" are overlooked for whoever controls the global reserve currency; the printing press can solve just about anything.
Not saying that's a good thing. Just saying.
Greece wasn't the only one to play that game. Italy also did something similar.
As for cutting Greece loose: the second that happens, Portugal, Spain, Ireland will all come under severe pressure. Then what? Cut them loose as well? Has anybody who claims that France is a strong country *really* gone through some of their books, or looked at how their economy functions? They're in shambles.
I think the Euro was a completely stupid idea to begin with, but I don't think the governments will let it unravel that quickly. Having said that, it looks like the US might be able to continue with its insane deficits a little bit longer if the financiers leave Europe.
Greece spends an obscene amount on defence. 400 years of Turkish rule will do that to a nation. The EU, being primarily an economic union, probably never gave Greece the warm fuzzy feeling that Turkey would be kept at bay.
Russian-Turkish competition is already flaring up in the Caucasus -- is this Russia's moment to penetrate deep into the Balkan/Mediterranean region with a rescue package, much like with Iceland, if the EU jettisons Greece? Could Germany and Russia have already made a behind-the-scenes deal?
So Greece as the Mediterranean Cuba? We are perhaps overdue for a regional military showdown. Should spike global oil prices nicely in the bargain. How charmingly devious of you, Mr. Putin.
I read somewhere a while back about Russia potentially stationing some forces of its "Emergency Situations" ministry in Serbia. This seemed to set off a panic in EU land and they suddenly didn't care as much about the Hague, war crimes, etc., EU accession negotiations full steam ahead!
Nearby Montenegro is a de-facto Russian Riviera on the Adriatic.
Makes it especially intriguing is that the US has set up numerous bases in Bulgaria and Macedonia. The Balkans look like they will be an interesting place in the next decade
"Greeks will do whatever it takes to remain in the EU"
I am sorry Leo, but i think that a lot of Greeks are not willing to accept Bulgaria-like (nothing against Bulgaria, i am only mentioning Bulgaria because they are next to us, and their wages are very low - this is why a lot of businesses have left Greece for Bulgaria, and this is why the oligarchs demand Bulgaria -like wages, because if we don't accept them, they will keep leaving, and unemployment will keep rising) wages.
And this is basically what is being asked of them, we are being asked to become Bulgaria, after alla, they are "Europe's finest" when it comes to deficits:
"Bulgaria joined the EU in 2007 and posted the smallest budget deficit among the 27 member states last year, according to the finance ministry. It is expected to be the only EU nation to balance its budget in 2010."
http://online.wsj.com/article/SB126319895247724345.html?mod=WSJEUROPE_hp...
Their numbers are really good, but the people are living in poverty. This is the future they want, and IF the people realize this (and i think that a lot of people ARE realizing this, i was being called "crazy" back in 2006 when i was talking about a crisis, but now it's becoming increasingly clear for everyone to see), then THEY WILL NOT ACCEPT IT
So go back to the drachma and become a third world country within Europe (already there). I love Greece but Greeks have to WAKE UP AND SMELL THE COFFEE. The public sector is a joke, way overbloated. Everyone wants to retire with a full pension at 45 years old! Let's call a spade a spade. If you always spend more than you earn, you're going to sink. Time for Greeks to realize this and get on with introducing the necessary austere fiscal measures to bolster public finances. They should also revamp governance policies to weed out blatant corruption.
Maybe it is not me the one who has to smell the coffee Leo, maybe the ones who need to wake up and smell the coffee are the ones who think that the people will not revolt against the looting that is going on on a worldwide scale
And that comment of yours that "Everyone wants to retire with a full pension at 45 years old" is -at least- lame...
ciaoant1,
How many ninety year olds+ in Greece who have been collecting pensions since they were 40 or 50? It's a joke. The private sector in Greece is getting squeezed while the public sector workers enjoy golden retirements. Same thing is happening here in North America. I call it Pensions Apartheid. Only difference is Greece can't afford it any longer.
And you think that we can "afford" wages of 400-500 euros/month?
The upper class maybe, but not the working-class people, i don't think that they can "afford" accepting this life of poverty
"When you've got nothing, you've got nothing to lose"
Bob Dylan
What can an entity do when it has little if anything the world wants? If it produces little to nothing?
If Greece or Italy, Spain or Peru, have no industry to speak of, if the people who reproduce there have little to occupy themselves, have no work to do, what is the solution?
It plays out every minute of every day in Haiti, much of Africa, Compton, and Harlem and is spreading to towns all over America.
Very cynic view but true. Plus what's going on in Haiti provides a nice proxy to what may be going on soon in certain emerging nations if the more dire predictions on this website were to come true. Wouldn't be surprised to see even instances of cannibalism being reported if people seriously commence to starve.
As far as Greece is concerned - In the end of the day a leopard never changes its spots. And profligacy seems to be the Greek way of life. I think in the end of the day there will be (should be) a debt restructuring which means that the pain would be shared between creditors and Greeks. Remember, it is only the US that makes counterparties whole 100% on the dollar and then asks Uncle Ben to turn on the printing press... thank you AIG and all the best from Europe!
When you state that "they will not accept this", you are implying that they demand higher wages than the country can afford, and if they are forced by the EU to introduce structural devaluation (i.e. lower wages and benefits), they will simply leave the single currency?
And then what?
Thing is, the ECB is not forcing them to do anything other than stick to what was previously agreed. How they meet the requirements on deficits is left entirely to the Greek government, the only thing they can't do is lie about it this time.
The Greek government has to tackle the pension crisis. It's not the only country that has to do this, but Greece spends a lot on defense relative to its GDP so it has to reign in public spending. It doesn't matter whether it's Pasok or New Democracy in power, they have to face the music or they risk going back to living like peasants with the drachma. Some will say "So what? Those were good years for the common Greek", but all this will do is delay an even bigger blowup down the road.
"When you state that "they will not accept this", you are implying that they demand higher wages than the country can afford, and if they are forced by the EU to introduce structural devaluation (i.e. lower wages and benefits), they will simply leave the single currency? "
No, i already daid in a previous message that i think that the only one who actually might leave the eurozone is Germany.
What i mean by "the people will not accept it", is that maybe they should revolt
They can revolt all they want, all they're doing is crippling Greece. Fools...FOOLS.. who revolt at any chance they get instead of working and making the necessary compromises. The idiots who are revolting just for the sake of revolting are a disgrace to the great men and women who liberated and built Greece.
And how exactly did they liberate Grece, if not by revolting?
Leo, i am not talking about a few scattered riots, i am talking about something that involves a lot of people
Look, I am not a fan of any political party in Greece. The former government was totally useless. They did absolutely nothing while in power and were scandal ridden. Pasok had its share of scandals, and for years promised the earth and the moon, but now that they're in power, they have to make the tough decisions or risk seeing Greece crumble under their watch.
The revolt you're talking about is happening across the earth as hard working taxpayers realize they're getting shafted by the financial oligarchs. Reckless greed has its limits. Myopic bankers think they can go on forever - and as long as politicians help them they will. But there will come a time when a major global revolt will take place. Marx may be long gone but he is grinning in his grave. Capitalists have destroyed capitalism, much like Marxists destroyed communism.
But think of the advantages! I too have been to Greece abd other European countries. A reversion to the 1880s' would definitely lower the Carbon footprint. And one could live the good life prevelant before WW1. This seems to be what the students want and as one knows what the students riot for they get.
Greece will leave the EU and default on its debt. There is no alternative.
http://translate.google.com/translate?hl=en&sl=el&tl=en&u=http%3A%2F%2Fw...
Here is a translated article from a local (Greek) newspaper - there are some interesting points in there i think
For nearly 100 years Americans delude themselves with this "middle class" notion. What has been referred to as American middle class was really a "upper class" in a global sense. A bartender/garbage man, taxi driver, shoe salesman in the US used to earn what the upper class globally would earn. Thats gone. Thre is a larger middle class today ,globally than ever. But an american bartender has fallen far far far down the totem pole. And rightfully so. should an engineer in Bangladesh earn less than an American taxi driver? There is a massive global middle class (scientists, engineers, doctors, lawyers unfortunately, management, hustlers). But the mailman, store clerk, chrysler marketing dept, sadwich shopowner will be in the global lowerclass.
Back in the 90s we had inflation of 22%, and my credit card (a cheap one) had a rate of 36%.
At a local taverna, we could eat and drink (4 people) for 8,000 drachmas (24 euros).
We did have technology and everything else. Money was a little tight, but with 95% home ownership in Crete and no property taxes we were doing fine (yes, Greeks pay no property taxes for one residence).
The problem of Greece is the enormous public sector (800,000 public employess, compared to 200.000 in Portugal and 120.000 in Austria).
They'll take some measures. Whether they work or not that's a different deal. If they return to the drachma, things will eventually go back where they were with some pain in the process. It's a much stronger country than say Iceland and it has a good work force, that is, if the government lets them work and stop promising them public sector jobs.
At any rate, the external or internal impact of Greece's troubles is not as huge as this "hollywood movie catastrophe" I read in the press. As a matter of fact it's minimal (something like 1.5% of the Euro club). But I am worried about the U.S. unfunded liablities, which probably exceed the world's GDP. Those could actually take both the dollar and the Euro down (competing interest, weakening of NATO).
"The problem of Greece is the enormous public sector (800,000 public employees, compared to 200.000 in Portugal and 120.000 in Austria)."
I knew it was bloated, but not that bloated! Thanks for the figures, but a better comparison would be public sector as a % of GDP, comparing Greece to Austria, Belgium, Spain, France, Italy, Portugal, etc.
ciaoant1 - Thanks for the link to the article translation. I was not aware of this Google translation service.
The Google translation of the Greek article is rough, as of 4:20pm EST, but Google offer readers the opportunity to improve the translation of any paragraph or headline, so maybe later today the translation will improve.
The headline at top of article that I would like to see an improved translation of is "What did for Greece information from the Section of the Statistical Office of". ("Τι ?δειξαν για την Ελλ?δα τα στοιχε?α απ? το τμ?μα της στατιστικ?ς υπηρεσ?ας του")
Anyway, the thrust of the article appears to blame Germany for the crisis in Greece. Here's another rough translation excerpted from the article.
"Now, a valid weekly newspaper «Die Zeit" in the last front that adorns the flag of Greece with the stamp "bankruptcy", concludes that the "domino effect on the path of failure that took Greece, Italy and Spain started from reports of rating agency Fitch in London, but the wages of enterprises in Germany. The X Flasmpek stresses that in this way "Germany won enormous advantages in the eurozone over mainly the southern countries and especially towards Greece. "
Maybe someone who understands Greek could provide a better translation of the main point of the article.
The main point appears to be , we would be exporting more if it wasn't for those awful Germans who are more productive and steal all our business...
I'll never forget turning up at a large Greek industrial firm for a 9am meeting, to find the offices empty and locked. Management started to drift in about 30 minutes later and when we discussed their finances, it was abundantly clear they had no real strategy, apart from selling surplus product to the state at a price that covered cash flow requirements.
Have been short Greece ever since.
"What did for Greece information from the Section of the Statistical Office of"
A better translation would be something like "What the information fron the bureau of statistics he runs showed for Greece"
"Now, a valid weekly newspaper «Die Zeit" in the last front that adorns the flag of Greece with the stamp "bankruptcy", concludes that the "domino effect on the path of failure that took Greece, Italy and Spain started from reports of rating agency Fitch in London, but the wages of enterprises in Germany. The X Flasmpek stresses that in this way "Germany won enormous advantages in the eurozone over mainly the southern countries and especially towards Greece. "
A better translation would be:
"The weekly newspaper «Die Zeit" has in the cover of its latest issue a flag of Greece and there is a stamp on it with the word "bankruptcy".
It argues that Greece, Italy and Spain are on their way to bankruptcy not because of the reports of the Fintch rating agency, but because of the wages in Germany. Flasmpek stresses that in this way "Germany won enormous advantages in the eurozone over mainly the southern countries and especially towards Greece."
It is a rough translation, but hopefully it helped
From the Kathimerini (English edition):
Minister to defend crisis plan Papaconstantinou due in Brussels to brief EU counterparts on details of economic recovery program
Finance Minister Giorgos Papaconstantinou is due in Brussels today on a tough mission to convince his European counterparts that his government’s economic recovery plan contains the necessary provisions to curb the country’s gaping budget deficit and ensure that Greece does not become a burden on the rest of the eurozone.
The crisis plan, officially called the Stability and Growth Program, was submitted last Friday to the European Commission, which is expected to provide its assessment by the middle of next month. In the meantime, Papaconstantinou is expected to face a barrage of questions from his counterparts in Brussels about the specific measures his government is planning to get Greek finances back on track. It is also expected that the minister will be questioned about statistics relating to the Greek economy, the credibility of which has been seriously eroded after it emerged that Greece’s budget deficit is 12.7 percent of gross domestic product, nearly twice the figure given by the previous conservative government in summer.
In comments to the press over the weekend, Papaconstantinou reiterated that the PASOK government would do “everything that is necessary” to restore the country’s “huge credibility deficit.” His words were echoed by other prominent ministers, including Defense Minister Evangelos Venizelos, who said yesterday: “If we need to take additional measures, then we will take them but always with a sense of justice, always mindful of the needs of the great majority of Greek citizens.”
One encouraging development over the weekend were the positive comments made by Spanish Prime Minister Jose Luis Rodriguez Zapatero to the newspaper El Pais. “We must have faith in the Greek government. It has presented a credible program for the improvement of state finances,” Zapatero said. “I have faith in (Greek Prime Minister George) Papandreou,” he added.
Another interesting comment from Kathimerini, Greece and Haiti:
Greece and Haiti
By Nikos Konstandaras
Greece and Haiti are worlds apart but both were on the world’s front pages this past week: one for the terrible earthquake and the other because of the threat that its economy poses to itself and to the eurozone. Greece is a member of the world’s richest group of countries, while Haiti is the poorest nation in the Western Hemisphere; out of 182 countries,Greece is in 18th place on the UN’s Human Development Report and Haiti is 149th. The Greeks’ per capita income in 2008 was $32,000, the Haitians’ $790.
There are, however, many similarities between the two countries as well as a moving footnote in their history which Prime Minister George Papandreou referred to at a Cabinet meeting on Thursday: Haiti was the first country to recognize the independence of the Greeks early in their war of liberation, in 1822. As the first independent nation born of a successful slave revolt in 1804, Haiti played an important role in the liberation of other peoples in Central America and elsewhere.
Greece and Haiti, however, are not linked only by their wars of liberation but also by the poverty and autocratic regimes that forced many of their people to emigrate in search of a better life.
Haitians began their mass migration after the dictator Fran?ois “Papa Doc” Duvalier came to power in 1957. Poverty, fear and misery drove more than a million of them abroad. Many did very well, including Canada’s Governor General, Michaelle Jean, singer Wyclef Jean and many others.
The diaspora, then, is common to both Greeks and Haitians, a sign of each country’s troubled history and a symbol of hope for them both to solve the problems that they face today. However different their cases look, the destruction of Haiti and the dead end of the Greek economy stem from a similar problem: Some issues are just too big for a nation state to deal with using just the resources that are within its borders.
Tyler Cowen, professor of economics at George Mason University, speculated on his blog Marginal Revolution that “the country of Haiti, as we knew it, probably does not exist anymore.”
It’s not long ago that a hurricane devastated the country which shares the island of Hispaniola with the much richer Dominican Republic. But last Tuesday’s earthquake was something else: It was the strongest in 200 years and its epicenter was precisely in the nation’s heart – the capital, Port-au-Prince, where 2 million of the country’s 10 million live. Apart from the dead, whose numbers can still not be estimated, houses, public buildings, infrastructure and institutions were destroyed. It will take a long time for the country to begin healing its wounds, which raises the question: How will such a poor country be able to develop now, after the catastrophe, when it was unable to do so before? The answer will have to depend on three things: generous aid from abroad, the intensive contribution of the diaspora and an increase of emigration from Haiti.
In Greece, we have realized that we would be in a terrible state had we not become part of the European Union. But the political security and the prosperity that this provided us seduced us into borrowing far more than we could pay. Our most important problem, though, is the social security system, which, even if we were to patch up the rest of our economy, will blow up in our faces in a few years’ time. There are simply not enough people and not enough funds in this country to keep the system viable. That is why, as in the case of Haiti, Greece needs the assistance not only of its partners but also a change in mentality and immigrants who will give new life to an exhausted economic and political system.
leo maybe you should reconsider your definition of a third world country.greece had drachmas in the 90ies and it was doing FINE.but i guess having your own currency is not trendy for experts like you.as for germany they deserve a big bravo,they tricked every vain idiotic government(france for vain,spain and greece for idiots) in europe to form a monetary union for the common good,and they destroyed their industrial base.just google germany exports and eurozone exports.you will find out that those good germans didn't exports the majority of their products to china,or the us but to countries of the eurozone.that is where their export growth came from,that is what they needed the monetary union.they don't want social and political integration(that would challenge the us),they want your money.of course a man without iq would say that the other countries are uncompetitive,but they have always been like that and they were fine.countries don't have to compete at things they are not good at,that is why they have their own currency.world economy is not the olympics.people here blame china for mercantilism and the germans are doing the same.they export,you consume.they save,you borrow.they don't have to have protectionism because they started they race with an advantage.the germans had siemens(bribing greek governments),vw and the rest,the greeks had small businesses and state monopolies.in 2002 they said now lets compete and of course they won.that is the history of eu.
Ask Ricardo Caballer, he will tell you Greece's financial situation is all the fault of non Greeks who have been willing to purchase Greek debt.
Leo came out with an interesting future projection of a global revolt.....the main point is all there. Capitalism is still an excellent producer of wealth, but somehow, sometimes around the 80's, the Tatcher and Reagan revolutions put in place froces that destroyed or twisted and bent any capacity of capitalism to redistribute this wealth in a decently balanced way.That contained the seeds of the formation of the oligarchic capitalism we are seeing now...when everyone, me included, was convinced karl Marx was dead and we could look forward...the oligarchy set the clock back with greed of an unprecedented and never seen violence.
If the distribution of wealth cannot or wilfully will not be reformed worldwide...the clash will be too real, and if the oligarchs will choose the militarization of society, as it already seems apparent...their take down will be the costliest blood bath in the history of mankind.
But is not yet just behind the corner....
Excellent point Budd...thx.
Q: Whats the plan of the "annointed" ones?
A: Run the currencies into the ground.
Bickering (Hegelian dialectic) is a way to disengage the public from seeing the long term implications of the plan. Will they or will they not bail out the Euro Zone's underperformers? It matters little when Brzezinski would take a World Government as fast as he would like the fracturing of the Euro Zone as well as the fracturing of the United States. Either way, it is win/win for them because the power structure is for their favor.
the eu will never let greece go. the eu will never let any country go. once your in the euro, your in. full stop.
with that in mind you might as well' take the piss' .
the object of the euro is merely to control the nations. there is nothing else.
I agree, Germany is now in control of eurozone, since they are pretty much controlling the ECB.
And they won't let go, Greece, Spain, etc will not exit the eurozone.
If someone is to exit, that is Germany, in case the others pressure them - Germany does not want to devalue
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