Exit from eurozone is Greece's worst option, says Jean-Claude Trichet

German economist Hans-Werner Sinn warns further austerity might push Greece to the brink of 'civil war' ...

Greece's exit from the eurozone would be the "worst possible option", Europe's central bank chief said at the weekend amid concerns over the debt-stricken country's ability to pull itself out of crisis.

Ahead of a crucial week for George Papandreou, the prime minister, with threats of renewed civil unrest over government austerity policies in the run-up to the leader's keynote annual economic speech, the ECB president sought to squash speculation that Athens' only solution was to revert to the drachma.

"We created the euro to achieve the single market for the prosperity and stability of Europe," Jean-Claude Trichet said at a meeting of prominent political and business leaders on the shores of Italy's Lake Como. "The national governments have to take care of their own national competitiveness within the euro area."

The Greek administration has won widespread praise for implementing an unprecedented belt-tightening programme of tax hikes, wage and pension cuts in return for a three-year, €110bn (£92bn) package of emergency aid from the IMF and eurozone nations ...

... the head of Germany's prestigious thinktank IFO Institute, Hans-Werner Sinn, predicted that further austerity would push the nation to the brink of "civil war".

The "least bad" option, he said, would be for Athens to drop the common currency ...

butteredballs
5 September 2010 11:49PM

This is self-serving propaganda from a venal idiot. Greece's ONLY sensible option is an exit.

France and Germany would hate it - because Greece could then repudiate her banking debts (which G.S. helped hide).

This would cause the failure of two or three big German and French banks and damage others.

It's purely out of self interest that the ECB is buying junk bonds and that should tell you all you need to know.

The last thing they want is for the financial class to take a haircut.

Far better that innocent people suffer savage cutbacks for twenty years.

Guardian  05 Sept 2010    Is capitalism the only game in town?

EU unveils tough proposals to curb public spending in member states

Call for regime of penalties for all 27 EU members ...

Unveiling a new "tool box" to promote "economic governance", Olli Rehn, commissioner for economic and monetary affairs, said the entire EU budget should be used to penalise fiscal miscreants and forestall the debt and deficit crises that have thrust the euro into its worst crisis.

Rehn called for the new regime of penalties to be applied to all 27 EU governments, including Britain, and not just to the 16 countries using the single currency.

"We propose for all member states to use the EU budget as additional leverage," said Rehn. "This means, expenditure under structural funds, agriculture spending, fisheries fund. In case of non-compliance with the rules, we foresee first, suspension [of payments]. Second, if non-compliance with recommendations, it would imply loss of payments." ...

From January, Rehn wants all governments to supply their budget, fiscal, and macro-economic plans for prior review by Brussels before they are passed by national parliaments. He hopes to see the proposals made binding by late September ...

Guardian  30 June 2010    

IMF says Spain taking right steps towards stability

'Liberalise'? It sounds so positive. Who would want to be deliberalised?

However, the question should read: who wants to receive lower wages?

But in a world governed by the third face of power, that would give the game away.

NB: Mr Strauss Kahn carries more weight than any elected politician.

Mr Strauss-Kahn said all the measures being put in place by the Spanish government were "clearly being done for the benefit of the economy".

"I am really confident in the medium and long-term prospects for the Spanish economy, providing the efforts that have to be made will be made," he added.

He specifically praised continuing efforts to liberalise the Spanish labour market, saying they went in "the right direction".

BBC NEWS  18 June 2010    IMF

Spanish borrowing costs at new high

'Communitarian Citizenship'

Debt-ridden Greece gets vote of confidence from China

• Chinese sign multibillion euro contracts with Greece
• News come hours after Greek debt downgrade ...

The deals, which will see Greek olive oil being exported to China, were a welcome relief for a government smarting over Moody's move hours earlier to downgrade the nation's credit rating to junk.

As investors moved in the other direction, the world's pre-eminent emerging economy embraced Greece.

Signing the agreements, China's vice premier Zhang Dejiang not only lauded Athens' efforts to resolve its worst debt crisis in years but gave the eurozone's weakest link a public vote of confidence, declaring it would soon come out of the woods.

"I am convinced that Greece can overcome its current economic difficulties," said the politician who arrived in Athens with 30 of the economic power's leading businessmen. "The Chinese government will encourage Chinese businesses to come to Greece to seek investment opportunities."

Greek officials said the fourteen deals amounted to the biggest single investment by China in Europe.

China views Greece as a "perfect gateway" to the continent and Balkan peninsular where Chinese exports have proliferated in recent years ...

Guardian  15 June 2010    China

IMF: Brussels needs more power over euro nations' budgets

Democracy? Not on the IMF's watch!

The IMF today accused eurozone governments of relying on "crisis management" to get through their troubles and warned they needed to move quickly to centralise economic decision making or risk a double-dip recession.

A series of reforms allowing the eurozone to impose stricter discipline on government budgets by increasing power at the centre must be agreed along with plans to tackle the structural weaknesses in the European economic system, including labour reforms, it said.

Without taking action, and moving quickly to harmonise monetary and fiscal policies, growth will stall and public finances will worsen again, possibly dragging down the world economy ...

Guardian  07 June 2010    IMF

Eurozone banks face £165bn in toxic loan losses

The European Central Bank warned today that eurozone banks face a "second wave" of up to €195bn (£165bn) in potential loan losses this year and next and that the financial sector is facing "hazardous contagion" from the sovereign debt crisis.

The ECB said eurozone banks would need to make provisions for further losses this year of €90bn, and €105bn in 2011, on top of some €238bn in bad debts written off by the end of 2009.

"We are experiencing now a second wave of writedowns, which relate to the performance of loans," ECB vice president Lucas Papademos said ...

Spanish unions have threatened to call a general strike over changes to rigid labour laws which economists regard as a barrier to job creation, exacerbating an unemployment rate which has hit 20% and is the highest in the 16-nation eurozone.

Zapatero's cause was boosted by praise from Dominique Strauss-Kahn, the International Monetary Fund's managing director, who backed Spain's austerity budget package ... although he made clear more needed to be done ...

gazon
1 Jun 2010, 8:34AM

These economic authorities who forced President Zapatero to make cuts in the salaries of the public workers, pensions and benefits of mothers are the very same authorities who a year or two ago were telling Spain and all EU countries to spend, never mind the deficit.

Now they say that the budget must be balanced (in the UK too) no matter what even if it brings out an economic contraction.

It is passing strange that in view of the failure of capitalism the left is being punished by the voters.

Guardian  31 May 2010    IMF

FTSE falls over 100 points on global recovery fears

European banks' exposure to indebted nations unsettles investors

Equity investors are panicked in part by the veil banks draw over their loans to sovereign nations.

Estimates put the total euro area exposure of foreign banks to Greek sovereign debt at €76bn (£65bn), with France accounting for about half and Germany a quarter of the total.

Estimates for Portugal, which may be vulnerable to a default, are €32bn.

German banks are estimated to account for half the loans to Spanish property developments, much of it on the Costas and now worthless.

So we have an unholy alliance between the French and German banks and the wider bond investment community. They want Greece, Portugal and Spain, along with Italy, Austria, Latvia and every "risky" nation to submit to austerity, to maintain their interest payments and cut their debt overhang.

It preserves the wealth of bondholders and in turn protects French and German banks.

But why should sovereign nations accept these demands. Surely bondholders, whether they are German banks or anybody else, should be punished for poor lending decisions. American and UK banks were punished for lending to sub-prime property owners; should German and French banks be protected from lending to sub-prime nations?

It is time bondholders took a severe haircut on their wealth, with the French and Germans taking the lead.

Guardian  25 May 2010

FTSE crashes through 5000 mark

• FTSE 100 loses 2.5% to nine-month low
• Bank shares hard hit by euro debt worries
• Market fears over North and South Korea

Guardian  25 May 2010    G20_IMF

UK and France reject EU bank plan

Coalition ministers and bankers to oppose pan-European resolution fund

EU unveils bank tax to prevent bailouts

EU plans upfront levy on lenders

IMF raises fresh concerns about the Spanish economy

The IMF - true to form - wants more 'precarity' for workers

The International Monetary Fund (IMF) has raised fresh concerns about Spain's economy, saying "far-reaching" reforms are needed to ensure its recovery ...

"It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency," said BBC economics correspondent Andrew Walker.

"The IMF says bluntly, the Spanish labour market is not working and needs reform of pay bargaining and lower payments for fired workers."

Last week, the Spanish government approved a 15bn euro austerity plan, including a 5% cut to public sector salaries, as it aims to reduce its deficit.

Spain is also having to cope with unemployment of more than 20% ...

BBC NEWS  24 May 2010    IMF

'Communitarian Citizenship'

German short-selling ban sparks new euro crisis

Germany's crackdown on short-sellers of bonds — widely blamed in the country for the deepening eurozone debt crisis — was intended to shore up the embattled single currency.

But the markets took the action as a sign of political panic and at one point yesterday the euro slid to a four-year low of $1.2146.

Governments in other eurozone countries left Germany isolated by coming out against the move.

French finance minister Christine Lagarde ruled a similar move and called instead for an urgent meeting of European regulators to discuss the German ban.

Sweden and the Netherlands also ruled out any similar measure ...

Guardian  19 May 2010

Schäuble interview: Berlin’s strictures

Fears Intensify That Euro Crisis Could Snowball

“This bailout wasn’t done to help the Greeks; it was done to help the French and German banks,” said Niall Ferguson, an economic historian at Harvard. “They’ve poured some water on the fire, but the fire has not gone out.”

The European rescue plan, totaling 750 billion euros, is intended to head off the risk of default but would vastly increase borrowing. That could hamstring Europe’s nascent recovery.

Indeed, it was too much debt that caused the problem in the first place: a new report by the International Monetary Fund warns that “high levels of public indebtedness could weigh on economic growth for years.”

The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually ...

NYT  16 May 2010

The E.U.'s Dangerous Game

There are lessons to be learned from this debacle. First, no government should sign an agreement that guarantees an open-ended recession, and leaves it to the world economy to eventually pull them out of it.

This process of “internal devaluation” — whereby unemployment is deliberately driven to high levels in order to drive down wages and prices while keeping the nominal exchange rate fixed — is not only unjust, it is unviable. This is even more true for Greece, given its initial debt burden.

The tens of thousands of Greeks in the streets have it right, and the E.U. economists have it wrong. You cannot shrink your way out of recession; you have to grow your way out, as the United States is doing (albeit too slowly).

If the E.U. and the I.M.F. will not offer a growth option to Greece, the country would be better off leaving the Euro and renegotiating its debt.

Argentina tried the “internal devaluation” strategy from mid-1998 to the end of 2001, suffering through a depression that pushed half the country into poverty.

It then dropped its peg to the dollar and defaulted on its debt. The economy shrank for just one more quarter and then had a robust recovery, growing 63 percent over the next six years ...

NYT  12 May 2010

Peer Review of Fiscal Policies

Here's an issue that might disturb the Nick 'n Dave show ...

EU Commission Plans Closer Oversight of National Budgets ...

Rules proposed by the European Commission, the bloc's executive, on Wednesday are aimed at preventing countries from running up huge budget deficits in the future ...

The commission wants to prevent countries getting into a mess in the first place. And while the proposal is primarily aimed at the group of 16 states that use the euro as their currency, the plan would apply to all 27 members ...

The commission would like to see countries that repeatedly breach its strict limits for budget deficits and debt levels have their subsidies and funding frozen ...

The most contentious proposal, however, is likely to be the one asking governments to submit budget proposals to other EU finance ministers even before they go before their own parliaments ...

The plans mark a change in tone from Brussels as the commission pushes for a more coordinated effort to deal with problems in the bloc's interlocked economy.

It would effectively curtail individual countries' control over their own economies in order to stop countries being forced to shoulder the burden of reckless member states' debts.

The commission will need the backing of the EU governments before such rules can be transformed into legislation.

Der Spiegel  12 May 2010

Global shares fall amid fear of Europe austerity plans

Eurozone 'economic government' will affect Britain too

European stabilisation mechanism

Governments up the stakes in their fight with markets

Why has such radical intervention been found necessary? It is, after all, hardly what the designers had in mind. This is where we need to go back to the beginning of the project for a currency union. It rested on three central assumptions: first, treaty-defined limits would constrain fiscal deficits of members; second, to the extent that this failed, the “no bail-out” clause would constrain them; and, third, member economies would converge over time. Alas, none of this has proved to be true ...

FT  11 May 2010

Lessons that Europe failed to learn

... there appear to be plenty of lessons that the eurocrats either failed to understand or, fearing a backlash from electorates, were too scared to implement.

For instance, why did we wait so long for a rescue plan? For more than eight months respected commentators have argued that Greece was a train without brakes, coming down the track at breakneck speed. Like Northern Rock, it needed to be dealt with to stop any threat of contagion.

The contagion word crops up because all EU countries have large debts and have agreed budgets this year that increase those debts still further.

Eurozone countries have total government debt worth £6tn. Germany alone has racked up £1.4tn of the total, while Greece accounts for £250bn.

Delay will only make things worse. So only someone who has failed to learn those lessons would wait until Greece's two-year bond rates hit 20%, as they did on Friday, and fears of instability had damaged its neighbours' reputations.

The idea of moral hazard, or the fear that a bailout will encourage profligacy in other nations, is another lesson unlearned ...

Guardian  10 May 2010

Global shares fall amid fear of Europe austerity plans

Eurozone strugglers must act decisively

Britain must fend for itself

IMF has one cure for debt crises – public spending cuts with tax rises

... while recent history suggests that the protesters in Athens have every reason to be wary of the strings attached to the fund's financial assistance, there are those who think that it is not the real villain in the crisis.

Stephen Lewis, of Monument Securities, says the culprits are the commission and the ECB, who baulked at the suggestion that Greece should have been allowed to restructure its debts, something that would have hurt banks in other euro area countries.

"The IMF should probably not be held wholly responsible for the conditionalities attaching to Greece's bailout. Over the years, IMF bailouts have typically included an insistence on exchange rate flexibility. The IMF has often also supervised a restructuring of the debtor country's liabilities. These elements in the IMF's standard approach make some economic sense."

Lewis adds that these conditions were absent from the Greek bailout, because devaluation would have been tantamount to the country leaving the eurozone, something that Brussels and Frankfurt could not stomach.

As a result, the only remedy available to Greece is prolonged and savage deflation – the precise opposite of what was deemed necessary everywhere else to prevent recession turning into depression.

Guardian  09 May 2010    IMF

Debt Aid Package for Europe Took Nudge From Washington

Reform the euro or bin it

German coalition 'suffers key regional poll loss'

The campaign has been overshadowed by the government's decision to contribute to a huge rescue package for Greece.

Meanwhile many cities in NRW are on the brink of bankruptcy ...

ANALYSIS
By Steve Rosenberg, BBC News, Berlin
It's only one regional election, but it matters because defeat in North Rhine Westphalia deprives Chancellor Angela Merkel of a majority in the upper house of the German parliament. And without that, she'll find it much harder to push through the national legislation she wants.

The multi-billion euro bailout of Greece may be one reason that voters have turned against her. The rescue package is extremely unpopular with the German public.

But it's not just Greece. Ever since they took power nationally, Chancellor Merkel's coalition of Christian Democrats and Free Democrats haven't stopped squabbling - over everything from body scanners at airports to budget deficits. And the more they've bickered, the more unpopular they've become.

The leader who's been nicknamed "Iron Angie" is suddenly looking weaker.

BBC NEWS  09 May 2010

Eurozone crisis is 'postponed'

EU ministers offer 500bn-euro plan

Darling rules out British support for euro

Chancellor says that responsibility for propping up single currency must be limited to eurozone countries ...

Darling is expected, however, to offer support for the use of about €60bn (£52bn) to come to the aid of any member state that runs into trouble, an extension of an existing fund that was originally set up to supply aid in the event of a natural disaster ...

Guardian  09 May 2010

Darling trapped in euro deal

Alistair Darling has agreed to consult directly with George Osborne and Vince Cable as European leaders looked poised to push through a new multi-billion pound bail-out fund part-financed by British taxpayers ...

The key element is an extension of an existing bail-out package, already used to support Hungary and Latvia.

This involves extending an already-existing Lisbon Treaty clause originally designed to provide cash for economies hit by natural disasters.

Under this, the European Commission will borrow directly from markets, with its own finances guaranteed by EU nations – something which would leave the UK public finances exposed if a country fails to repay the loan. It could also impact the UK's credit rating.

Another plan being considered is to create a permanent continent-wide equivalent of the International Monetary Fund ...

Telegraph  08 May 2010

Osborne sounded out by euro finance ministers

Control the jackals

Greek Debt Woes Ripple Outward

Darling joins EU plan to rescue sinking euro

EU leaders announce €70bn plan to protect euro

Messrs Merkel and Sarkozy might do well to reflect on the time Britain took on the international speculators and lost.

The day George Soros made a killing shorting the pound; the day the Treasury spent £27 bn trying to prop up an overvalued currency.

Is this the, er, 'thinking' behind the empty sub-Churchillian rhetoric from the corporate lackey in charge in Brussels.

They should be taking their cue from John Palmer and Joseph Stiglitz, and go back to the drawing board: the anti-IMF/WTO drawing board.

The one that puts people before the likes of Goldman Sachs.    Black Wednesday

EU leaders have agreed a financial defence plan in an attempt to protect the eurozone countries from speculative attacks in the wake of the Greek debt crisis.

The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said today that an "intervention unit" designed to preserve financial stability in the 16 eurozone countries would be in place by Monday when the markets reopen.

The creation of the unit, which will have up to €70bn at its disposal to shield the euro against further market speculation ...

The European commission president, José Manuel Barroso, said: "We will defend the euro whatever it takes. We have several instruments at our disposal and we will use them."

Jean-Claude Juncker, who heads the Eurogroup of eurozone finance ministers, said: "We are talking about a global attack against the euro, and the eurozone must react as one."

Guardian  08 May 2010

It's time the EU had a new economic philosophy

The current system for running the euro structure is ... toothless ... that ... the Greeks are now paying a heavy price in social injustice for so-called Greek national sovereignty.

National governments are not obliged to work within a coordinated euro-area wide economic strategy. They pay no penalty for breaking the rules ...

There are other glaring deficiencies.

There is no adequate system for transfers of resources to compensate the less competitive EU regions and countries for the inevitable effects of economic integration such as exists in all other economic and monetary unions (such as the United States).

There is not even a symmetrical obligation on those euro-area countries that are strongest to stimulate consumption and growth and thus to balance measures by weaker economies obliged to curb consumption and employment because of excessive budget deficits and state debt ...

The EU leaders ... should unambiguously signal their intent to make European economic union a reality by give euro-area decision-making bodies real decision-making powers over fiscal policy, discipline and balanced economic growth ... the EU as a whole must accelerate plans for tough European wide regulation of financial markets, banks and speculators something which whoever forms the next British government would do well to support ...

In truth, the very foundations of the global neo-liberal system ... is now discredited.

The EU as a whole also needs a new economic philosophy based on green and sustainable growth and which encourages social cohesion ... and which actively promotes greater social equality.

Guardian  07 May 2010    Blog    Economic Democracy    IMF

Reform the euro or bin it

Britain's banks must tell us how much Greece owes them

Moody's warned yesterday that any additional perception that other governments might default on sovereign debt would hit the UK particularly hard, because our banking sector is disproportionately large ...

... Britain's banks have a problem. The Bank of International Settlements says UK institutions have lent $15bn to Greece, $24bn to Portugal, $77bn to Italy and $114bn to Spain. Defaults would therefore be very painful for some ...

In France ... individual institutions have begun to give details of what they are owed ...

Is it too much to expect that Britain's banks should begin making similar declarations, particularly as Europe's financial authorities are now publicly urging institutional investors not to dump their Greek bonds?

The Independent asked each of Britain's largest banks for details of their exposure to Greece last week – not a single one was prepared to even offer a ballpark figure ...

Independent  07 May 2010    IMF

'Very real' threat that Greek contagion could spread to Britain

Pound dumped by investors over political uncertainty

Reform the euro or bin it

Joseph Stiglitz puts people before "a flawed economic model"

Germany (like China) views its high savings and export prowess as virtues. But ... Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a "negative externality" on trading partners. Indeed, Keynes believed it was surplus countries, far more than those in deficit, that posed a threat to global prosperity; he went so far as to advocate a tax on surplus countries.

The social and economic consequences of the current arrangements should be unacceptable.

Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.

One proposed solution is for these countries to engineer the equivalent of a devaluation – a uniform decrease in wages. This, I believe, is unachievable, and its distributive consequences are unacceptable …

There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. ...

There is a third solution, which Europe may come to realise is the most promising for all: implement the institutional reforms, including the necessary fiscal framework, that should have been made when the euro was launched.

It is not too late for Europe to implement these reforms and thus live up to the ideals, based on solidarity, that underlay the euro's creation.

But if Europe cannot do so, then perhaps it is better to admit failure and move on than to extract a high price in unemployment and human suffering in the name of a flawed economic model.

Guardian  05 May 2010

exiledlondoner
6 May 2010, 8:40PM

When Wall Street thinks rigid austerity measures are not the way forward, then it's time to try a new approach.

Will the Eurozone countries allow themselves to be sacrificed one by one to maintain Germany's position?

The problem is that Greece, Spain and Portugal desperately need a devaluation - something that to the Germans is akin to heresy.

This was always going to happen sooner or later, when they fudged the convergence criteria - the Eurozone is not one economy.

Guardian  06 May 2010

   IMF

Wall Street panic as Dow plunges on fears for financial system

Greece and the single currency: Europe's existential crisis

Argentina to repay 2001 debt as Greece struggles to avoid default

Greece agrees painful cuts in return for bailout

Leigh Thomas, 12:42, Sunday 2 May 2010

The Greece government announced it would slash pensions, hike taxes and halt year-end bonuses on Sunday as it called for a national sacrifice to access a 120 billion euro bailout and beat bankruptcy.

Prime Minister George Papandreou announced Athens had reached a deal with the European Union and International Monetary Fund to secure loans in return for deeply unpopular austerity measures in a desperate bid to save the nation.

"With our decision today our citizens will have to make big sacrifices," he said in a televised address at the start of an extraordinary cabinet meeting, one day after police clashed with protesters angry at the austerity drive.

Greece has been under heavy pressure to cut a massive public deficit that has rattled international markets and sparked fears of contagion to other heavily indebted European countries.

The country faces an urgent need for help with nine billion euros (12 billion dollars) in debts due on May 19.

In exchange for emergency loans, Greece agreed new budget cuts of 30 billion euros over three years with the aim of slashing the public deficit to less than three percent of output by 2014, said Finance Minister George Papaconstantinou.

The deficit reached 13.6 percent of gross domestic product last year.

Among the major measures to make the budget cuts, the Greek government is to scrap bonus 13th and 14th month wages for public sector workers as well as for retired people from both the public and private sectors, Papaconstantinou said.

The 21-percent value added tax would also be lifted this year by one to two percentage points. Illegal construction, which is rampant in the country, would also be taxed.

Papaconstantinou said the measures were the "only road to save the country", which was threatened with default on debts totalling nearly 300 billion euros.

The country faces a long road out of recession as the finance ministry announced that the economy would shrink by four percent this year, instead of the previously estimated 2.0 percent, and only return to growth in 2012.

The debt will rise from 133 percent of output this year to peak at 149 percent in 2013 before beginning to fall again in 2014, the ministry said.

Papaconstantinou said the overall value of the EU-IMF bailout package would be announced at an extraordinary meeting of eurozone finance ministers Sunday afternoon in Brussels.

French Finance Minister Christine Lagarde has said the loans could run from 100 to 120 billion euros (133 billion to 160 billion dollars) over three years.

Visibly uneasy making the announcement on the morning after violent anti-government protests in Athens, Papandreou said the size of the bailout was "without precedent" in the world.

After months of hesitation, eurozone countries decided to accelerate rescue efforts for Greece out of fear its debt crisis could pull down other members with severely strained public finances such as Portugal or even Spain.

"Today the problem has taken on huge dimensions, today the fire risked extending not only to Greece but to the eurozone and beyond," Papandreou said.

"The cost of extinguishing it is very high, and it's very high for Greek citizens."

Speaking after Papandreou's announcement, European Union Commission Jose Manuel Barroso recommended the aid package be activated, saying the austerity measures planned by Athens were "solid and credible".

After eurozone finance ministers back the deal, the funding will have to be approve by some parliaments, including the German and French legislatures.

Greece was left with no choice but to turn to the EU and IMF after its borrowing costs soared to record heights and its credit rating was cut ot junk status last week.

The government, the EU and the IMF wrapped up negotiations on Saturday as 15,000 people swarmed through the streets of Athens in May Day protests against the austerity drive.

Anti-riot police fired tear gas at youths to contain clashes on the margins of the marches which Greek union leaders wanted to be a prelude to what they hope will be a crippling nationwide general strike on Wednesday.

Yahoo 02 May 2010

Greece wins widespread support for boldness of reform plans

Greece faces ‘big sacrifices'

Eurozone agrees €110bn Greece loan

Maastricht madhouse fuels EMU-wide contagion

In a rational world, Brussels would tap the EU's AAA rating to issue cheap "Barroso Bunds" to cover rescue costs.

But we are not in a such a world.

We are in the Maastricht madhouse, a currency union without a treasury, ruled by the "no bail-out" clause of Article 125 of the EU Treaties.

Europe is at last paying the price for fudging the true implications of EMU ...

Four professors will launch a legal challenge in early May at the Verfassungsgericht (high court). Should they secure an injunction, EMU may fly apart.

The Court ruled in 1993 that Maastricht was constitutional only as long as EMU remains an area of monetary order.

"A 'transfer union' is a bottomless pit and is bound to threaten currency stability. That is what we are going file," said Tübingen Professor Joachim Starbatty.

When accused of consigning Greece to ruin, he told the Frankfurter Allgemeine that EMU exit and default is Greece's only salvation.

"The truth has to come out into the open. Greece is in no position to pay it debts," he said.

The EU-IMF "therapy" of deflation for Greece repeats the catastrophic errors of Chancellor Heinrich Bruning in the early 1930s and must lead to a depression, he said.

Yet that is what IMF chief Dominique Strauss-Kahn is preparing for Greece ...

"The only effective remedy that remains is deflation. That will be painful. That means falling wages, and falling prices. There is no other way."

Actually, the IMF pursues other ways often, last year in Jamaica. What Mr Strauss-Kahn means is that the EU will not tolerate any other way.

The Greek people must be sacrificed for the Project ...

Telegraph  25 Apr 2010

IMF chief Strauss-Kahn tries to ease Greece fears

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, says the Greek people should not fear the IMF ...

ANALYSIS
Andrew Walker, BBC News, Washington

A cuddly, friendly IMF - that was the picture painted by Dominique Strauss-Kahn.

Inevitably, the prospect of IMF involvement in the Greek rescue has some people worried. The reputation is for painful cuts in public spending, which are unwelcome in their own right and seen by some critics as likely to aggravate an economic downturn.

The Greeks are not the only ones demonising the IMF, Mr Strauss-Kahn said. This is how he said they ought to see the IMF: as "a kind of cooperative organization, where all the countries of the world work together to try to help those in trouble. Today, Greece is in trouble. Tomorrow, maybe another".

Preventing the crisis spreading to some of those others is what the IMF is keen to do.

What we know is that Mr Strauss-Kahn is keen to get on with things and have the IMF loan agreed. But he batted away questions about the detail ...

For all the cuddliness, the policy conditions are likely to be painful. The aim will be to stabilise Greek government debt.

The IMF's critics will argue that cutting public spending is the wrong thing to do in an economy that is already contracting.

It is certainly a tough judgment to get right, but further cuts and the political trauma they bring are likely to be on the menu.

BBC NEWS  25 Apr 2010    IMF

Greek meltdown in danger of spreading

Years of austerity for bailed-out Greece

Europe evolves

Several articles use the word 'endgame' in respect of the Greek crisis. The FT reports that the EU's economics commissioner - Olli Rehn - wants tougher auditing powers, but it avoids the logical conclusion: that sixteen sovereign governments cannot have sixteen independent economic policies AND share a single currency.

Mr Rehn is wise to reconsider the eurozone’s rules. But his singleminded focus on reprimanding deficit countries is not enough.

A new rulebook should not continue to simply punish the overindebted. It should also encourage nations that run large current account surpluses to spend more.

Europe also needs new enforcement mechanisms. If elected politicians are to follow the rules, voters must reward them for doing so.

That means, above all, that the euro laws must be enforced for all countries – not just the small ones ...

FT  15 April 2010

Fury in Greece over IMF intervention

Greece asks for IMF-EU rescue talks

Greece is the first domino to fall, but are others far behind?

Greece has no option but to take the money

Greek bonds fall further

Merkel's Greece Deal 'Betrays the Concept of Europe'

The center-left Frankfurter Rundschau writes:

"If -- after forty years and a single currency -- the Chancellor now calls on the International Monetary Fund to save Greece, she is betraying the very concept of Europe.

"In calling on the IMF, Merkel calls on none other than the United States, which dominates the IMF with its blocking minority of 17 percent. What a wretched state of affairs. What a disgrace for the European Commission and the European Central Bank. It is as if Germany could not solve a problem of the size of Hesse.

"And the betrayal goes deeper still: In the past, every European crisis has deepened EU integration. It moved forward in the very moments when the pressure became unbearable and the institutions revealed weakness. Now, though, it is moving backwards." ...

Der Siegel  26 Mar 2010

Europe manages a wise compromise

After much dispute ... eurozone leaders decided this week to ask the IMF to finance a rescue package for Greece, one-third funded by the Fund and two-thirds funded by other members ...

The help for Greece is to provide the breathing space the country needs to put its fiscal house in order.

Should this prove impossible, restructuring must be not unthinkable, but inevitable and, despite its evident social, economic and political costs, even desirable ...

FT  26 Mar 2010

Partners paper over cracks in Athens deal

Eurozone eyes IMF-style fund

'Detrimental to the Euro'

A top official at the European Central Bank has taken the unusual step of publicly criticizing the German government.

Lorenzo Bini Smaghi, one of the ECB's six board members, has attacked plans to call on the International Monetary Fund to come to the aid of Greece, saying such a move could undermine Europe's common currency, the euro.

"If the IMF steps in, the image of the euro would be that of a currency that is able to survive only with the external support of an international organization," he told the influential German weekly Die Zeit, in an interview to be published on Thursday.

German Chancellor Anglea Merkel has repeatedly suggested that cash-strapped Greece turn to the IMF instead of relying on the European Union -- or other countries in the 16-member euro zone -- for financial assistance, should it become necessary.

France has recently indicated that it agrees with Merkel's position.

Indeed, the two big countries could push through the plan during the European Union summit on Thursday and Friday in Brussels despite deep misgivings in the rest of the 27-member bloc about allowing the IMF to dictate terms to a euro-zone country ...

Der Spiegel  24 Mar 2010

European Monetary Fund being considered by Brussels

The European Commission has confirmed that it may set up a version of the International Monetary Fund to bolster the eurozone's financial stability. Germany and France are leading the move, part of a series of initiatives aimed at avoiding a repeat of the sort of financial crisis engulfing Greece ...

BBC NEWS  08 Mar 2010

Brussels targets derivatives to help euro

EU Monetary Union

German Banks Turn Their Backs on Greek Bonds

Greece needs to refinance 20 billion euros' worth of debt by May, but has found it difficult to raise money on the bond markets.

On Thursday, the country delayed an issue out of fear of a ratings downgrade. And on Friday, German banks said they aren't interested in taking on more Greek debt.

The deadline facing Athens is an ominous one. By April and May, Greece must refinance €20 billion in sovereign debt, the first chunk of the €53 billion the country will need to refinance by the end of the year. But as winter turns to spring, it's growing apparent that Greek efforts to raise money face big challenges ...

The news highlights just how challenging the road ahead is for Greece. The country is carrying €300 billion in sovereign debt and its budget deficit runs to 12.7 percent of gross domestic product, more than four times the 3 percent allowed by the rules governing Europe's common currency zone ...

Meanwhile, US Federal Reserve Chairman Ben Bernanke said on Thursday that the Fed is looking into derivative contracts created for Greece by Goldman Sachs which helped Athens hide large chunks of debt as it was joining the euro zone.

"Obviously, using these instruments in a way that intentionally destabilizes a company or country is counterproductive, and I'm sure the (Securities and Exchange Commission) will be looking into that." ...

Der Spiegel  26 Feb 2010

Banks Bet Greece Defaults on Debt They Helped Hide

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich ...

NYT  24 Feb 2010

Greece loses EU voting power in blow to sovereignty

The council of EU finance ministers said Athens must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether.

It if fails to do so, the EU will itself impose cuts under the draconian Article 126.9 of the Lisbon Treaty in what would amount to economic suzerainty.

While the symbolic move to suspend Greece of its voting rights at one meeting makes no practical difference, it marks a constitutional watershed and represents a crushing loss of sovereignty ...

Telegraph  16 Feb 2010

Most Germans want Greece thrown out of euro

A poll for popular newspaper Bild am Sonntag found that 53pc of Germans wanted Greece to be expelled from the euro if necessary in the coming months.

Two-thirds were adamantly against German money being put towards a bail-out of the troubled country, the paper also found ...

The German constitution has legal restrictions on any prospective bail-outs of other nations.

However, it is the scale of public disapproval for such a move that is of particular concern to German politicians.

The proposals have created fractures in the country's ruling coalition, with Mrs Merkel's coalition partners, the Free Democrats, aggressively resisting such a move.

The party's Treasury spokesman Otto Fricke said: "Solving this problem cannot be about aid for Greece. If anything, it's about keeping any damage away from German taxpayers." ...

Telegraph  15 Feb 2010

ECB slammed as Europe crumbles

Europe's south refuses to downsize without a fight

The hard-hit 'Club Med' countries of Greece, Spain, Portugal and Italy once flourished within the eurozone. Now the financial markets have turned on Athens, and Greece's neighbours fear they could be next ...

Suddenly Greeks who had never borrowed in their lives went on a spree, buying summer homes, second cars and anything else that was perceived to improve lifestyles.

"After joining the euro they changed behaviourally. People who had always kept their money in the bank started spending and borrowing, putting refrigerators, cars, everything on credit cards," the former minister told the Observer. "And the state did the same without ever thinking how the hell it was going to pay the money back." ...

In Spain, the replacement of the peseta with the euro played its part in unprecedented boom years that generated a lethal property bubble. The sharpness of the downturn since the global financial crisis struck has been shocking.

Spain's unemployment rate has hit 19.5% – twice the EU average. There are now four million people out of work. More than a million homes have no breadwinner ...

The tale of woe continues in Italy, where industrial output plunged by 17.4% in 2009, and many small exporters are fighting for survival.

A recent report by the business organisation Confesercenti estimated that the nation's shopkeepers are now paying billions of euros a year to loan sharks – often backed by mafia clans – to cover loans that incur 10% a month in interest charges.

Public debt at the beginning of 2010 was the third highest in the world after the US and Japan and is expected to soar to 115% of GDP in 2009. It currently stands at €1.663 trillion ...

Observer  14 Feb 2010

Can anyone fix the euro puzzle?

Wall St. Helped Greece to Mask Debt

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts ...

One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards ...

NYT  13 Feb 2010

'Timid' EU must not make us fight this battle alone, says Greek prime minister

"there is a sense that summits of 27 leaders can be too unwieldy and indecisive" (!)

George Papandreou, the Greek prime minister, today slammed the EU for displaying "timidity" in its dealings with the country as it grappled with its worst financial crisis in a decade ...

The union had, he said, been fragmented by multiple voices, differences and diverging statements. "There was speculation about our country which created a psychology of imminent collapse, prophesies which risked becoming self-fulfilling," he said. "There was a lack of co-ordination between various bodies of the union, the commission, the member states, the European Central Bank, even different opinions within those bodies."

EU leaders also failed to impress the financial markets with their tentative response to the Greek debt crisis and suffered another blow from fresh data today showing the eurozone economy stagnated in the last quarter ...

The crisis management by small groups of key leaders, orchestrated by the new European council president, Herman van Rompuy, illustrated how such emergencies might be handled in the future in Europe, as there is a sense that summits of 27 leaders can be too unwieldy and indecisive.

Olli Rehn of Finland, the new European commissioner for economic and monetary affairs, said the EU needed to be bolder in monitoring member states' economic policies to avert a repeat of the crisis. "We urgently need deeper and bolder surveillance of economic policies," Rehn said ...

Guardian  12 Feb 2010

Greece faces devaluation, default or deflation.
Next stop the IMF

We feel your pain. But not enough to put our hands in our pockets to help you. Behind the sham show of solidarity, the simple message for the troubled government of George Papandreou was that Greece is not Alabama and Brussels is not Washington.

In the United States, the federal budget is worth around 25% of national output each year. States where the economy is booming pay more in tax receipts to the Treasury than they take out in spending. Poor states receive more from Washington than they raise in taxes. The sun belt subsidises the rust belt.

Europe has no such mechanism ...

Guardian  11 Feb 2010   Blogs

Will markets call EU bluff on Greek rescue?

Greek bail-out accord lacks substance and finance's poker players may soon call its bluff ...

The 27 leaders never even discussed how they might shore up Greece or the rest of Club Med. German Chancellor Angela Merkel said she was not willing to broach the subject at all.

The only relevant topic was whether Greece was complying with Treaty obligations, and how the country would slash its budget deficit from 12.7pc to 8.7pc this year – in a slump.

"They offered nothing," said Jochen Felsenheimer, a credit expert at Assenagon in Frankfurt. "It was just words without any concrete measures, hoping to buy time."

Whether the EU has time is an open question. Credit Suisse says Greece must raise €30bn (£26bn) in debt by mid-year, mostly in April and May. Greek banks have been shut out of Europe's inter-dealer markets, forcing them to raise money at killer rates. They are suffering an erosion of deposits as rich Greeks shift money abroad ...

Telegraph 11 Feb 2010

Banks hit by lack of detail

Greece left isolated and vulnerable to markets by German refusal to pay for Athenian errors ...

Optymystic
12 Feb 2010, 12:31AM

I cannot accept that waiting for the IMF to fund Greece does anything for the limited credibility of the EU. Obama and the rest of the US administration are evidently not interested in dealing with the Europeans on an individual basis, why should he talk to the Luxembourg premier, or even the Belgian for that matter. I don't thing the Chinese take these one-horsed republics, dukedoms and monarchies any more seriously ...

Obama has found the idea that four different individuals claim to speak for Europe farcical and this is not an attitude which is likely to alter if, heaven forfend, in four years time he is replaced by Sarah Palin or some other neocon. The Union needs to start operating one and the Greek crisis provides an ideal opportunity. There is no need for German tax payers to fund Greek black marketeers. Europe should have organized a hard loan, with a strict repayment schedule, forcing a rigorous tax regime and budgetary control. That loan would buy Greece time, hold down the cost of its borrowing, and stabilise the euro.

The British should have been actively involved. It is ridiculous to suggest that the UK does not have an interest in the Eurozone. Where does it expect its exports to go? The UK should be joining with France and Germany in buying Greek debt. The UK has a clear interest in maintaining the Euro at relatively high value.

princesschipchops
12 Feb 2010, 12:34AM

FuriousCameltoe I actually agree with you (faints) Greece probably would prefer to be out of the Euro right now. In fact I am actually starting to think that this crisis may destroy the Euro quite quickly. Because they have made an economic union but not it seems a political union. So there is no real way of dealing with this crisis. And what we are seeing all over the world is the retreat of many countries into protectionism in one form or another. It is going to be interesting to see what wins over in some of the bigger EU players minds - the desire to protect their own nation or the desire to see this project succeed.

If the desire is to see this project succeed then of course they will probably eventually reach into their pockets. But right now I am not sure they will. Of course the poor buggers living in Greece - ordinary normal people - are the ones who right now will be suffering. They are the ones who will be anxious and fearful. The ones who may face sudden job losses, hikes in taxes and all other sorts of nasty things.

But hey - aint capitalism great!

MacCosham
12 Feb 2010, 6:45AM

Angela Merkel, the German chancellor, would find it hard to explain to the citizens of Berlin or Cologne, who have to work until they are 67, why they should put their hands in their pockets to prevent the Greek retirement age going up from 61 to 63.

Employed, 60-64: Greece 31%, Germany 23% Employed, 65-69: Greece 8%, Germany 3% (http://en.wikipedia.org/wiki/Retirement)

Larry Elliot, you are either a liar or an idiot that spouts nonsense. You have a single fact in your article among all the hot air, and it is blatantly wrong.

Just as moronic is the idea that Greece is somehow close to default. The only acute problem Greece has at the moment is the attack by Wall Street and City parasites, who are skimming off 3% of GDP by speculation. To put this in perspective, net inflows of EU funding to Greece is less than 1,5% of GDP.

Guardian 11 Feb 2010

How Brussels Is Trying to Prevent a Collapse of the Euro

Sub Text: It's about relinquishing more sovereignty to Brussels

Cohesion and Stability

The Commission doesn't hold Greece solely responsible for the current euro woes. Experts close to Economic and Monetary Affairs Commissioner Joaquín Almunia say nearly every participating country is compromising the cohesion and stability of the common currency.

"The combination of decreasing competitiveness and excessive accumulation of national debt is alarming," the experts wrote in a recent report, adding that if the member countries don't get their problems under control, it will "jeopardize the cohesion of the monetary union."

Differing economic development within the euro zone and a lack of political coordination are to blame, they say. In the more than 10 years since the euro was introduced, the Commission states, it has become clear that simply controlling the development of member states' budgets is not enough. What that means, more concretely, is that the stability provisions stipulated in the Maastricht Treaty to regulate the common currency aren't working, and member states need to better coordinate their financial and economic policy measures.

That is precisely what euro skeptics have said from the beginning -- that a common currency can't work in the long run without a common economic and financial policy. The member countries' governments ignored these objections, unready to give up a further aspect of their national sovereignty.

Now politicians are facing a difficult decision: Should they continue as they have, thus potentially undermining the euro's ability to function? Or should they yield a portion of their national sovereignty to Brussels? ...

Der Spiegel 09 Feb 2010

EU's lack of detail on Greek rescue

Five Threats to the Common Currency

Angela Merkel dashes Greek hopes of rescue bid

EU pledge on Greece fails to calm fears

Germany, Forced to Buoy Greece, Rues Euro Shift

Franco-German bailout of Athens expected to avert euro collapse

Greek public sector workers strike

Storm over bailout of Greece

EU President's secret bid for economic power

Is Germany to Blame?

Berlin looks to build Greek ‘firewall‘

Greek crisis intensifies ...

Don't leave Greece to face the speculators alone

The euro's darkest hour