For Cyprus, Gaslight at the End of Tunnel?

Πηγή: New York Times
By STANLEY REED
April 5 2013

LONDON — If there are any bright spots in the gloom surrounding the economy of Cyprus, one place to look would be about 170 kilometers south of the coastal city of Limassol. There, about 1,700 meters below the surface of the Mediterranean Sea, is a potentially lucrative natural gas field called Aphrodite.

Noble Energy, the Houston-based company that found Aphrodite in 2011, so far has drilled only a single exploratory well in the mile-deep water 100 miles south of the island. But based on that early look, the company estimates that the field contains 142 billion cubic meters to 227 billion cubic meters, or 5 trillion to 8 trillion cubic feet, of gas. It is a significant find — potentially worth $45 billion or more at current prices, if it proves extractable. That would be enough to supply Cyprus’s domestic needs for years and turn the debt-strapped island country into an energy exporter.

“I am certain that gas will be the answer to our future,” said Charles Ellinas, chief executive of the Cyprus National Hydrocarbons Company, a state concern that was recently formed to help spearhead development of a Cypriot natural gas industry.

Cyprus has the potential to become one of the hubs of an eastern Mediterranean region that could become an important source of natural gas for Europe, with political unrest making supplies from North Africa uncertain.

Over the past two decades an Israeli-American-led group of small and medium-size oilcompanies has made a series of big discoveries in what is known as the Levantine basin, a vast area loosely bounded by Cyprus, Syria, Lebanon, Israel and Egypt. Israel, which has begun gradually tapping the gas, began production in a big offshore field called Tamar on March 30.

Gideon Tadmor is the chairman of Delek Drilling and chief executive of Avner Oil, affiliates of Delek Group, an Israeli company that has led exploration in the area since the 1990s. He said the Israeli oil explorers had taken their cues from successful earlier exploration to the south, in waters off Egypt. “We had a notion there was a good reason for the geological play to extend beyond the geopolitical borders,” Mr. Tadmor said.

While it is still hard to predict how large an exporter the eastern Mediterranean might eventually become, it is attracting industry attention well beyond the region.

“If you look at new sources of supply in the eastern Mediterranean, with what we’ve seen in Cyprus, in Israel and other places — you’ve got to say those will probably be the real competition,” said Al Cook, a vice president on the giant Shah Deniz pipeline project that BP is leading in Azerbaijan, which is meant to transport natural gas to Europe.

But enabling the Mediterranean to approach its energy potential will require navigating potentially treacherous politics. Any export deals by the Greek Cypriot government in Nicosia will risk the ire of Turkey, which warned during recent bailout negotiations that the Turkish Cypriot northern part of the island should share in any exploitation of natural resources. Cyprus has been divided since a Turkish invasion in 1974.

Meanwhile, Israel, where larger gas finds have been made by Noble and Delek, will also need to figure out what export routes make geopolitical and economic sense.

Top priority will go to making sure that the country, which has long been overly dependent on imported fuel, is assured of sufficient domestic supplies before the Israeli government authorizes exports.

When the government does choose export routes for its gas — a decision expected soon — security and political considerations probably will take precedence. While pipelines might be less expensive, Israel is wary of sending gas north through Syria and Lebanon, both of which, by the way, may have their own offshore gas deposits.

Mr. Tadmor said many options were on the table for Israel as the industry awaited a decision from Prime Minister Benjamin Netanyahu’s new government on whether to permit exports and in what form.

“It could be L.N.G. onshore or offshore and also piped gas solutions like Jordan or even Turkey,” he said. L.N.G. is liquified natural gas, which can be carried on special tanker ships.

The recent thaw between Israel and Turkey brokered by President Barack Obama has made energy cooperation between the two countries more likely. Sending gas to Egypt, which has been running short of late, is also possible, analysts say.

Also under consideration is piping some Israeli gas to a Cypriot L.N.G. processing plant — if one is built. Some of the companies are involved in both Cyprus and Israel. And the Aphrodite field may extend into Israeli waters, analysts say, which would be further reason for the countries to collaborate.

Mainly, it is the lure of substantial amounts of natural gas within easy reach of Europe — a huge consumer and importer of the fuel for industry and power generation — that has drawn some major fossil-fuels players to Cyprus. In January, Eni or Italy, with the Korean giant Kogas as a 20 percent partner, signed an exploration deal for a vast swath of sea bottom off Cyprus. France’s Total signed a similar agreement with Cyprus a month later.

“It is promising for Cyprus that companies the caliber of Eni and Total are getting involved — that is an early sign of confidence,” said Catherine Hunter, an analyst at the energy research firm IHS in London.

As for Cyprus, it is uncertain how much the country’s gas can do for its besieged economy, and how quickly. In one big concession in its recently arranged bailout, the troika of international lenders — the International Monetary Fund, the European Central Bank and the European Commission — agreed that the country’s gas reserves would remain under Cypriot jurisdiction.

Noble and its partners are still preparing to drill a second well to begin confirming the size of Aphrodite. So far, the volumes of gas that the companies think they have discovered, while suggesting a large find, are not far above the minimum analysts say would justify building a multibillion dollar facility to liquify the gas for ship transport.

Mr. Ellinas says that L.N.G. is the preferred option for exporting the gas but that the big liquification plant he envisions for Vassilikos, an industrial site on the south coast, would cost $6 billion for the first of what might eventually be three export units.

But if it can be cost-justified, such a plant wold give “us flexibility, security and everything else,” he said. “We can export to Europe and everywhere else. If you have a pipeline and gas prices go down you are stuck.”

Construction of an L.N.G. plant would take four to five years, once a final investment decision was made and could stretch the finances of the Cypriot government and the balance sheets of the companies that hold the leases for the Aphrodite field.

To put the potential construction bill into perspective, Cyprus’s entire economy — before the crash, at least — was only about €18 billion, or $23 billion, and the country is counting on its recently arranged €10 billion bailout to keep its banks from further collapse.

Noble, for its part, has a relatively modest annual capital budget of about $4 billion, and has commitments elsewhere, including Israel.

One banker, who insisted on not being named because of the sensitivity of the matter, said that the costs of developing Cyprus’s deepwater gas would probably be so high that an L.N.G. project would be only marginally profitable for the government at current gas prices, unless more gas was found. Mr. Ellinas, though, predicted that much more would be discovered.

Other options include a less-expensive floating L.N.G. facility. The cheapest approach might be an offshore pipeline to Turkey. But no matter how grim its financial predicament the government of Cyprus might have little interest in supplying Turkey, its longtime enemy.

“A subsea pipeline is a lot cheaper than an L.N.G. terminal, but a no-go politically,” said Laura El-Katiri, a research fellow at the Oxford Institute for Energy Studies.

Of course, Cyprus’s financial meltdown could lead to new attitudes. The country could come under pressure from its international creditors to adopt quicker ways to turn gas into cash — even if it meant a Turkish pipeline. And the role of Mr. Ellinas’s company, which was created by the previous Cypriot government, voted out of office in February, may come under review, Ms. Hunter said.

L.N.G. might be the preferred choice of the Israelis. A liquification plant would be easier to guard, than a long pipeline, which could be cut. Or if Cyprus built a plant, Israel might want to shunt some gas to that facility, to gain economies of scale. Delek, an Israeli company, is already a minority partner in Aphrodite.

“Setting up an export facility in an area under Israeli control appears to be the best alternative,” said an Israeli interministerial committee in September. The committee also recommended that a major international company be brought in to orchestrate development of the gas industry.

The offshore Tamar field, which began piping gas to the Israeli domestic market in late March, was developed by a consortium led by Noble and Delek. Tamar alone is enough to power the Israeli economy for many years.

Now the two companies are working on plans for exploiting a much bigger field near Cypriot waters called Leviathan, which is double or triple the size of estimates for Aphrodite.

In December, Noble and its Israeli partners brought in and experienced L.N.G. player by reaching an agreement in principle with Woodside Petroleum, a company that operates a half-dozen L.N.G. plants in Australia. Woodside said in a statement at the time that the pact, which gives it a 30 percent stake in Leviathan, could lead to “a key role in the potential development of a liquefied natural gas industry in Israel. ”

Mr. Ellinas, of Cyprus, said he hoped that the Israelis would use the Cypriot L.N.G. plant and would hook Leviathan into it. That solution would certainly be one way to reduce costs. But in the end, each country may want to keep its big gas-processing investments close to home. In a tough neighborhood, control may trump economics.

Report: Soros Unloads All Investments in Major Financial Stocks; Invests Over $130 Million In Gold

Πηγή: SHFTplan
By Mac Slavo
August 16 2012

In a harbinger of what may be coming our way in the Fall of 2012, billionaire financier George Soros has sold all of his equity positions in major financial stocks according to a 13-F report filed with the SEC for the quarter ending June 30, 2012.

Soros, who manages funds through various accounts in the US and the Cayman Islands, has reportedly unloaded over one million shares of stock in financial companies and banks that include Citigroup (420,000 shares), JP Morgan (701,400 shares) and Goldman Sachs (120,000 shares). The total value of the stock sales amounts to nearly $50 million.

What’s equally as interesting as his sale of major financials is where Soros has shifted his money. At the same time he was selling bank stocks, he was acquiring some 884,000 shares (approx. $130 million) of Gold via the SPDR Gold Trust.

When a major global player with direct ties to the White House, Wall Street, and the banking system starts off-loading stocks and starts stacking gold, it suggests a very serious market move is set to happen.

While often lambasted for his calls to centralize global banking, increase government intervention in the economy and his support of what he has called an “emergence of the new world order,” if there’s anyone with an inside track of where things are headed next it’s Soros.

Soros, who has written extensively of a coming global paradigm shift in his book The Crash of 2008 and What It Means, calling the current economic and political model ”an end of an era,” has recently suggested that the financial and economic situation across the world is so serious that Europe could soon descend into chaos and conflict. He also notes that the world is entering “one of the most dangerous periods in modern history”, and foresees violent riots in America and a brutal clamp-down by the government that will dramatically curtail civil liberties.

This is an individual who not only predicted the collapse of 2008 and took action to insulate himself, he also proposed the various fixes that governments in Europe and the US would eventually implement in order to stave off a deflationary depression. In his aforementioned book he suggested that central banks infuse the system with massive amounts of monetary expansion, but also warned that not injecting enough money would simply extend the onset of deflation and printing too much could lead to hyperinflationary currency collapse.

Based on recent activity in Soros’ US held accounts, it seems that governments and central banks have failed at those efforts to stabilize the system. As such, Soros is getting out of those companies which are most at risk should the financial system buckle like it did in 2008 and he’s shifting his assets into what may be the only asset class left standing when it’s all said and done.

Wave of Suicides Shocks Greece

This memorial is to Anthony Perris, 60, who allegedly pushed his 90-year-old mother from a rooftop before jumping himself. "My life has become a constant tragedy," he wrote in a suicide note.

Πηγή: Spiegel
By Barbara Hardinghaus and Julia Amalia Heyer
August 15 2012

Greece has always had one of the lowest suicide rates in Europe, but its economic crisis has triggered a disturbing increase in the number of people killing themselves. Are the deaths the result of personal desperation or are people making a political statement with the only thing they have left to sacrifice?

On July 16, a businessman and father of three hanged himself in his shop on the island of Crete. A 49-year-old man from Patras was found by his son. He had also hanged himself. On July 25, a 79-year-old man on the southern Peloponnese peninsula hanged himself with a cable tied to an olive tree. On August 3, a 31-year-old man shot himself to death at his home near Olympia. On August 5, a 15-year-old boy hanged himself in Pieria. And, on August 6, a 60-year-old former footballer self-immolated in Chalcis.

These are also reports from Greece, reports that, at first glance, seem to have nothing to do with the economy. They come together to form a grim statistic, raising questions of what is triggering the suicides and whether the high incidence is merely a coincidence.

Or do people see suicide as a way out of the crisis that has taken hold of their country and their lives? Are they bowing out before things get even worse? Germany and the International Monetary Fund (IMF) are opposed to a new bailoutpackage for Athens. The country faces a shortfall of at least €40 billion ($49 billion). Greece could very well be officially bankrupt by the fall.

Greece, a country whose Orthodox Church does not condone suicide, has always had one of the lowest suicide rates in Europe. But now, there were 350 suicide attempts and 50 deaths in Athens in June alone. Most of the suicides were among members of the middle class and, in many cases, the act itself was carried out in public, almost as if it were a theatrical performance.

Desperate for Dignity

On April 4, shortly after 9 a.m., a 77-year-old pharmacist shot himself to death on Syntagma Square in downtown Athens. Dimitris Christoulas, a short man, stood against one of the large trees on the square, held a pistol to his temple and pulled the trigger.

"My father was a political person, a fighter," says his daughter, Emmy Christoulas. Weeks after her father's death, she is sitting in her living room in Chalandri, a northern suburb of Athens. She is a slim 42-year-old wearing oversized jeans, her short black hair streaked with gray.

Her father was politically active, a member of the "We Won't Pay" movement. He repeatedly called for an international review of Greece's national debt because he was convinced that it wasn't the fault of the people. He had come to beleaguered downtown Athens every day last summer to take part in rallies and to lend a hand, usually in the Red Cross tent.

When he went to Syntagma Square for the last time, on April 4, he sent his daughter a text message consisting of one short sentence: "This is the end." Then he switched off his cell phone. "It was at exactly 8:31 a.m.," says Emmy, pulling a cigarillo from a crumpled pack. When she was unable to reach her father by phone after receiving the text message, she and two friends drove to his apartment.

She heard a news report on the radio that someone had shot and killed himself under a tree on Syntagma Square. "First the text message, and then that report," she says. "I was sure it was him."

Since her father's death, Emmy Christoulas has taken the subway to the square, nine stops from her apartment, many times. She visits the memorial to her father two or three times a week, usually in the evening. When she does, she stands a short distance away from the tree.

It's become quiet in the square, where a band is playing and the sound of guitar music is wafting through the warm air. Christoulas crosses her arms over her chest and looks at the people who stop at the memorial. It consists of wreaths and a few stuffed animals leaning against the tree, as well as notes pinned to the trunk. "Don't walk like a robot! Open your spirit!" one note written in red letters on a piece of cardboard reads. The lines that Dimitris Christoulas wrote in a suicide note are engraved into a marble plaque.

The government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid into for 35 years with no help from the state. I see no other solution than this dignified end to my life so that I don't find myself fishing through garbage cans for my sustenance.

The words "Dimitris' gesture cannot be repeated" are written on a piece of paper above the plaque. But his gesture is repeating itself on an almost daily basis. The newspaper Ta Nea describes the mood among Greeks as a "society on the verge of a nervous breakdown." The uncertainty over what the next day will bring is growing by the day.

Christoulas ended his farewell letter with the words: "I believe that young people with no future will one day take up arms and hang the traitors of this country on Syntagma Square."

Continuing the Fight

The sadness brought on by her father's death is not diminishing, says Emmy Christoulas, as she sits in her apartment. She twists the silver ring on her thumb and says: "When I don't think about it for a moment, I realize that I am no longer merely playing the role of his daughter." When she thinks about Greek society and the suffering around her, she says she wants to send her own messages to the country. One of them is: "Progress and change come through loss."

The way she describes it, it almost sounds like her father's suicide had been a political necessity - and that she has realized she has to make the best of it and continue the fight he began.

Emmy was five when she attended her first demonstration, perched on her father's shoulders. It was April 25, 1975, after the end of the Greek military junta. When she speaks, she quotes the Bohemian-Austrian poet Rainer Maria Rilke and the German philosopher Jürgen Habermas, and she talks about models of democracy and an open society. She believes in big ideas and, in this sense, she is very much her father's daughter. When she doesn't go to the bar in the evening to drink a glass of vodka, she stays home alone with her dogs. She doesn't talk much about her pain.

On the morning of April 4, Dimitris Christoulas put on his light-colored trench coat, stuck his pistol in one pocket and the farewell letter in the other, and set out for the square, as he had done so many times before, and wrote the last text message to his daughter.

On the day after the memorial service for her father, Emmy Christoulas drove her father's body 13 hours to Bulgaria to have him cremated. The Greek Orthodox Church denies church burials to people who have committed suicide. Her father had left her the money for the trip.

Christoulas, an assistant to a member of parliament with the left-wing Syriza Party, didn't go to work for two days. She resumed her life on the third day. Citizens shape politics, not the other way around, she says, repeating her father's mantra.

At first, she would remove the notes and collect the stuffed animals, which she kept in a box at home, whenever she went to visit the tree on Syntagma Square. When she goes there these days, she hardly glances at the notes and letters anymore, and it doesn't bother her when people come up and talk to her. "On the contrary," she says, noting that strangers often congratulate her. "It makes me proud and strong," she says. As long as it doesn't disappear from people's minds, she says his death has meaning. She sees it as an opportunity for those who want change -- and for those who use the only thing they have left, their life, to influence politics.

Heroism or Desperation?

Nikiforos Angelopoulos, an Athens psychiatrist, has kept track of suicides and, with each new death, he has become more afraid. He tries to see each act as the failure of an individual, confused person.

The 60-year-old did his doctoral dissertation on the subject of "hostility." Suicide is a disorder, he says, a form of hostility -- a person's hostility against him- or herself. He is sitting in his office in the upscale Kolonaki neighborhood, a wiry man with a fringe of white hair and alert blue eyes. He is determined to prevent copycat suicides, but he fears that the wave is growing. It reminds him of the 1920s, when intellectuals committed suicide after Greece lost a war against Turkey. He wants to prevent more people from hanging, poisoning and shooting themselves to death.

The 90-year-old woman who fell to her death from a rooftop terrace on Vathi Square jumped together with her son. But the truth is that she didn't jump at all. Her son pushed her. Then he waited three minutes and followed his mother. It was a 15-meter (49-foot) drop to the pavement below. His name was Anthony Perris, a musician and writer, a quiet, 60-year-old man.

The spot where he hit the ground is three kilometers (2 miles) from Syntagma Square, next to the building where he lived with his mother. Perris had cared for his mother, who had Alzheimer's and cancer, for 20 years. He took her for a short walk in the small park outside every day. On the evening before the suicide, he closed the blinds in the apartment. The next morning, he took his mother into the elevator and up to the roof terrace above the sixth floor.

Perris also left a suicide note, placing it on the kitchen table. "My life has become a constant tragedy," he wrote. He tried to sell his house, but no one had the money to buy it. He owned a house, a boat and a moped.

"What's the use of owning things when you don't have any money to buy food?" Perris asked in his suicide note.

Everything that the papers are saying about the rash of suicides is "misleading and dangerous," says Angelopoulos, the psychiatrist. People who commit suicide, he notes, are not political fighters, even if the public turns them into heroes.

The pharmacist who shot himself to death on Syntagma Square was a desperate individual, just like all the others, says Angelopoulos, who sounds a little desperate himself. He is fighting a lonely battle. All the same, the Greek Ministry for Health set up a suicide hotline a few weeks ago. Despite all the budget cuts and austerity measures, it feels the expense is justified.

A Growing Problem

When asked whether she had any idea that her father would take his struggle as far as he did, Emmy Christoulas thinks for a while before answering. In retrospect, she says, there had always been signs. Shortly before his death, her father signed over to her the red VW Beetle the family used to drive through Europe. "He was suddenly in such a hurry," she says, but she didn't understand why.

On the morning after our visit with Christoulas, the Athens police received another emergency call. A 61-year-old man has hanged himself from a tree on a hill in Aghios Philippos Park, not far from his house. He was a sailor who had recently lost his job. He had a wife, a son, a daughter and a dog. His body was removed by the afternoon, a few hours after his death.

The red-and-white strip of crime scene tape is still hanging between two trees, fluttering in the wind above the big city.

The Perils of 2012

Πηγή: Social Europe Journal
By Joseph Stiglitz
Jan 13 2012

The year 2011 will be remembered as the time when many ever-optimistic Americans began to give up hope. President John F. Kennedy once said that a rising tide lifts all boats. But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.

In that brief moment when the rising tide was indeed rising, millions of people believed that they might have a fair chance of realising the “American Dream.” Now those dreams, too, are receding. By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labor force – meant little to the 50 year olds with little hope of ever holding a job again.

Indeed, middle-aged people who thought that they would be unemployed for a few months have now realised that they were, in fact, forcibly retired. Young people who graduated from college with tens of thousands of dollars of education debt cannot find any jobs at all. People who moved in with friends and relatives have become homeless. Houses bought during the property boom are still on the market or have been sold at a loss. More than seven million American families have lost their homes.

The dark underbelly of the previous decade’s financial boom has been fully exposed in Europe as well. Dithering over Greece and key national governments’ devotion to austerity began to exact a heavy toll last year. Contagion spread to Italy. Spain’s unemployment, which had been near 20% since the beginning of the recession, crept even higher. The unthinkable – the end of the euro – began to seem like a real possibility.

This year is set to be even worse. It is possible, of course, that the United States will solve its political problems and finally adopt the stimulus measures that it needs to bring down unemployment to 6% or 7% (the pre-crisis level of 4% or 5% is too much to hope for). But this is as unlikely as it is that Europe will figure out that austerity alone will not solve its problems. On the contrary, austerity will only exacerbate the economic slowdown. Without growth, the debt crisis – and the euro crisis – will only worsen. And the long crisis that began with the collapse of the housing bubble in 2007 and the subsequent recession will continue.

Moreover, the major emerging-market countries, which steered successfully through the storms of 2008 and 2009, may not cope as well with the problems looming on the horizon. Brazil’s growth has already stalled, fuelling anxiety among its neighbours in Latin America.

Meanwhile, long-term problems – including climate change and other environmental threats, and increasing inequality in most countries around the world – have not gone away. Some have grown more severe. For example, high unemployment has depressed wages and increased poverty.

The good news is that addressing these long-term problems would actually help to solve the short-term problems. Increased investment to retrofit the economy for global warming would help to stimulate economic activity, growth, and job creation. More progressive taxation, in effect redistributing income from the top to the middle and bottom, would simultaneously reduce inequality and increase employment by boosting total demand. Higher taxes at the top could generate revenues to finance needed public investment, and to provide some social protection for those at the bottom, including the unemployed.

Even without widening the fiscal deficit, such “balanced budget” increases in taxes and spending would lower unemployment and increase output. The worry, however, is that politics and ideology on both sides of the Atlantic, but especially in the US, will not allow any of this to occur. Fixation on the deficit will induce cutbacks in social spending, worsening inequality. Likewise, the enduring attraction of supply-side economics, despite all of the evidence against it (especially in a period in which there is high unemployment), will prevent raising taxes at the top.

Even before the crisis, there was a rebalancing of economic power – in fact, a correction of a 200-year historical anomaly, in which Asia’s share of global GDP fell from nearly 50% to, at one point, below 10%. The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to reflect a commitment not to grow.

As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions. With all of the problems confronting the global economy, we will be lucky if these strains do not begin to manifest themselves within the next twelve months.

Stiglitz on the Great Depression: 'The Book of Jobs'

DOMINO THEORY: The financial meltdown is the Depression parallel everyone notices. The more frightening parallel is everything else.

Πηγή: The Vanity Fair
By Joseph Stiglitz
Dec 13 2011

Forget monetary policy. Re-examining the cause of the Great Depression—the revolution in agriculture that threw millions out of work—the author argues that the U.S. is now facing and must manage a similar shift in the “real” economy, from industry to service, or risk a tragic replay of 80 years ago.

It has now been almost five years since the bursting of the housing bubble, and four years since the onset of the recession. There are 6.6 million fewer jobs in the United States than there were four years ago. Some 23 million Americans who would like to work full-time cannot get a job. Almost half of those who are unemployed have been unemployed long-term. Wages are falling—the real income of a typical American household is now below the level it was in 1997.

We knew the crisis was serious back in 2008. And we thought we knew who the “bad guys” were—the nation’s big banks, which through cynical lending and reckless gambling had brought the U.S. to the brink of ruin. The Bush and Obama administrations justified a bailout on the grounds that only if the banks were handed money without limit—and without conditions—could the economy recover. We did this not because we loved the banks but because (we were told) we couldn’t do without the lending that they made possible. Many, especially in the financial sector, argued that strong, resolute, and generous action to save not just the banks but the bankers, their shareholders, and their creditors would return the economy to where it had been before the crisis. In the meantime, a short-term stimulus, moderate in size, would suffice to tide the economy over until the banks could be restored to health.

The banks got their bailout. Some of the money went to bonuses. Little of it went to lending. And the economy didn’t really recover—output is barely greater than it was before the crisis, and the job situation is bleak. The diagnosis of our condition and the prescription that followed from it were incorrect. First, it was wrong to think that the bankers would mend their ways—that they would start to lend, if only they were treated nicely enough. We were told, in effect: “Don’t put conditions on the banks to require them to restructure the mortgages or to behave more honestly in their foreclosures. Don’t force them to use the money to lend. Such conditions will upset our delicate markets.” In the end, bank managers looked out for themselves and did what they are accustomed to doing.

Even when we fully repair the banking system, we’ll still be in deep trouble—because we were already in deep trouble. That seeming golden age of 2007 was far from a paradise. Yes, America had many things about which it could be proud. Companies in the information-technology field were at the leading edge of a revolution. But incomes for most working Americans still hadn’t returned to their levels prior to the previous recession. The American standard of living was sustained only by rising debt—debt so large that the U.S. savings rate had dropped to near zero. And “zero” doesn’t really tell the story. Because the rich have always been able to save a significant percentage of their income, putting them in the positive column, an average rate of close to zero means that everyone else must be in negative numbers. (Here’s the reality: in the years leading up to the recession, according to research done by my Columbia University colleague Bruce Greenwald, the bottom 80 percent of the American population had been spending around 110 percent of its income.) What made this level of indebtedness possible was the housing bubble, which Alan Greenspan and then Ben Bernanke, chairmen of the Federal Reserve Board, helped to engineer through low interest rates and nonregulation—not even using the regulatory tools they had. As we now know, this enabled banks to lend and households to borrow on the basis of assets whose value was determined in part by mass delusion.

Greece paying for lack of monitoring: former PM

Πηγή: thewest
By AFP
Dec 5 2011

European Union monitors and ratings agencies bear some of the blame for Greece's debt crisis that has plunged the continent into financial turmoil, former Greek prime minister George Papandreou says.

Papandreou said his predecessors "didn't really see it coming", as far as the debt crisis was concerned.

"Had there been a stronger monitoring of the European Union from the European Union and even from the ratings agencies on the member states, I would not have, as a prime minister, inherited a situation where the deficit was close to 16 per cent and the debt almost doubled in the previous government," he told CNN on Sunday.

"That's why I think monitoring is important. We're paying for this right now. And many of the Greeks are unjustly paying for this because they're paying for things that they weren't responsible for."

Papandreou, who is due to meet with visiting US Vice President Joe Biden in Athens on Monday for eurozone crisis talks, heads the socialist party know as the Panhellenic Socialist Movement, or Pasok. He stepped down as prime minister in November to make way for a national unity government.

His ouster was triggered by a second EU-IMF debt rescue agreed in October with even tougher austerity measures for Greece that proved hugely unpopular.

The new coalition government headed by Prime Minister Lucas Papademos is planning tough austerity measures to meet the terms of the new bailout.

Papandreou urged patience, saying "the magnitude of changes we are making in this country we have never done over the past 30, 40 years".

And he expressed optimism that the changes mean Greece now has a "more sure prospect" of improving its moribund economy.

European Union leaders are due to gather in Brussels on Thursday and Friday to thrash out a way to save the 17-country single currency bloc, likely with proposed treaty changes to create closer fiscal union and economic governance.Germany's Chancellor Angela Merkel and French President Nicolas Sarkozy have vowed to unveil proposed EU treaty changes to create what Merkel has dubbed a "European fiscal union with strict rules" and the French leader calls "true economic government".

Greece may miss 2012 selloff target due to EU crisis

Workers of the Hellenic Steel Company stand outside a factory during a strike at Aspropyrgos suburb west of Athens November 25, 2011.

Πηγή: Reuters

By Angeliki Koutantou

Nov 27 2011

Greece may miss its target for privatization revenues next year because of the worsening economic climate in Europe, the head of the agency responsible for selling state assets said in an interview to be published on Sunday.
Greece's repeated failure to meet budget targets including for privatization revenues has angered international lenders, raising questions about whether they will continue indefinitely to keep the country afloat with bailout loans.

Costas Mitropoulos, head of the Hellenic Republic Asset Development Fund, told the Kathimerini newspaper the privatization revenue target of 9.3 billion euros ($12.3 billion) for 2012 was "achievable," based on the draft budget assumptions.

"But reality will show whether these assumptions were right. In order to be able to sell, there should be buyers," he said, noting that even Germany failed this week to sell all its bonds at an auction.

"If this (difficult economic) situation continues, then it is certain that it will be difficult for us to find buyers for our assets."

Greece initially agreed with its international lenders to raise five billion euros from state asset sales this year. But government delays in setting up the privatization fund and imploding market values on the Athens bourse forced the government to cut the target to 4 billion euros.

Now Greece is seen raising only about 1.8 billion euros this year.

Under the terms of last year's 110 billion euro bailout, Greece is meant to sell state assets worth 50 billion euros by 2015 to convince its lenders it is serious about reforming its uncompetitive economy and also to shoulder part of the cost.

Greece's new national unity government is now pushing a tough 2012 austerity budget through parliament, a key condition for unlocking funds from a second bailout agreed last month worth an additional 130 billion euros.

A poll published in Sunday's edition of Eleftheros Typos daily showed more than 70 percent of Greeks expect their country's economy to remain in its current doldrums or to deteriorate further under the new government.

Greece is in its fourth year of recession. The draft budget envisages the economy contracting by 2.8 percent in 2012 after shrinking more than five percent this year.

EU bank failures will crash Wall Street — again

Πηγή: Market Watch
By Paul Farell
Oct 18 2011

SAN LUIS OBISPO, Calif. (MarketWatch) — Worst-case scenario’s closing fast: Occupy Wall Street growing. But no political power or allies yet. Feared yes, attacked by GOP proxy tea party. Soon the Occupation will explode into a new American Revolution.

When? A string of European bank collapses is dead ahead. And like the Arab Spring, they will trigger an economic disaster for American banks.

Yes, coming soon says Martin Weiss in his “7 Major Advance Warnings,” which is “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.” His new Weiss Ratings warnings are the “most important” in a 40-year career. The stress on Wall Street banks will force them back to Congress for more bailouts.

Warning eight: No new bailouts. That will push the economy into a deep recession.

Then what? New Glass-Steagall? Not enough. Tax the rich? Not enough. Perp walks? Not enough. Presidential commission? Useless promises. Occupy Wall Street will fail without a fundamental constitutional change. No compromise. Or Wall Street wins, again. We go back to the same free market, deregulated, too-greedy to-fail, conservative Reaganomics policies that have been destroying democracy for a generation.

All this was so obvious, so predictable. America is at a crossroads. Occupy Wall Street buildup has emerged as America’s last great hope to restore democracy. Last week when USA Today called the Occupiers a “ragtag assortment of college kids, labor unionists, conspiracy theorists and others” hinting they’re a flash-in-the-pan “devoid of remedies,” I smiled, reminded of that famous painting of George Washington crossing the Delaware on Christmas 1776, leading what historians also called a “ragtag” Continental Army, surprising the British, and winning the Battle of Trenton.

America’s collective conscience wants true democracy restored

Yes, USA Today sees a “ragtag” army: No mission, no goals, no organization, no agenda, no leaders, and no staying power. Wrong. Look deeper: The Occupiers are the voice of America’s collective conscience demanding a return to our 1776 roots, to a “government of the people, by the people, for the people.”

Our collective inner voice knows America’s moral compass is broken. We’ve become a government “of, by and for” special interests, the wealthiest 1%, Wall Street insiders, CEOs and Forbes-400 billionaires. It happened fast: In one generation the Super Rich grabbed “absolute power,” killing the middle class American dream.

Wall Street banks are already dismissing the Occupiers … planning bigger bonuses this year… lifting limits on their license to gamble Main Street deposits in the $600 trillion global derivatives casino … they already spend hundreds of millions lobbying every year … they’re convinced they can defeat the Occupiers with campaign donations in the back rooms of Congress … writing off the fight as another business expense … ultimately expecting the Occupiers will vanish into the cold winter months.

One citizen. One dollar. One vote. Anything less is failure

Warning: Don’t be fooled. Occupy Wall Street knows exactly want it wants. The tea party, GOP’s proxy, isn’t fooled. They feel threatened, counter-attacking, worried their role will be lost in the 2012 elections, fearful they’ll lose sway over Republicans, so they’ve got a smear campaign against Occupy Wall Street. Won’t work:

Amid all the noise surrounding Occupy Wall Street we hear their “one simple demand.” Missed by most outsiders, that demand echoes down through American history, first heard in 1776 in the Declaration of Independence. Earlier the Occupiers voiced their one simple demand:

“We demand that integrity be restored to our elections. One citizen. One dollar. One vote. Only citizens should make campaign contributions. Campaign contributions by citizens should not exceed $1 to any political candidate or party. Help us reclaim democracy.”

Yes, one simple demand: “Stop the monied corruption at the heart of our democracy.” That one simple demand echoed over and over. And no compromise when dealing with so fundamental a principle of democracy. Compromises the last generation surrendered America to Wall Street and the Super Rich. Compromise this principle again, and we all lose, destroy America. No compromise. Period.

Phase 2: EU bank collapse gives Occupiers new political power

The Occupiers Revolution enters a new phase soon: First Arab Spring rippled into American Fall. Next, EU bank collapses will ripple through Wall Street. For a long time we’ve been warning the 2008 meltdown never ran its course, foiled by mega-bailouts … bankers never shared the sacrifice … fought all reforms … are back to business-as-usual … learned no lessons … now even more delusional, expecting bigger bonuses … trapped in denial for three years … cannot see what’s ahead … a perfect setup for a bigger crash.

That’s why my eye locked on Martin Weiss’ “7 Major Advance Warnings.” Weiss has been a champion of the little guy for 40 years, author of “The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.” Weiss Ratings of domestic and foreign debt markets downgraded U.S. debt before the S&P.

Both of us were warning well in advance of the 2008 crash. It was so predictable: Weiss warned of “failure of Bear Stearns Lehman, Washington Mutual, near-failure of Citigroup and the demise of Fannie Mae years before it collapsed.”

So listen closely to his “7 Major Advance Warnings,” which are “the most important in the 40-year history of my company.” Many will dismiss them, distracted by today’s campaign noise. Others will dismiss them as “over there,” problems for Europeans. Weiss warns: EU banks problems are “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.”

So listen and discount what Wall Street is selling you. Protect your portfolio. Here are edited highlights:

1. Greece will default very soon ...

”Banks must bite the bullet and take some big hits in their Greek loans. … Whether banks accept this ‘solution’ voluntarily or not, it will mean Greece is in default.”

2. The contagion of fear will spread …

Global investors know “if one major Western government can default, so can others.” They will refuse to lend “to highly indebted governments” or “demand outrageously high yields.”

3. European megabanks will collapse …

Some of the “largest banks will collapse under the weight of defaulting sovereign debts and … mass withdrawals … Spain … French banks” … the impact will ripple across “J.P. Morgan Chase, Bank of America and Citigroup … All three are in danger.”

4. EU governments suffer new credit rating downgrades ...

”France and Germany, will scramble to rescue their failing banks.” But “bank bailouts are seriously flawed” as “governments gut their own fiscal balance … suffer big downgrades,” or pay “far higher interest rates.”

5. Spain and Italy next to face default on their massive debts ...

With “$3.4 trillion in debt, or about 10 times more than Greece” they too risk default.

6. Global debt markets will suffer a critical meltdown ...

Anticipating “default by a country as large as Spain or Italy, nearly all debt markets in the world will freeze.” Withdrawals, panic “not only crush the borrowing power of the PIIGS” but threaten meltdowns in “France, Germany, Japan, the U.K. and the U.S.”

7. Vicious cycle: sovereign defaults, bank failures, global depression ...

Government defaults trigger more bank failures, “cut off the flow of credit to businesses and households, sink the global economy into a depression, and perpetuate the vicious cycle.”

Warning to investors: No bank bailouts, power to Occupation

History inevitably repeats itself: Arab Spring triggered Wall Street Fall. Next, the raging European monetary collapse will ripple through America’s banking system, completing the 2008 meltdown that never ended because Wall Street fought all reforms.

But now, a bigger meltdown as history repeats a dangerous cycle like the 1929 Crash and Great Depression.

History will also deal a fatal blow to Wall Street. Weiss adds a key warning: No bank bailouts. America’s banking system is bankrupt, structurally and morally. Washington is broken. And thanks to the Occupiers Revolution the masses will never accept new bank bailouts. Never. They’ll toss politicians and overthrow government first.

No new bailouts will be the stake in the heart of Wall Street, ending the “greed is good” power of America’s “bloodsucking vampire squid,” handing the Occupiers new political power in Washington.

Weiss’s worst-case scenario highlights everything we’ve both been warning investors about for a long time. The 2008 meltdown never ended, lessons never learned. But now the end game is accelerating.

Listen closely: Weiss final warning to all investors: “Get all or most of your money out of danger immediately … above all, stay safe!” Prepare for the coming bank collapse. And discover how this historic scenario will empower the Occupiers message to get money out of elections: “One citizen. One dollar. One vote.”

Compromise on that principle and Wall Street wins, again.

What is in Greece's new austerity law?

The IMF is releasing 3.2 billion euros to debt-stricken Greece.

Πηγή: iol
By Reuters
Oct 17 2011

Below is a list of the key measures included in Greece's new austerity law, which will be put to a vote in the country's parliament later this week.

Passage of the law is a must for the country to qualify for further rescue payments under its current EU/IMF bailout, as well as for a planned second bailout to be discussed at an EU summit on October 23.

PUBLIC SECTOR WAGE CUTS

For the first time in the country's 190-year history, all the country's 700,000 civil servants will be paid and promoted under the same set of rules, set out in a new wage scale.

The wage scale curtails basic salaries and abolishes a host of bonuses, leading to an average income cut of about 20 percent, according to estimates by public sector labour unions. This wage cut comes on top another 20-percent salary reduction passed under a previous austerity round last year.

Wages at public sector companies are set at 65 percent of their Dec. 2009 level. The average wage cost per employee is capped at 1,900 euros a month.

The government's General Accounting Office (GAO) estimates that the single wage scale and the public sector wage caps will result in savings of about 2 billion euros a year.


PUBLIC SECTOR JOB CUTS

About 30,000 state workers will be put into a “Labour Reserve”, where they will draw just 60 percent of their salaries. They will be laid off permanently if no other public sector job is found for them within a year.

About half of those likely to be assigned to the reserve are close to retirement, reducing the potential impact of the measure, but the government puts the savings next year at 300 million euros.


LABOUR MARKET REFORM

The law makes it easier for firms to cut their payroll costs by concluding company-level wage agreements. It does this by suspending wage bargaining at industry-wide, “sectoral” level. At least two ruling party members of parliament said they will vote against the measure if it is not watered down or withdrawn.


PENSION CUTS

The part of a pension that exceeds 1,000 euros ($1,387) a month will be cut by 20 percent. Pensioners below 55 years of age, mainly former police and army personnel, will suffer a 40 percent cut.

Supplementary pensions paid out to civil servants and by the country's biggest pension fund, IKA, will be cut by between 20 and 30 percent.

Pensions to former bank and state company employees will be cut by 15 percent.

Lump-sum payments to public sector employees upon retirement will be cut by between 20 and 30 percent.

According to GAO estimates, the pension cuts will save 235 million euros a year from the state budget and more than 1 billion euros from pension funds, which are run by the state.

TAX HIKES

The tax-free threshold is lowered to 5,000 euros a year from 8,000 euros. Tax credits on consumer spending will be curtailed.

A solidarity tax, which has already been announced earlier this year and equals between 1 and 5 percent of gross income, will be paid twice next year - once on 2012 income and once, retroactively, on 2011 income.

Greece heads for standstill before austerity vote

A man shouts slogans during a rally of the "Indignant" group in front of the parliament in Athens October 15, 2011. 

Πηγή: msnbc
By Reuters
Oct 17 2011

ATHENS — Prime Minister George Papandreou appealed for unity on Monday as Greece braced for a 48-hour general strike timed to coincide with a vote on a deeply unpopular package of austerity measures demanded by international lenders.

"This is maybe the most crucial week for Greece and Europe," Papandreou said during a meeting with the head of state, President Karolos Papoulias.

"It is very important on our part, that the entire Greek political class shows a sense of unity and responsibility."

His comments came as Greece's two main unions, representing about half the four million-strong workforce, prepare for one of the biggest protests since the crisis began two years ago, likely to hit food and fuel supplies, disrupt transport and leave hospitals run by skeleton staff.

The 48 hour general strike is scheduled for Wednesday and Thursday to coincide with the vote in parliament, expected to take place in two stages on both days.

Memories are still fresh of the battles between riot police and stone-throwing protesters at anti-austerity demonstrations in June and sporadic signs of trouble were reported on Monday with a petrol bomb hurled at a garbage truck in a northern suburb of Athens.

Papandreou, trailing badly in opinion polls, has defied a wave of protests, pledging to push through a deeply unpopular package that includes tax rises, pay and pension cuts, job layoffs and changes to collective pay deals.

His four-seat majority is expected to hold up with the support of smaller opposition parties, but at least two members of the ruling PASOK party may oppose part of the bill.

With European Union leaders racing to prepare a new bailout deal in time for a summit on October 23 and growing speculation that Greece may be forced to default on its massive public debt, Papandreou said Greece had to show its resolve.

"We must show we want the great changes, to go into this negotiation on October 23 with our head high, with a strong negotiating hand, to make sure we obtain the best for Greece," he said.

Trapped in deep recession and choked by a debt equivalent to some 162 percent of gross domestic product, Greece has been shut out of bond markets and would run out of money within weeks without international support.

Inspectors from the EU and the International Monetary Fund were in Athens last week and have recommended releasing an 8 billion euro aid tranche to enable the government to keep paying its bills past November.

That will only provide temporary relief and they have told Papandreou's struggling Socialist government to push ahead with further belt-tightening, on top of what are already the deepest cuts in Greece's postwar history.

"I WANT THEM OUT"

How far this will be possible remains unclear in the face of growing bitterness from Greeks who have increasingly turned against their political leadership.

"I want them out. They can't solve our problems because they are the ones who got us here," said Maria Papadopoulou, a 57-year old pensioner who helps to support both an unemployed daughter and a son at university.

"I don't usually take to the streets but this week we have to rise up and send a message to the government," she said, as mournful protest songs from the era of the 1970s military junta blasted out of loudspeakers set up by strikers occupying the nearby finance ministry.

"These measures are targeting the wrong people, the poor. I hope they won't be passed," she said.

With the official unemployment rate running at about 16 percent and many people already suffering wage cuts of more than 50 percent over the past two years, there has been growing doubt that repeated doses of austerity can solve the crisis.

The strike on Wednesday and Thursday will hit public sector institutions including tax offices, state schools and airports as well as banks and businesses ranging from taxis and clothes shops to suppliers of everyday staples like bakers.

As well as the finance ministry, the justice ministry has also been occupied and even judges will hold indefinite stoppages, only issuing rulings on major cases.

Customs officials who clear fuel refinery deliveries hold a 24-hour strike on Monday and will decide whether to extend their action, potentially hitting petrol supplies.

Garbage piled up on Athens streets for a week due to labor action and municipalities hired private firms to collect it before a "disease bomb" explodes, the health minister said.

A 48-hour strike by seamen, starting on Monday, has brought passenger ferries to a halt, disrupting traffic to the country's dozens of islands.

"Leave the seamen and their pensions alone, there's too few of us left anyway," George Nikolaidis of the seamen's union told a private radio station.

Public transport services in Athens are expected to be operating at least some services, allowing demonstrators to reach the main site of the protest in Syntagma Square, outside parliament.

Revised data on Monday showing Greece's 2010 budget deficit reached 10.6 percent of GDP, above the 10.5 percent previously reported, underlined the scale of the problem.

Greek banks may need short-term nationalisation - Blackrock

Πηγή: Reuters
By Angeliki Koutantou

Oct 16 2011

Some Greek banks may have to be nationalised temporarily to cope if Europe imposes a major discount on Greek bonds as part of a euro zone rescue, a top executive of investment firm BlackRock told Greek newspapers on Sunday.

BlackRock Solutions is carrying out an audit of Greek lenders' loan portfolios, a process the Greek central bank hopes will help them regain access to market funding.

Due to Greece's debt crisis, Greek banks have been shut out of wholesale funding markets and have become dependent on the European Central Bank for liquidity.

If Greece's debt restructuring becomes more aggressive and investors continue to dump their shares, lenders will have to book serious losses and require state rescue funds to boost their capital adequacy ratios.

Craig Phillips, global head of BlackRock's financial markets advisory group, said more banks may come under state control due to the combined effect of a sharp fall in their share prices and their funding problems.

"It's a natural consequence that state funds should be given to banks and that government acquire stakes in them to restore their viability and then they would be privatised again," he told the weekly To Vima.

Greece's bank rescue fund has 10 billion euros (8.7 billion pounds) to recapitalise the Greek banking system and that amount should grow to 30 billion once euro zone parliaments ratify the EU's rescue mechanism, the EFSF.

In an interview with the daily Kathimerini, Phillips said Greek banks have not been endangered by reckless lending but the impact of the deep recession in Greece could hurt their credit.

"The Greek banking system is quite conservative compared to the size of the economy," he said. "(The main concern is) how deep the recession will be and how it will affect borrowing."

Phillips said he expected to see more mergers in the sector, after Greece's second and third largest lenders, Eurobank (EFGr.AT) and Alpha Bank (ACBr.AT) unveiled a merger deal in August to tackle the crisis.

"It is expected that there will be new mergers among banks to streamline their cost and become more competitive," he said.

Greece’s failed state and Europe’s response

Πηγή: Opendemocracy
By Takis S Pappas

Oct 13 2011

Far more dangerous than the present financial crisis threatening the euro, Greece looks like a failed EU state, which puts at risk the stability of the entire European project.

It is over two years now since Greece-as-a-problem made the news the world over. Amid countless – highly conflicting – views expressed by a miscellany of experts and public opinion-makers, and after several remedies proposed by politicians, at present the problem is only getting worse.

By now, it is clear that the EU-IMF programme for bailing out Greece has not been successful, whether as a result of its faulty conception or Greece’s poor performance under it. Accordingly, two schools of thought have emerged: for one of them, EU governments should cling onto their strategy of trying to rescue Greece, as a Greek default would cause contagion throughout the Eurozone. In the other school of thought, the EU governments should cut off Greece’s lifeline and, to the ultras within this school, let it fall out of the euro; however big the cost, it is said, the long-term benefits will be better for the Eurozone and, why not, for Greece, too.

Both schools of thought are wrong because they fail to face up to reality squarely. For, let it be admitted, the problem with Greece is much more profound than most politicians and analysts have so far calculated. In stark reality, and far more dangerously than its present financial crisis threatening the euro project, Greece looks like a failed EU state, which, as such, puts at risk the stability of the entire European project. This is why a European political, rather than simply economic, plan for rescuing Greece must become a most urgent priority.

To understand better the Greek predicament, try contrasting Greece with enduringstates, by which one means any sovereign state with: control over its borders; an organized and efficient civil service, able above all to raise tax revenue in order to provide basic public goods; a legitimate political authority, able to maintain public order, and a society that respects the rule of law; the capacity to produce unassisted growth; and, finally, the ability to interact on a par with other states in the international arena. In contrast, failed states, according to the definition provided by the Crisis States Research Centre of the London School of Economics, can no longer reproduce the conditions of their own existence and, therefore, are under threat of imminent collapse. Is Greece, then, a failed state? Let’s look at the facts.

Greece’s national sovereignty, first of all, is by now severely limited by the massive outside intervention in its economy and policy-making decisions. Although tourists seem to avoid Athens these days, the place is swarming with teams of foreign experts monitoring ministries, checking books, setting deadlines for policy implementation, and pushing through state sale-offs.

A somewhat related issue is Greece’s increasing difficulty in coping with border security as tens of thousands of illegal immigrants and asylum seekers enter each year from Turkey. To stem this influx, Greece has invited Frontex, an EU agency tasked with reinforcing border security in member states, to patrol it with the Greek soldiers. More recently, it was requested of Frontex that they remain at the Greek-Turkish border on a permanent basis.

If borders remain porous, what they contain presents a more dispiriting picture. The civil service, notorious for its inefficiency and endemic corruption, has long ago lost all popular confidence in it. It is also unable to collect tax revenue. As the Greek finance minister has revealed, last June, out of the country’s 34 major tax offices, 28 managed an average of less than one audit on taxpayers per employee, while 12 had not performed a single check.

The failure of the state is clearly reflected in the fast deterioration of the services it provides in basic goods, such as education, health, sanitation, and transport. Diminished funds, frequent strikes, and low morale in public administration have combined to bring the state virtually to a halt.

Nor are authorities able to protect citizens, and their properties, from social disorder, widespread vandalism, and occasional bouts of violence, as has been painfully evident during the riots of December 2008 and the subsequent looting, burning, and destruction of property that has taken place in Athens and other Greek cities. The police, in particular, have been remarkably inadequate in maintaining public order.

Inevitably, this has caused a breakdown in the rule of law. A few months ago, to block works on a planned landfill site in a town near Athens, the local population clashed with the police for 126 days until the government decided to bow out of the project. Meanwhile, large numbers of Greeks have joined the ‘I Won’t Pay’ movement, refusing to cover bus fares or highway tolls. Even the university authorities have openly declared that they will not apply a new law that was overwhelmingly approved in Parliament. The number of public acts of disobedience against the law, can be listed, regrettably, at great length.

Turn to the political class and you will find that its authority has vanished into thin air. Prime minister George Papandreou may have shown political courage at times, but has no control over either his party or his government. Major opposition leader Antonis Samaras lacks ideas, a strong political team, and political capital among other EU heads of state. Squabbling over political and economic ruins, Greece’s leaders seem unable to build political trust and propose a realistic agenda for the future. No wonder, then, that, as repeated surveys show, their approval rates have collapsed.

Growth is out of the question. At present, the prospects for the Greek economy look depressing. According to recent IMF forecasts, Greece’s GDP will shrink by 5% this year and will be 2% smaller in 2012; the economy is expected to contract for four successive years. Greece is meanwhile faced with one of the greater human flights in her history. This includes three categories of individual, mostly young people, who should be the most valuable to Greece if Greece is to overcome its present crisis: academics and intellectuals; entrepreneurial middle-class professionals with technical skills and expertise; and long-term immigrants who, in the last two decades, were the backbone of Greece’s development and who became well integrated in Greek society.

As might be expected, such an accumulation of failure affects Greece’s role in the world. Negatively, of course, as the erstwhile proud country is now bossed around by the IMF, bullied by north Europeans, and insulted by just about anybody with an axe to grind. As a result, national resentment among Greeks only adds to their social angst and economic desperation.

Evidently, the problem with Greece is far deeper and much more serious than this country’s (already deep and serious) financial crisis. It involves nothing less than a complete and drastic overhaul of the Greek state system. It should however be equally obvious that, as Greece is an EU country, Europe cannot but face up to this problem and contribute to its solution, as any alternative route must inevitably lead to the collapse of the entire project of European integration.

Rebuilding a state is not easy. It will surely take a long time, and require huge initiative on a massive scale and at great cost; it will also involve a huge transfer of sovereignty from Athens to Brussels, which, however, depending on how it is done, need not necessarily provoke resentment among the Greek people. But this is an inexorable task if the EU wants to avoid a looming breakdown, not just of the euro, as many currently seem to fear, but of something much more important – the European project itself, which, for all its many deficiencies and enormous cost, has nevertheless defined Europe’s postwar stability and growth.

Statement by the European Commission, the ECB and IMF on the Fifth Review Mission to Greece

Πηγή: IMF
Oct 11 2011

Press Release No. 11/359

Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) have concluded their fifth review mission to Greece to discuss recent economic developments. The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to bring the government’s economic program back on track.

Regarding the outlook, the recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards. There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate. However, exports are rebounding—albeit from a low base—and a shift towards a more dynamic export sector, supported by a moderation of unit labor costs, should lead to more balanced and sustainable growth over the medium term. Inflation has come down over the last year and is expected to remain below the euro area average in the period ahead.

In the fiscal area, the government has achieved a major reduction in the deficit since the start of the program despite a deep recession. However, the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures.

As for 2012, the mission believes that the additional measures announced by the government, in combination with a determined implementation of the adjusted Medium-Term Fiscal Strategy, should be sufficient to bring the fiscal program back on track and ensure that the deficit target of EUR 14.9 billion will be met.

Looking to 2013-14, additional measures are likely to be needed to meet program targets. Such measures should be adopted in the context of an update of the Medium-Term Fiscal Strategy by mid-2012. To ensure that the program is growth-friendly, and in view of the ambitious assumptions regarding improvement in revenue administration already embedded in the Medium-Term Fiscal Strategy, it is essential that such measures focus on the expenditure side.

In the area of privatisation, progress has been achieved with the creation of a professionally managed privatisation fund. However, delays in the preparation of the assets for privatisation, and to some extent worse market conditions, mean that revenues in 2011 will be significantly lower than expected. The government remains, however, committed to the revenue target of EUR 35 billion by the end of 2014. Ensuring that the privatisation fund remains independent from political pressures remains key for success in this area.

Banks have improved their capital base through market-based means. As evident from this weekend’s resolution of Proton Bank, the recent amendment of the banking law ensures that non-viable banks can be wound down while protecting depositors' interest and preserving the stability of the financial system.

As to structural reforms, areas of progress include the transport sector, licensing procedures, and regulated professions. As overall progress has been uneven, a reinvigoration of reforms remains the overarching challenge facing the authorities. In this regard, the decision to suspend the mandatory extension of sector-level collective agreements to the firm level is a major step forward, as it will help ensure the flexibility in the labour market needed to boost growth and prevent high unemployment from getting entrenched.

Overall, the authorities continue to make important progress, notably with regard to fiscal consolidation. To ensure a further reduction in the deficit in a socially acceptable manner and to set the stage for a recovery to take hold, it is essential that the authorities put more emphasis on structural reforms in the public sector and the economy more broadly.

The success of the program continues to depend on mobilizing adequate financing from private sector involvement (PSI) and the official sector. Ongoing discussions on PSI together with assurances provided by European leaders at their July 21 summit suggest that the program remains fully financed.

Once the Eurogroup and the IMF’s Executive Board have approved the conclusions of the fifth review, the next tranche of EUR 8 billion (EUR 5.8 billion by the euro area Member States, and EUR 2.2 billion by the IMF) will become available, most likely, in early November.

Derivatives: The $600 Trillion Time Bomb That's Set to Explode

Πηγή: Money Morning

BY KEITH FITZ-GERALD, Chief Investment Strategist, Money Morning
OCTOBER 12, 2011

Do you want to know the real reason banks aren't lending and the PIIGS have control of the barnyard in Europe?

It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States.

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.

The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS).

Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.

Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.

Think I'm exaggerating?

The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble.

Compounding the problem is the fact that nobody even knows if the $600 trillion figure is accurate, because specialized derivatives vehicles like the credit default swaps that are now roiling Europe remain largely unregulated and unaccounted for.


Tick...Tick...Tick

To be fair, the Bank for International Settlements (BIS) estimated the net notional value of uncollateralized derivatives risks is between $2 trillion and $8 trillion, which is still a staggering amount of money and well beyond the billions being talked about in Europe.

Imagine the fallout from a $600 trillion explosion if several banks went down at once. It would eclipse the collapse of Lehman Brothers in no uncertain terms.

A governmental default would panic already anxious investors, causing a run on several major European banks in an effort to recover their deposits. That would, in turn, cause several banks to literally run out of money and declare bankruptcy.

Short-term borrowing costs would skyrocket and liquidity would evaporate. That would cause a ricochet across the Atlantic as the institutions themselves then panic and try to recover their own capital by withdrawing liquidity by any means possible.

And that's why banks are hoarding cash instead of lending it.

The major banks know there is no way they can collateralize the potential daisy chain failure that Greece represents. So they're doing everything they can to stockpile cash and keep their trading under wraps and away from public scrutiny.

What really scares me, though, is that the banks

think this is an acceptable risk because the odds of a default are allegedly smaller than one in 10,000.

But haven't we heard that before?

Although American banks have limited their exposure to Greece, they have loaned hundreds of billions of dollars to European banks and European governments that may not be capable of paying them back.

According to the Bank of International Settlements, U.S. banks have loaned only $60.5 billion to banks in Greece, Ireland, Portugal, Spain and Italy - the countries most at risk of default. But they've lent $275.8 billion to French and German banks.

And undoubtedly bet trillions on the same debt.

There are three key takeaways here:

• There is not enough capital on hand to cover the possible losses associated with the default of a single counterparty - JPMorgan Chase & Co. (NYSE: JPM), BNP Paribas SA (PINK: BNPQY) or the National Bank of Greece (NYSE ADR: NBG) for example - let alone multiple failures.
• That means banks with large derivatives exposure have to risk even more money to generate the incremental returns needed to cover the bets they've already made.
• And the fact that Wall Street believes it has the risks under control practically guarantees that it doesn't.Seems to me that the world's central bankers and politicians should be less concerned about stimulating "demand" and more concerned about fixing derivatives before this $600 trillion time bomb goes off.

SPAIN: 'Rich Must Share Cost of Crisis'

Πηγή: The International News Magazine
By Raquel Martínez Oct 12 2011

MADRID, Oct 12 (IPS) - As global working-class outrage against corporate capitalism explodes in
organised protests around the world, scores of citizens in Spain are demanding
an end to tax breaks for the wealthy.

At a time when austerity measures have slashed public spending on essential services such as healthcare
and education, thousands of people in over 166 cities across Spain, loosely organised around the 15-M
movement, have been calling for higher corporate taxes, so the wealthy can "share the cost of the crisis."

Disgruntled citizens also called for a referendum to decide on the advisability of constitutional reforms
that established a cap on Spain's public debt, which currently stands at 702 billion euros at an annual cost
of 25 billion million euros, according to the Bank of Spain.

Despite these demands, the reforms were negotiated without a referendum.

The bulk of the country's tax burden falls on the shoulders of middle- and working-class people, who
currently fork out 80 percent of their wages in Personal Income Tax (IRPF), according to the Organización
de Inspectores de Hacienda del Estado (IHE).

Francisco de la Torre Díaz, spokesperson for IHE, told IPS, "The economic crisis has (exacerbated) tax
disparities in two ways: firstly, through the increase in indirect taxes (like the Value Added Tax, or VAT) to
18 percent, which is regressive by nature; but mainly because of the significant decrease in corporate
taxes."

Last month, in what many believe to be a token gesture, the patrimony tax, or property sales tax, which
was abolished by the government in 2008, was reinstated for the next two years to alleviate tax pressure
on average wage earners.

But the added weight of this tax on the total taken in by the Agencia Tributaria (AEAT), an office similar to
the Inland Revenue Department, is negligible - less than 0. 5 percent, according to IHE.

"Most (of the big) 'Forbes magazine' Spanish players are barely affected by this tax, since a large amount
of their patrimony is not tributary," Torre Díaz told IPS.

"The taxes extracted from the highest incomes earners, a large percentage of which are companies, have
been steadily decreasing over the years," Torre Díaz told IPS.

"Between 2007 and 2010, corporate tax collection had dropped by 64 percent, meaning the state went
from receiving nearly 45 billion euros to less than 16 billion euros," he added.

This represents a significant loss of revenue to the government, funds that could be utilised to subsidize
the public programmes currently on the chopping block.

In addition, Observatorio de Responsabilidad Social Corporativa (Spain's observatory on corporate social
responsibility) estimates that a full 80 percent of the companies on IBEX 35, the stock market index of
Spain's principle stock exchange, have money in tax havens.

Susana Ruiz, policy advisor for Innovative Financing and Private Sector Campaigns at Intermón Oxfam,
pointed out the dangers of promoting investment abroad by Spanish companies, while simultaneously
maintaining lax standards for taxing them at home.

"Stronger accountability measures should be put in place to avoid tax evasion by these big companies,"
she told IPS.

"Their dark structures not only allow the diversion of profits on which taxes should be paid domestically,
but also encourage money transfers to tax havens, which enables corporations to dodge tax payments in
developing countries where they are carrying out their main productivity or extractive activity," Ruiz added.

A further cause for alarm is the lack of political will among the Group of 20 (G20) - representing some of
the most economically and politically influential industrialised and developing nations - to bring an end to
these fraudulent practices, which have dire ripple effects like massive drugs and arms trafficking.

The 'country by country reporting requirement', that demands that multinationals present detailed
accounts for each and every country of operation, have not even been included in the G20 agenda for the
next meeting slated to be held in France, Ruiz told IPS.

Aside from multilateral efforts, the Spanish government itself has considerable leeway to restock its state
coffers, according to economist and development expert Manuel de la Iglesia-Caruncho,

He told IPS that according to the most recent figures released by Eurostat, the statistical office of the
European Union, the average income of 27 EU countries rose to 35.8 percent of GDP in 2009, while Spain
grew by just 30.4 percent.

Iglesia-Caruncho stressed the necessity for the wealthiest corporations to correct the country's many
deficits by paying higher taxes. Fair tax payments by corporations would lead to a reduction in the fiscal
deficit, an end to runaway speculation in financial markets and an immediate improvement in public
services, he said.

"But only," he cautioned, "on the condition that these additional resources are used efficiently in
employment- and knowledge-generating activities such as investment in productive and social
infrastructure, health, education, research and development (R&D) or the environment."

Iglesia-Caruncho also challenged the dominant argument against tax increases - based on the notion that
withdrawing resources from the private sector would deprive economic operators of incentives, thereby
leading to an overall reduction in consumption - by pointing to the example of many Scandinavian
countries that collect high taxes and still enjoy high growth and consumption.

These states, he added, are protected from market shocks and failures by properly redistributing social
wealth.

Corporate adherence to fair tax standards will not necessarily lead to a contraction in economic activity,
since "aggregate demand is maintained by increasing public expenditure and encouraging economic
operators to continue investing," the expert told IPS.

The Spanish Parliament has currently been dissolved prior to the Nov. 20 general election. However,
despite the period of relative government inactivity many believe that, at the very least, the crisis has
sparked a lively public debate that has put the necessity of a fairer and more just tax system back on table.