Greece signs up to €24bn austerity package

[BunkerHill24]

Source: The Times

April 30, 2010

The Greek Government has agreed the draft outline of a €24 billion (£21 billion) rescue package, which is expected to include savage cuts in Civil Service wages and state benefits along with hefty tax increases to cut its deficit.

Final details of the measures were still being decided last night with officials from the International Monetary Fund (IMF), the European Commission (EC), and the European Central Bank (ECB). A final draft should be ready for approval by the Greek Parliament next week.

Any deal, however, could still be derailed by political infighting in Germany, where opponents of Angela Merkel’s Government threatened to block a Bill authorising the country’s participation in a three-year, €20 billion austerity package.




Read more: http://business.timesonline.co.uk/tol/business/economics/article7112290.ece

[Cleita]

1. Moodys and Standard and Poors are rating Greek bonds as junk.

Amazing that they have any credibility after our Goldman Sachs scandal.

[BunkerHill24]

2. C'mon, you wouldn't possibly expect Standard & Poor's and Moody's Corp ...

to act responsibly, do you? They are birds of prey, of course.

[Oerdin]

3. Honestly.

Greece needs to cut much more then this. They're bankrupt as can be and will shortly be defaulting on their debt unless the rest of the EU bails them out. The BBC is reporting Greece will need to come up with $150 billion in the next few months so $21 billion just isn't going to cut it.

[PaulaFarrell]

4. Disaster capitalism at its finest

The UK loaned £27 billion to one single bank - here is a whole country that needs rescuing but suddenly the money is hard to find. Unless of course Greece cuts wages and benefits and increases regressive taxes like VAT, in order to insure that 'banks and investors' don't get short-changed

[xxqqqzme]

13. And this time the US didn't have to rig an election

or fund a coup. Get goldman sachs involved and they all fall down. All paper, no blood in the streets. It is walmarting regime change.

[Zynx]

29. What do you propose for Greece?

I'm actually curious. What is this supposed other solution?

[bemildred]

5. Greece should repudiate the debt and start over.

Let the big banks have a taste of "austerity" for a change.

[naaman fletcher]

11. They should repudiate..

But then they can't borrow money, so they will have to not spend more than they have, which means they need to cut spending.

[bemildred]

16. Stirring logic there.

It would have lots of consequences, clearly, but so would bank imposed "austerity". The question is which will be worse?

[IndianaGreen]

22. The choice is between the bankers and the people

I vote for the people!

Default!

[muriel_volestrangler]

24. If they defaulted, they certainly have to leave the Euro, and probably the EU too

because the other countries wouldn't put up with continuing to pay Greece, while it defaults on its debts anyway.

Greece has benefited from membership of the EU more than any country, financially. In 2007 it received more money from the EU, net, than any, despite being one of the smaller ones.

http://www.eu-oplysningen.dk/euo_en/spsv/all/79/

Getting kicked out of the EU would mean a big loss of income for Greece.

[bemildred]

25. Well, the thing is, you can't threaten someone with something they are not afraid of. nt

[muriel_volestrangler]

27. Most Greeks would like to leave the EU, you think?

I think they might well like to leave the Euro, and let a 'new drachma' float - that way, they'd just have to spend more on imports, but their exports would become more competitive, and it could well help employment, and they'd accept the higher cost of oil etc. as a trade-off.

But leaving the EU means they lose a lot of subsidies and grants. Those are probably mainly agricultural (EU money mostly is), but Greece is still quite rural. And many countries like to hang on to their agriculture, for the image of their nation.

[bemildred]

28. I can't speak for "most greeks".

But you can't threaten "most greeks" with the death of the Euro or leaving the EU unless they give a shit about that, and near as I can tell they don't.

[Odin2005]

6. Expect rioting in the streets of Athens.

The Greeks don't take shit.

[robcon]

7. Yeah, I expect Greece with live up to its promises.

Sure they will. :sarcasm:

[fasttense]

8. For crying out loud, why doesn't Greece simply tell the banks to stick it.

Default and make the lying, cheating scoundrels take it in the shorts for a change.

No, instead they are taking the food out of their baby's mouths, they are allowing their elderly slow and certain starvation, just to feed the Corporate Welfare Fraud. Next they will be sending the police out to confiscate any wealth their middle class might have hidden under their mattresses.

Capitalism is DEAD, Long Live Corporate Welfare Fraud.

[dmallind]

9. Because they would then never get another dime

And how would they continue to pay their massive government work force? Or keep up even with necessary spending? Their only choices would be to tax at insanely high levels or print money and deal with 1930'S Germany-level ionflation.

[naaman fletcher]

12. my basics thought..

Is that in the long run they will be better off if they have to live within their means. Observing individuals who repudiate credit card debt and mortgages.... after 6 months or so of not being able to live off of credit I generally observe them being happier as they simplify their lives and the stress level is lowered.

My guess is that on a national level Greece will be happy in the long run if they repudiate and start living within their means.

[dmallind]

14. Agreed - but how to do that is the bugger

The government sector in Greece is mindbogglingly large. I'm certainly no anti-government Norquist type but even I think it's a bit much when the government constitutes so much of the labor force. The workers - esp government workers, are quite naturally going to be reluctant to take pay or benefit cuts and that's almost certainly the only way Greece can live within its means> It's not like Greece is spending trillions on its military or on space exploation etc. It's spending huge amounts however on its government workforce.

[bemildred]

19. Well, I think the point is that nothing good will be done by running them deeper into debt.

Except for banks and other parasites, who will make out like bandits, thus leaving Greece worse than before.

[dmallind]

15. Agreed - but how to do that is the bugger

The government sector in Greece is mindbogglingly large. I'm certainly no anti-government Norquist type but even I think it's a bit much when the government constitutes so much of the labor force. The workers - esp government workers, are quite naturally going to be reluctant to take pay or benefit cuts and that's almost certainly the only way Greece can live within its means> It's not like Greece is spending trillions on its military or on space exploation etc. It's spending huge amounts however on its government workforce.

[Abq_Sarah]

20. In order to live within their means

They would still have to make major and painful cuts in their spending along with tax increases for every segment of the population.

I don't think that's what the protesters have in mind.

[Joanne98]

10. The Shock Doctrine strikes again.

[LongTomH]

18. Ahh! Ya beat me to it!

I'm waiting to see what Naomi Klein has to say about Greece's 'rescue.'

[IndianaGreen]

23. neoliberalism

and Larry Summers

[fedsron2us]

17. It will be all pain and no gain if they persist in staying in the Euro

which is essentially a Deutschmark peg. The currency union is crucifying the Greek economy which has traditionally relied on agricultural exports and tourism for much of its earnings. Austerity measures alone wont get them out of this hole since it is going to shrink domestic demand without offering much in the way of a competitive advantage for Greece against it nearest competitors such as Turkey who have captured much of its tourist market since the inception of the Euro. The Greeks need to decouple from the Euro, 'restucture' their debts (i.e whole or partial default) and let their currency devalue. Inflation would at least spread the burden and make the austerity a little more bearable.

The only real alternative is for the ECB to monetise the debt by buying up all Greek bonds which essentially means adding a lot of extra liquidity to the Eurozone. This would bail the bond holders (mainly the banks) albeit with some FX and inflationary risk. It would require some changes to the ECB charter but would kill those in short positions. Such a decision would be bonanza for any trader who had the balls to take on Greek bonds last week when the yield got up to nearly 20%. I think that this solution might work in the short to medium term since it would give the Greeks a financial lifeline while allowing the ECB to exercise some control over their debt issuance.

Unfortunately, it does not seem to be the solution favoured by the Germans who seem to prefer a smaller limited EU bailout of Greece paid for by EURO member governments. This is a crazy option which has absolutely no chance of success since it is essentially asking other indebted countries such as Portugal, Ireland and Spain to take on additional borrowings on the Greeks behalf. Why the Portuguese would want to borrow at 6% plus on the markets and then lend the money to Greece at less than 5% is completely beyond me. If they go down that route disaster beckons.

[and-justice-for-all]

21. Ok, so let me get this straight...

Greece, who is a member of the EU, is in economical peril needs funds to keep their ass afloat. Germany is willing to help them do this but with restrictions to see to it that Greece does in fact make sacrifices in order to turn themselves around and people are bitching about it?

So what would you purpose, that Greece just be left to sink? Greece does not have many options and taking the funds with restrictions is worth it.

[fedsron2us]

26. The money is not just coming from Germany

All Eurozone members plus the IMF have to contribute.

This means already indebted countries such as Ireland which has already introduced severe austerity measures on its own citizens will have to borrow more money to contribute to the bailout. The Germans have said they will indemnify countries such as Ireland for the additional interest costs of such borrowing but it is not clear if that would also cover the cost of any default.

In addition even after the bailout and the austerity measure the Greeks will still be even more in debt in 2014 than they are now.

http://www.ft.com/cms/s/0/de21becc-57af-11df-855b-00144feab49a.html

[bemildred]

30. More debt is not the solution to too much debt.

Just saying.