Fast and furious meetings and teleconferencing today among G7 money ministers and central banksters, justly panicked [though they’d never admit it] that the whole game of debt and privatization is under threat.
They can’t be so stupid that they didn’t see it coming. Hell, long-time readers will have seen it coming, since we’ve warned of it ever since we launched this blog.
We’re leaving at or near the apexes of multiple exponential curves, among them debt, resource consumption, environmental pollution, and species extinctions.
The “solution” mandated — growth, the only way to pay the interest on all that debt — is suicidal, if growth is meant to imply the perpetuation of an a system on rape of our common terrestrial home, our finite, delicately balanced Spaceship Earth, hurtling through space and equipped with limited supplies.
We’ve got to find a better way of doing things at a time when systems of immense power, control, and wealth are armed with tools of surveillance beyond the dreams of despots of the past.
And so on with the show, today consisting of a spirited response, a panicked meeting of the powerful, more bad numbers, calls for more consolidation of powers in the European unions [this time, an EU prosecutor], a presidential history lesson, calls by and on Germany, more Grexit mobilization, a rating agency lays Grexit odds, a Greek Army officer stealing food to live, and much, much more.
Hitting the highlights
Today’s Guardian liveblog sums up some of the day’s news:
- G7 finance ministers and central bankers have discussed the eurocrisis by phone today as fears grow that Europe could trigger a new panic in the global economy. On the call, leaders discussed plans for closer fiscal union across Europe, which increasingly looks like the only way to stem the crisis.
- Spain’s prime minister warned that the country is now in a situation of “extreme difficulty”. Mariano Rajoy said it was imperative that Europe proves that the euro is irreversable, by agreeing a banking union and embracing eurobonds. Germany, though, remained opposed to allowing Spain’s banks to be bailed out without a formal request from the Spanish government.
- A grim set of economic data showed that the eurozone economy is shrinking. Private sector output across the single currency region fell by its fastest rate in almost three years, while retail sales fell 1% and Germany factory orders also dropped. Economists predicted that the eurozone could shrink by 0.5% in the current quarter, putting more pressure on the ECB (which meets to set eurozone interest rates tomorrow).
More numbers from the BBC:
The Markit purchasing managers’ index fell to 46 in May from 46.7 in April, its lowest level in almost three years. A figure below 50 indicates contraction.
German output fell for the first time in six months, while declines in Spain and France accelerated.
The eurozone’s private sector has now contracted for four months in a row.
The May figures indicate that “the economy is contracting at the fastest pace for around three years”, said Markit’s chief economist Chris Williamson.
“Companies report business activity to have been hit by heightened political and economic uncertainty, which has exacerbated already weak demand, both in the euro area and further afield.”
More details from Agence France-Presse:
Any score below 50 indicates economic contraction, with the latest reading of the closely-watched survey of buying activity showing recession in the debt-laden eurozone periphery clearly now eating into the core.
The final score was a shade better than the first estimate of 45.9 points but the results showed that German output fell for the first time since November and that downturns in France and Spain accelerated, with Italy firmly mired in a steep downturn.
France posted a 37-month low of 44.6 points, with Spain languishing on 41.2 points. Italy’s score rose, but only to 43.5 points.
Obama gets a Fabius schooling
Barack Obama’s running for reelection, and he’s got to paint things as rosy as he can, since Mitt Romney’s running neck-and-neck in recent polls.
And now that the crash has reverberated back across the Atlantic, sending those all important growth numbers into the red, Obama painted the U.S. malaise as a consequence of the European crisis, not something domestic.
But that didn’t set well with the French, and Foreign Minister Laurent Fabius decided to give the president a little lesson in recent history, a bit beyond the range of Obama’s rhetorical focus.
From Agence France-Presse:
“The crisis did not start in Europe… Lehman Brothers was not a European bank,” Fabius said after talks with his counterpart Giulio Terzi in Rome.
“We should not shift responsibility. We’re all in the same boat,” he said.
Obama said Saturday that Europe’s economic woes were causing trouble for the United States’ own economy, after the US unemployment rate rose for the first time in almost a year, spelling trouble for his reelection bid.
“The crisis in Europe’s economy has cast a shadow on our own. And all of this makes it even more challenging to fully recover and lay the foundation for an economy that’s built to last,” he said in his weekly radio and Internet address.
Europols talk up the euro in Russia
Russia has good reason to be leery of Europe, what with NATO in a belligerent mode and with that new anti-missile system along the western border. Given the last few centuries of war-filled history, Russia has, uh, concerns.
But with the euro under threat, the EU officials tried to put on a good show for their troubled currency.
From New Europe:
The troubled euro was praised by European Commission President Barroso and by Council President Van Rompuy at the EU – Russia summit.
Speaking at the end of the summit, Barroso said the EU leaders had “full confidence in the future of the Euro area and of the European Union.” He added that “the debate now in the European Union is not how we are going to undo the integration. The debate is about how we are going to further deepen the integration to complement our monetary union with a full economic union, including in some areas like the banking sector supervision and also in some fiscal aspects.”
In case that wasn’t clear enough, he emphasised, “no one should be in any doubt – there is absolute commitment in the European Union and in the Euro area to the euro and to the solidity and further integration of all our efforts.”
Van Rompuy was equally forthright, “Let me be clear, there is no way back for the Euro. There is only the way ahead towards more integration.”
All power to the
One very important use of the crisis has to consolidate power in the institutions of Brussels, accomplished by the surrender of sovereign powers by member states.
Now comes a call for a Brussels criminal prosecutor.
From Nikolaj Nielsen of EUobserver:
MEPs on the recently established anti-mafia committee and the European Commission have revived talk of creating an EU public prosecutor’s office.
French centre-right deputy Veronique Mathieu – among others – proposed the initiative at a meeting of the anti-crime body in the European Parliament in Brussels on Monday (4 June).
EU home affairs commissioner Cecilia Malmstrom said it would be a “good idea,” but added that it needs wider political backing.
A parliament spokesman said that several member states are against it as things stand.
The commission’s website says it “would be responsible for investigating, prosecuting and bringing to justice those who damage assets managed by or on behalf of the EU.”
Creation of the eurozone a mistake
That’s the conclusion of economist Robert J. Samuelson, writing in the Washington Post:
Europe is at the abyss — again. Its turmoil is rattling global stock markets and stoking fear and bewilderment. The obvious question is, what’s the solution? The answer is, there is no solution. Europe faces choices, some bad and others worse. Unfortunately, it’s unclear which are which. The best that can be imagined is that Europe lurches from crisis to crisis and that its slumping economy weakens the already fragile global recovery. The worst is a massive flight from the euro and an economic free fall that resurrects the dark days of 2008 and 2009.
Can anyone doubt that the euro’s creation in 1999 was a huge blunder? It aimed to promote European prosperity and unity, but it’s doing just the opposite. The very belief in its early success reduced interest rates in Europe’s periphery (Greece, Portugal, Spain, Ireland, Italy). Low rates fed credit booms and housing bubbles that, once burst, caused recessions and swollen budget deficits.
Soros says Germany has three months to fix it
Which is exactly what Angela Merkel doesn’t want to hear.
From Michael Day of The Independent:
The billionaire finance sage George Soros has told Germany it has three months to save the euro – and prevent the disintegration of the European Union.
Only a German volte face on policy by the end of September could prevent a messy and potentially catastrophic break-up of the single currency, and the EU itself, the financier, pictured, said in a speech to the Festival of Economics, in the Italian city of Trento.
“In my judgement the authorities have a three-month window during which they could still correct their mistakes and reverse the current trends,” said Mr Soros, known as the “man who broke the Bank of England” after making a £1bn profit from the UK exit from the Exchange Rate Mechanism in 1992. “By ‘the authorities’ I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver’s seat and nothing can be done without German support.”
Putting another cash number on the Grexit
Along with all that talk of a Greek exit from the eurozone, the occasional number is heard.
Here’s the latest, from Makis Papasimakopoulos of Athens News:
The Open Europe think tank has estimated that the immediate cost of a Greek exit from the euro is somewhere between 67 and 259 billion euros. This is the approximate amount that the country will need in order to avoid a potential collapse after its exit from the eurozone structure, to be shared between the IMF and the eurozone itself.
Hospitals and state care alone would require a total of 12 billion euros, with the banking sector and social security funds also needing a further 55 billion so as to avoid damages to the pension scheme.
Furthermore, the Bank of Greece would be required to print 128 billion worth of notes to prop up the country’s liquidity factor.
The Iron Chancellor calls for Greek discipline
Stout-hearted conservative that she is, Merkel is fine with centralized power. Hell, she’s the driving force of the current push.
She’s also very conservative when it comes to cash, especially when her country’s banks have so much of it to gain from Greece —but only if those Greeks stick to that austerity “memorandum.”
From Greek Reporter’s Stella Tsolakidou:
Addressing a Social Democratic Union meeting in Berlin yesterday, Chancellor Angela Merkel clarified that Greece is legally bound to stick to the already signed bailout agreements, and reminded the Greek parties that no alteration in the terms and conditions of the Memorandum will be accepted.
The German Chancellor also noted that in case Greece does violate the financial agreements, the country would have to appear before the European Court of Justice just like any other country has to do.
Moreover, Merkel rejected the EU bond idea as a crisis solution anew but seemed willing to become flexible about the imposition of a new taxation on financial transactions and the measures aiming at boosting growth within the Euro Zone. Merkel insisted that all EU Member-States must give part of their national sovereignty in terms of their national budgets in exchange for development.
German banks can handle the Grexit
While Merkel’s preaching discipline, her government’s bank watchdog says that even if Greece gets the boot, German banks can weather the storm.
Bafin [short for Bundesanstalt für Finanzdienstleistungsaufsicht] is Berlin’s financial oversight for the banking industry, and they’re already prepared for the Grexit.
German banks have limited exposure to Greece and should be able to handle any outcome in the southern European country, German financial watchdog Bafin said on Tuesday.
“I won’t join speculation about Greece’s future financial policy but I am certain that Germany’s banks are now prepared for all possible scenarios,” Bafin president Elke Koenig said in the text of a speech at the watchdog’s annual news conference.
Bafin and the Bundesbank were monitoring the situation in Spain and Portugal very carefully but developments were in no way comparable to Greece, Koenig said.
India prepares for the Grexit
Seems like everyone’s doing it these days.
The government has prepared a contingency plan for Greece exiting the euro zone and even a collapse of the monetary union, Indian officials said on Tuesday. The euro zone debt crisis has already put a damper on India’s exports to Europe, the biggest destination for Indian goods, as well as capital inflows into equity and debt markets. Prime Minister Manmohan Singh’s government blames Europe’s woes for the slowdown in Asia’s third-biggest economy, although economists say Indian policy inertia is also to blame.
“Yes, India does have a contingency plan. There are different crisis management groups within the government to deal with such a possible scenario,” Kaushik Basu, the chief economic adviser to finance minister Pranab Mukherjee, told Reuters.
He declined to give details of the plan, but another senior official familiar with the planning said the finance ministry and central bank were prepared to take monetary and fiscal measures if necessary to try to insulate India from the shockwaves of a euro zone collapse.
Laying odds on the Grexit
And you can bet that Wall Street hedge funds are betting on the outcome with their derivative buys and Goldman Sachs salivates.
From Agence France-Presse:
International ratings agency Standard & Poor’s said Monday there was a one in three chance that Greece will leave the eurozone in the months following June 17 polls.
“We believe there is at least a one in three chance of Greece exiting the eurozone in the coming months,” if, for example, it were to reject the austerity measures and reforms agreed to in exchange for a massive EU-IMF bailout, SP said.
Turning its back on the deal could lead to “a consequent suspension of external financial support,” it said.
“Such an outcome would, in our view, seriously damage Greece’s economy and fiscal position in the medium term and most likely lead to another Greek sovereign default.”
Greek army officer steals food to survive
If this story from Ekathmerini is right, then Greece is lots closer to a dangerous tipping point that even we’d suspected:
An army officer was caught red-handed while trying to break into a mini-market in Arta in northwestern Greece in the early hours of Tuesday by police investigating reports of a disturbance.
The 43-year-old sergeant major, who serves at an Arta training base, told arresting officers that he was trying to rob the store in order to get something to eat as he could no longer afford food.
The suspect was handed over to the military police and will be facing a military court.
Greece’s military has a long history of overthrowing governments, and if the situation has deteriorated so badly that young officers are reduced to stealing food in order to survive, we should all be very worried.
Cancer drugs rushed back to hospitals, pharmacies
Considerable attention’s been devoted to stories about Greek cancer patients unable to take critically needed chemotherapy drugs because either they can’t afford them or because drug companies cut off Greek hospitals and pharmacies because of a mountain of unpaid bills.
Now somebody’s blinked because it was giving too much fuel to Syria’s fire, with elections less than two weeks away.
The provision of anti-cancer drugs by hospitals and pharmacies will return to normal by Wednesday, caretaker Health Minister Christos Kittas said on Monday following meetings with health sector professionals and emergency talks with Prime Minister Panayiotis Pikrammenos over dangerous shortages.
Kittas said the ministry had reached an agreement with the pharmaceutical firms that import the expensive anti-cancer drugs as a stopgap solution. Ministry sources said pharmacies, hospitals and the National Organization for Healthcare Provision (EOPYY), the country’s main healthcare provider, will be immediately supplied with the medicines.
Serious shortages of anti-cancer drugs have appeared in recent weeks due to public spending cuts and the reluctance of pharmacists to stock the expensive medicines over fears they will not be paid by debt-wracked social security funds. Last month, EOPYY promised to settle its 250-million-euro debt to pharmacists before elections on June 17.
The drug shortages – and the debacle with the anti-cancer medicines – was the focus of intense political debate over the weekend with leftist SYRIZA blaming the previous administration and former Health Minister Andreas Loverdos accusing SYRIZA of “investing in the problems of cancer sufferers to garner votes.”
In a related development, hospital suppliers are on Tuesday to stop deliveries to six major institutions until some 150 million euros in debts are settled.
A late relating of that related development. . .
Health sector staff unpaid this year
This is one of the most remarkable stories to emerge out of the Greek crisis.
The noxious “lazy Greek” stereotype is thoroughly debunked by the conduct of the people who work in Greece’s health system, who continue to serve the public even though many haven’t been paid a single euro since the first of the year.
From A. Papapostolou of Greek Reporter:
Henry Dunant Hospital, a gleaming, state-of-the-art facility in central Athens, is one of the best medical centers in Greece. But quality hasn’t protected it from one of the most troubling trends of the country’s economic crisis: a plague of late payments that threatens to drive Greeks deeper into an economic abyss, according to Wall Street Journal.
The hospital’s 1,150 employees, doctors included, have yet to be paid any of their 2012 salaries. Employees just received the final payment of their 2011 salaries at the end of May. The hospital, which is owned by the Greek Red Cross, owes tens of millions of euros to its suppliers and banks. It, in turn, is owed at least €20 million by the Greek government.
Henry Dunant is one of a sharply growing number of Greek institutions and companies that aren’t paying because they haven’t been paid. Many employees aren’t receiving their salaries—certainly not on time and sometimes not at all. Businesses aren’t paying each other. And the government isn’t paying its suppliers or refunds owed to taxpayers.
“The only reason this hospital is open now is because the unpaid employees are keeping it open,” said Anthony Rapp, a former manager of U.S. Air Force hospitals who is part of a new executive team brought in to save it. “What is happening in this hospital is a microcosm of what is happening in Greece.”
It’s party time in Greece — 22 of them
A total of 22 parties will contest the general elections in Greece on June 17,it was announced Tuesday after the approval of their participation by the country’s Supreme Court.
The court did not give the “green light” to seven political parties due to belated submission of incomplete files, according to the official announcement by the court.
In the previous elections of May 6, 32 parties participated, but no one won a clear parliamentary majority.
Italy’s biggest bankster to be tried for fraud
Poor guy probably wishes he’d gone to Wall Street instead.
From the BBC:
The former boss of Unicredit, Italy’s largest bank, will go on trial for alleged corporate tax fraud, a Milan judge has announced.
Alessandro Profumo, currently chairman of Banca Monti dei Paschi di Siena, and 19 other executives stand accused of hiding tax liabilities using instruments arranged by Barclays.
Mr Profumo, who denies any wrongdoing, resigned from Unicredit over share sales to Libya.
The trial will begin on 1 October.
“I await a public judgement confidently and impatiently, as I am certain of the correctness of all my activities,” Mr Profumo said.
Portugal coughs up cash to banks
Bringing them up to capital reserve requirements, at least for now.
From Istanbul’s Hürriyet Daily News:
Portugal will inject more than 6.65 billion euros ($8.2 billion) into private banks BCP and BPI, and the state-owned CGD to meet criteria established by the European Banking Authority, the finance ministry said yesterday.
“In all, the state will inject more than 6.65 billion euros in these banks,” though five billion euros is to come from an envelope worth 12 billion included in a financial rescue plan drawn up in May 2011, the ministry said.
Portugal last year became the third eurozone country after Greece and Ireland to be bailed out, receiving an EU-IMF package worth up to 78 billion euros in return for a commitment to reform its economy and impose austerity measures.
European Union and International Monetary Fund auditors said in April Portugal was meeting debt-rescue targets and could be strong enough to borrow on financial markets next year but is in a deeper recession than thought.
France says no austerity needed
The government of Francoise Hollande, with a new parliament to be elected, had an announcement to make in Brussels. We can do the discipline without the austerity.
From Honor Mahony of EUobserver:
France has said it will manage both to reach its EU-inspired targets on deficit reduction and do it without introducing new austerity measures.
Speaking in Brussels on Monday (4 June) finance minister Pierre Moscovici said he wanted to convince EU officials of the “seriousness, responsibility and credibility” of the government’s programme.
“I told [EU economic affairs commissioner Olli Rehn] that not only is it doable but it will be done,” he said referring both to the 2013 target to reduce France’s budget deficit to three percent and have a balanced budget by 2017. “We take seriously the demands for budget credibility that the commission is asking of us and which the situation demands of us,” he added.
The European Commission recently expressed doubts about next year’s target.
Brits to exploit captive labor
Yep, let’s put those prisoners to work on a paying basis!
The Cameron government program to exploit prison labor has some wonder catchphrases.
From The Independent’s Oliver Wright:
An urgent investigation has been launched into government plans to double the number of prisoners being paid to work while still behind bars.
Ken Clarke, the Justice Secretary, has told officials he wants to see nearly 20,000 convicts – twice the number of people currently employed by Starbucks in the UK – carrying out regular work in prison within 10 years.
But the plans have caused alarm among trade unions, who fear that a large increase in prison labour could adversely affect the job market in surrounding areas. They are now leading an investigation into the policy.
The Department of Justice has rebranded the old Prison Industries Unit as a new body called One3one Solutions and wants to increase prison revenues to £130m a year by 2021. One3one, which is named after the number of prisons in the UK estate, is offering interested companies the chance of “utilising a workforce of motivated prisoners” who, it claims, are looking to “build outstanding business relationships with you”.