Lots of pre-bailout posturing going on as the Troikarchs set to work on nailing down the terms of the next Spanish bailout. The big question is whether or not Germany, the still healthy powerhouse of Europe, will be chipping in something other than chump change as the Spanish economy continues its downward spiral; we’ve got hints both pro and con, plus a discussion among German journalists and a political economist.
Then it’s own to Greece, where Prime Minister Antonis Samaras is busy hammering out an austerity package for the Troikarchs. Just what will be cut and who’ll be hit hardest are still in question, but Samaras and his partners are getting ready to unveil their proposal, and he’ll also be meeting with the German and French leaders to make his plea for stringing out the worst of the misery measures.
We’ve got some Greek union news, both anger at the cuts and a broken strike, allegations that the IMF knew the last Greek bailouts were unenforceable, some praise for the coalition from a visitor from Washington, news of another kind of Greek depression, and a bank tankover.
To close, we’ve got the latest on LIBORgate, a rating agency’s British blessing, and a French government outsourcing scandal.
Stroking Spain, the IMF gambit
Amazing how differently the money masters are treating Spain and Greece. While Greeks get kicks, Spaniards get strokes.
Consider the latest from the IMF, reported by Reuters:
The International Monetary Fund on Friday praised Spain for the measures it is taking to confront the crisis but warned their success would depend on steps being taken at the European Union level and lower stress within sovereign debt markets.
In its annual report on the Spanish economy, the IMF said mounting market pressure on Spain and soaring borrowing costs would have negative consequences for the rest of Europe.
“All in all, the Spanish authorities have been proactive in the adoption of measures throughout the crisis, with a significant intensification in recent months,” the Fund said in its article IV report.
The IMF said the restructuring of the financial system, for which Spain has sought an up to €100bn credit line, and the latest fiscal package as well as an ambitious agenda of structural reforms, had the potential to rebuild trust and get the economy back on a sustainable path.
However, it insisted, as in previous reports, that there was scope for a softer austerity path over the next two years to avoid the recession deepening further.
More from Deutsche Presse-Agentur:
Spain was facing an unprecedented recession, very high unemployment and rapidly increasing public debt, IMF directors said after concluding consultations with Spain.
The head of the IMF mission for Spain, James Daniel, said the country‘s unemployment rate over the coming years was “unacceptably high,” as it is expected to go from 24.9 per cent for this year to 24.7 per cent in 2013 and 24.3 per cent in 2014.
Further labour reform would be “premature,” Daniel told a press conference in Washington.
“We think the labour market reform of February is really quite strong, but these things take a long time to have effect,” he said.
Spain’s bad numbers, really bad
More details are emerging about those Spanish job losses, and they’re really sobering — as is the government’s prediction that the recession is destined to last another two years.
Spain’s GDP will contract 2% in 2012, according to the government, and the recession is likely to last through 2014.
Meanwhile, the industrial sector lost 21,000 jobs and agriculture lost 44,000 between April and June. Seasonal upsurges in employment (+42,800 in the tourism service sector, +6,500 in construction) brought some short-term relief. But for most people, the outlook remains gloomy as the government’s 65 billion euro austerity measures cut swathes through the country, with 63,000 public employees laid off from April to June. Spain’s two major unions, Comisiones Obreras (CC OO) and Union General de Trabajadores (UGT) accuse the Mariano Rajoy administration of having launched a second massive labor reform, after the one passed by his Socialist predecessor, Jose Luis Rodriguez Zapatero. ”And it’s sole effect is that of multiplying layoffs and terminations times five,” union sources said. ”The government will continue to try to improve this situation, which undoubtedly is caused by the recession, by reducing the deficit and continuing its structural reforms,” Deputy Premier Soraya Sanz de Santamaria countered on Friday.
But the medicine could end up killing the patient: even the European Commission put its two cents in, today exhorting Spain to reduce an unemployment rate it defined as ”unacceptable.”
German position remains ambiguous, but fervent
Will Germany kick in more for the eurozone bailout?
While no nation has been more fervent in demanding the surrender of national budget autonomy to the barons of Brussels, without more funding, the eurozone is either destined for collapse or a membership reduction.
Now the country’s economic minister is warning the Frankfurt-based eurobank against any big bond buys from afflicted countries, which is causing some fretting in Madrid, along with a dose of outrage.
From The Irish Times:
Germany’s economy minister Philipp Roesler has warned the European Central Bank (ECB) against any large-scale government bond purchases, amid market expectations the ECB is poised to buy more Spanish and Italian debt to drive down yields.
Mr Roesler, who is also Germany’s vice chancellor and leader of chancellor Angela Merkel’s junior coalition partner the Free Democrat Liberals (FDP) told the Neue Osnabruecker Zeitung (OZ) in an interview published today, the ECB had to remain independent.
“Preserving price stability must be the principal role of the ECB and not the financing of state debt. Buying government bonds cannot be a permanent solution. We can only establish new trust in the euro zone if budget discipline is strictly maintained and structural reforms are implemented.”
Germany came in for heavy criticism from Spain’s Europe minister Inigo Mendez de Vigo, in an interview with German daily Bild, published today.
He warned Berlin not to forget the huge amount of aid it received from other nations as it lay in ruins after the second World War, and urged Germany to show more political and economic solidarity in tackling the euro zone crisis.
He also called for action on the European Central Bank to help put an end to the “absurdly high rates for Spanish bonds,” and warned German politicians from talking so much about a Greek euro zone exit that it became a self-fulfiling prophecy.
Another German weighs in on the Spailout
This time, it’s the finance minister, and he’s declaring that the Spailout, at least in its latest proposed iteration, is just chump change — apparently not one of those big bond buys his fellow minister scorns.
Not big? As they say, a billion here, a hundred billion there, nd soon you’re talking real money.
From the Associated Press:
German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper that Spain’s short-term financing needs are “not so big.”
Asked about talk that Spain could soon make an application for the eurozone rescue fund to buy bonds, he replied: “There is nothing to this speculation.”
“The high interest rates are painful and they create a lot of concern — but it’s not the end of the world if one has to pay a few percent more at a few bond auctions,” Schaeuble was quoted as saying.
He added that an aid package worth up to €100 billion ($123 billion) to help Spain’s banks, which are laden with soured investments following a property sector collapse, is “sufficiently large.” Spain’s budget-cutting and economic reform efforts will have positive effects, “on the financial markets too,” he insisted.
Eurobankster to cajole German central bankster
The Bundesbank, Germany’s central bank, has been making unkindly rumbles about shelling out more German cash to fund bailouts, the the headed of the eurozone’s central bank is getting ready to whisper swdeet nothings in his German counterpart’s shell-like ear.
European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in the coming days in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases, two central bank officials said.
Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy makers for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, the officials said late yesterday on condition of anonymity because the talks are private.
Draghi’s proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, the officials said. Further ECB rate cuts and long-term loans to banks are also up for discussion, one of the officials said.
Draghi is trying to put together a game changer in the battle against the sovereign debt crisis, and winning Weidmann’s support would enable him to present a united front to financial markets. Draghi flagged the intervention on July 26, saying the ECB will do whatever it takes to preserve the euro. The Bundesbank responded yesterday by reiterating its opposition to ECB bond purchases.
Draghi will speak with Weidmann before the ECB’s Governing Council convenes in Frankfurt on Aug. 2, the officials said. He has also reached out to other ECB policy makers in an effort to build consensus, they said. A Bundesbank spokesman declined to comment.
More from Joseph Cotterill of FT Alphaville on the Bundesbank’s reluctance to bankroll more bailouts:
Bundesbankers have made their biggest protests on actions by the ECB through resigning (Stark, and Weber) instead of building new alliances within the ECB. If institutional discord ultimately gets resolved either by exit or increased ‘voice’ (or restored loyalty), for all its ferocity the Bundesbank so far seems inclined to exit. We’d also note Bundesbank reactions to ECB changes to collateral rules as previous examples of exit — such as its reservations over the expansion of additional credit claims (which were indeed largely left at the risk of national central banks), or over government-guaranteed bank bond collateral.
That’s not to underrate the power of the Bundesbank’s misgivings — it can point to provisions of the EU Treaty (Articles 123 and 125, after all), and its objections often seem to rest on the idea that it is defending democratic legitimacy by not playing fast and loose with the law.
So, consensus – or dissensus. One point we’d make — if Draghi is serious about undoing the distortions in yields (hence, policy transmission) caused by fear of “convertibility”, or is considering further rate cuts, surely the ECB needs to be supporting rates in Germany, being wary of a negative yield trap.
And for that the Bundesbank will be needed.
Here’s a report on the eurocrisis from two German journalists and an economics consultant appearing on Deutsche Welle’s Quadriga web chat show. The players are Moritz Döbler of Berlin’s Tagesspiegel, WirtschaftsWoche European Union correspondent Silke Wettach, and economist Friederike Spiecker. Issues range from the Grexit to the the general economic picture in Europe today:
And on to Greece. . .
Samaras begs for more time
The coalition prime minister is playing for time, seeking to extend the time frame for the brutal demands of the Troikarchs.
That’s all he can hope to negotiate, since he’s already raised the white flag on the notion of changing the other terms.
From New Europe:
Following his meeting with the European Commission President, José Manuel Barroso, the Prime Minister of Greece, Antonis Samaras, is meeting the troika of international creditors to try to sway them to allow Athens some extra margin of time for reforms and to carry on the latest instalment of bailout money.
Representatives of the European Union, the International Monetary Fund and the European Central Bank are spending a week in Athens, verifying the condition of Greece’s finances before deciding on more that €31.5 billion instalment. The latest tranche of the bailout is critical for the country, as without it Greece is likely to go bankrupt and consequently be forced out of the Eurozone.
Samaras pledged that the government would everything in its power to get Greece back on track and primarily to cut the deficit and restore economic growth. Athens prepared a plan for a two-year, €11.7bn austerity plan, which includes further reductions in pension, benefits and healthcare spending.
Greeks head to the eurozone till again
This time it’s for a comparatively small amount, but without it, the country’s own till will run dry before the end of next month.
From Greek economist Yanis Varoufakis, Professor of Economic Theory at the University of Athens:
On 20th August, the Greek government will have to borrow 3.2 billion from one arm of the Eurozone (from the EFSF) in order to repay another (the ECB). Yet Greece is insolvent. The very idea of an insolvent entity borrowing more from a community, like the Eurozone, in order to repay that same community is obscene. All it does is to shift the burden from the Central Bank to the taxpayers of Germany, Holland, Austria and Finland. This is not an act of solidarity with Greece. It is an act of irresponsible kicking-the-can-up-a-steep-hill. The simple point I have been trying to drive home for a long while now is that the Eurozone must make a simple decision: Either to give Greece a proper chance of exiting its current death spiral. Or to dump Greece now, before the Greek state loses all its remaining assets and before it gets deeper into debt. And if our Eurozone partners are not prepared to make up their minds (caught up in their own short term concerns and shenanigans), then Athens must force their hand to decide within the next 23 days. How? By announcing that Greece will NOT be borrowing on 20th August monies it cannot repay under the present scheme of things.
[H]ere is how I described the Eurozone’s dilemma concerning Greece on BSkyB (Sky News). The footage comes from the eve of the Greek parliamentary election (16th June). But it is still pertinent, I think.
Coalition bosses to huddle on austerian cuts
It’s all boiling down to questions of who’ll be hit the hardest.
Greece’s three coalition leaders are to hold a crucial meeting on Monday that is likely to decide what form the 11.5 billion euros of spending cuts for the next two years are likely to take.
It appears that Prime Minister Antonis Samaras, PASOK leader Evangelos Venizelos and Democratic Left chief Fotis Kouvelis have agreed that the measures should not include a further cut to civil servants’ salaries, thereby ending the 13th and 14th monthly payments, nor the imposition of a 1,500-euro per capita ceiling on healthcare coverage. Instead, it will raise from 5 to 15 euros the cost of a visit to a public hospital for treatment.
One of the areas where the three leaders have yet to agree is on the rise in the retirement age from 65 to 67. This would save about 1 billion euros over the next two years. Venizelos and Kouvelis suggested trying to find alternative measures of equal value.
The leaders also have to decide where to set the limit on how much retirees who have basic and auxiliary pensions can receive per month. It is likely that the ceiling will be placed between 2,300 and 2,500 euros. There is also a proposal to reduce any pensions above 1,400 euros by 10 percent but Venizelos wants the reduction to be only on the amount that exceeds this level, rather than on the total retirement pay.
Among the measures that look certain to be included in the latest cost-cutting package is a 22.7 percent reduction to the lump sum civil servants receive when they retire. Private sector workers who draw their pensions from state-backed funds could also be in line for a cut. Also, public hospitals will be instructed to increase their use of generic drugs to 66 percent of the total medicines they use by 2014.
Unions fire back as cuts draw near
One of the central planks of the neoliberal agenda is destruction of the power of organized labor, and Greek unions are firing back in a desperate effort to spare off the worst for their members.
It’s an impossible situation for the Greek worker, who has already lost about half of their remuneration when you add in the benefit cuts.
From Athens News:
The recession in 2013 will be above 5.5 percent and unemployment may approach 28 percent if the measures proposed by the representatives of the country’s creditors are applied, General Confederation of Workers of Greece (GSEE) president Yiannis Panagopoulos warned after a meeting between the GSEE presidium and the chiefs of the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) on Friday in Athens.
Panagopoulos said that all of GSEE’s forecasts have come true to date, noting that the “creditors’ programme” has failed, while the country’s economy and society were being destroyed.
“It is a destructive policy and no Greek government can or should accept it,” he said, adding that GSEE will continue with its recourses to international and Greek courts to “deal with this wave of the attack”.
In statements to the press, Panagopoulos noted that the two sides had only agreed on “the fact that we disagree on everything”.
What did they know and when did they know it?
Did the IMF know they couldn’t enforce the demands of those earlier bailouts?
That’s the allegation of the country’s former delegate to the International Monetary Fund, and it’s setting off a tempest in a teapot.
Comments made by Greece’s former representative to the International Monetary Fund, Panayiotis Roumeliotis, to the New York Times, according to which the IMF knew from the outset that the bailout programs extended to Greece were unenforceable, have prompted an angry response from the Fund and from former Prime Minister George Papandreou, whose Socialist government signed Greece’s first debt deal with foreign creditors.
An IMF spokesperson told Skai that during Fund board meetings on the subject of Greece, Roumeliotis had never voiced any objections regarding the policies put forward. On the contrary, noted the IMF representative, as Greece’s envoy he had given his full support.
Meanwhile an associate of Papandreou conveyed the anger of the former premier at Roumeliotis, who has been a non-executive vice chairman of Piraeus Bank since last January. “Recently we have watched with patience and self-restraint as Panayiotis Roumeliotis’s memory seems to be flooding back every time he makes a public statement,” Papandreou’s associate said. The statement added that, in view of Roumeliotis’s former position as the country’s representative to the IMF, it is unclear why he did not brief Greek government officials that the economic program was unenforceable, if that was his impression, or why he did not give up his post. “Why did he not raise the issue with officials at the Fund in order to get the necessary answers and subsequently inform the country’s leadership? Why did he not resign?” the statement said. “How come his memory came back after he left the IMF and found a job in the private sector?”
Samaras’s strike-breaking ends steel walkout
Steelworkers have voted to end their nine-month strike against a leading Greek corporation days after Antonis Samaras sent in riot police to break their picket line.
From Keep Talking Greece:
After 272 days of strike, workers at Halyvourgia steel plant decided to suspend the strike and return to work. Upon a recommendation of the Halyvourgia workers’ union, 107 voted in favour of strike suspension, 14 against, while 29 refrained from voting, in a secret-ballot process that took place on Saturday morning.
The steel plant workers’ union decided to return to work on Monday morning (July 30/2012) at 6 o’ clock in the morning. They will gather outside the plant and will enter once the riot police squads withdraw from the area.
On Friday, strikers had a meeting with Labour Minister Yiannis Vroutsis, who has been “operating” an a middle-man between the strikers and the plant management. Workers had asked for re-hiring of 40 colleagues and withdrawal of police squads.
Halyvoyrgia management rejected the re-hiring however promising to do it once the plant starts to work again and bring profit.
On July 23rd, riot police and stikers clashed in front of the plant when Samaras’ government decided to ‘enforce’ a court’s decision that had ruled the strike was illegal.
Once again, neoliberalism is about breaking up any resistance to the corporate and financier capture of national wealth, and unions are number one on their hit parade.
Hillary’s minion backs the Troika
Along the way, he also gives a pat on the head to the coalition’s express resolve to submit.
From Athens News:
In a press briefing after meeting government officials in Athens on Friday, U.S. Assistant Secretary of State for European and Eurasian Affairs Dr. Philip H. Gordon said his visit aimed to convey the U.S. government’s support and solidarity with the Greek people and Greek government in their efforts to fix the economy and carry out reforms.
Reporting on meetings with Pasok and the Democratic Left, as well as Foreign Minister Dimitris Avramopoulos, Gordon said he had been encouraged to hear that all the coalition members seemed determined to implement the measures agreed.
He added that markets will also begin to respond positively once they see structural reforms taking place. Gordon underlined that Greece would only be able to convince its Eurozone partners and markets if it delivered on reforms.
“The party leaders understand that and will finish the job,” he stressed.
Yep, they gotta deliver.
Greeks, Europe’s most pessimistic people
No surprise, given that their outlook under the austerian regime is, well, depressing.
Crisis-hit Greeks are the European Union’s most pessimistic nation as far as the future of their economy is concerned, a Eurobarometer survey carried out in May showed yesterday.
One hundred percent of Greeks questioned in the survey carried out at the request of the European Commission think that the situation of the economy is “bad” compared to an EU average of 77 percent.
Greece, which is currently in its fifth year of recession, was followed by Spain, Portugal and Ireland, which all scored well over 90 percent. Only 21 percent of Germans said the state of their national economy is “bad.”
Asked about the fallout from the debt crisis, 77 percent of Greeks said the worst is yet to come. The EU average was 60 percent.
The Spring 2012 Eurobarometer was conducted between May 12 and 27. A total of 32,728 people were interviewed across the 27 member states as well as five candidate states.
Gee, think the Troikarchs can figure out a way to make sure some of any additional bailout money goes to the Big Pharma happy pill people? Then Greece could finally take the U.S. number one position as the country with the highest rate of its population on antidepressants.
Bank takeover move should please Troikarchs
The government has agreed to turn over the assets of a bank they’d taken over to another, private bank.
Nobody seems to have thought to transforming the institution into a publicly owned bank, which it already was during the brief period when the government nominally owned it.
From Keep Talking Greece:
Debt-ridden Greece sent a positive message to the Troika, as it announced that the country’s fourth-biggest lender Piraeus Bank took over the healthy assets of state lender Agricultural Bank (ATE). Greece’s lender had been pushing since summer 2011 for ATEbank’s restructure as it was the only bank that had failed to pass the stress tests. Greek government has a 90 percent stake in the ATE.
The deal was announced on Friday afternoon through a statement issued by the Central Bank of Greece. Piraeus Bank will take over ATEbank’s performing loans, securities portfolio and deposits. The government has a roughly 90 percent stake in the ailing lender.
ATEbank failed a European stress test in 2011 and had not published its 2011 results while it awaited a final decision on its future. It is estimated that the bank requires a capital injection of as much as 5 billion euros to continue operating.
According to ATEbanks’ date (first 9 months of 2011) the bank’s deposits were 17 billion euro. Recent data estimate that deposits went down approximately by 2.5-3 billion euro. Loans to farmers would make a small part in the whole portfolio of loans.
Advisors to Hellenic Financial Stability Fund were BNP Baribas and Moelis & Co.
Samaris to make nice with Hollerkle
Now that the French president and the German chancellor are BFFs and united in their eurozone agenda, the Greek prime minister is goin’ a-courtin’.
Prime Minister Antonis Samaras is due to meet German Chancellor Angela Merkel and French President Francois Hollande in less than a month as part of an effort to rebuild faith in Greece among the country’s lenders, Kathimerini understands.
Sources said that the meetings with the two leaders are due to take place in Berlin and Paris on August 25 and 26. Samaras is also seeking one-on-one talks with Eurogroup chief Jean-Claude Juncker, International Monetary Fund Managing Director Christine Lagarde and European Central Bank President Mario Draghi.
The premier hopes to have tangible signs of progress to show when he holds these meetings. Once an agreement has been reached within the coalition government on 11.5 billion euros in cuts for 2013 and 2014, attention will turn to trying to pass some of the measures for this year and next once Parliament resumes its activity on August 20. Samaras and Finance Minister Yannis Stournaras favor frontloading the program, partly with the aim of rebuilding trust with Greece’s creditors.
LIBORgate circle widens
The interest rate rigging scandal is growing wider, with the latest evidence tying in another British bank and a Swiss giant.
From Carrick Mollenkamp and Emily Flitter of Reuters:
New details from court documents and sources close to the Libor scandal investigation suggest that groups of traders working at three major European banks were heavily involved in rigging global benchmark interest rates.
Some of those traders, including one who used to work at Barclays Plc in New York, still have senior positions on Wall Street trading desks.
Until now, most of the attention has involved traders at Barclays, which last month reached a $453 million settlement with U.S. and UK authorities for its role in the manipulation of rates. Now, it is becoming clear that traders from at least two other banks – UK-based Royal Bank of Scotland Group Plc and Switzerland’s UBS AG – played a central role.
Among them, the three banks employed more than a dozen traders who sought to influence rates in either dollar, euro or yen rates. Some of the traders who are being probed have worked for several banks under scrutiny, raising the possibility that the rate fixing became more ingrained as traders changed jobs.
The documents reviewed by Reuters in analyzing the traders’ involvement included court filings by Canadian regulators who have been investigating potential antitrust issues; settlement documents with Barclays filed by the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission in Washington and by the Financial Services Authority in the U.K.; and a private employment lawsuit filed by a former RBS trader in Singapore’s High Court.
S&P affirms Britain’s AAA rating
Yep, the country that’s home to the banks that wreaked such havoc on the rest of Europe and is busily engaged in its own version of austerity is maintaining its gold-plated rating with one of the rating world’s big three.
From Tom Lawrence of The Independent:
A key agency has affirmed Britain’s gold-plated AAA credit rating in a boost to the coalition Government’s belt-tightening austerity measures following a week of heavy criticism.
Standard & Poor’s (S&P) said its outlook for the UK’s coveted rating was stable and predicted the economy would pick up in the coming months.
“We project that despite recent weakness, the UK economy should begin to recover in the second half of 2012 and steadily strengthen, and we expect economic policy to continue focusing on closing the fiscal gap,” the agency said in a statement yesterday.
“In our view, monetary flexibility remains a key credit strength owing to the British pound sterling’s role as a global reserve currency.”
A little outsourcing flap in France
And this time, it’s the government that’s doing it, resulting in a wee bit of embarrassment for for the socialist [sic] president.
From Tony Cross of Radio France Internationale:
As a deluge of job losses hits France, François Hollande’s government has been embarrassed by the decision of a Socialist-controlled regional council to scrap a contract with two French call-centres in favour of one in Morocco. The case could become a symbol of the Socialists’ difficulties in tackling economic crisis in a globalised economy.
The mainstream right-wing opposition UMP and the far-right Front National are crying “hypocrite” over the decision by the Ile de France regional transport network, Stif, to switch its customer relations helpline to a call centre in Morocco.
Stif is the public transport network covering Paris and the surrounding region, with a population of over 12 million people.
Webhelp, the company that has run the line up until now, did so from two call centres, one in Fontenay-le-Comte in the western Vendée region, the other in Saint-Avold in Moselle near the German border.
In June Industrial Recovery Minister Arnaud Montebourg called on telecoms operators to repatriate call centres based abroad and lashed companies that shed jobs in France and relocate abroad during his campaign to become his party’s presidential candidate.