We open with a dramatic austerity suicide, then move on to a call from Austria for exit facilitation legislation, a urobank plan to buy up high interest bonds, German hopes stirred by rumors of a Finnish eurozone exit, the German war of words over a Gerxit, evictions in Ireland, a new Spanish “bad bank,” spiking mortgage delinquencies in Ireland, and an Irish proposal to cut welfare payments.
We’ve got an excretory complaint about the BBC and a eurobank proposal to pay banks to borrow from them.
From Greece, we’ve got word of a Troika order to cut still more, some “no mercy” pronouncements from Germany, more on the latest coalition cuts, a pledge of obedience from the finance minister, more political heat, and a hot landing for tax collectors on a Greek Island.
Desperate man sets himself afire in Rome
The most dramatic of Italy’s austerity suicides took place Sunday outside the parliament building in Rome, a tragic testimonial to the real human costs of the austerity imposed under unelected Prime Minister Mario Monti, the technocrat installed by the Troika to carry out their mandate.
From A 54-year-old man died on Sunday after setting himself on fire outside the Italian parliament last week to highlight his struggle with unemployment, police said.
Angelo di Carlo suffered 85 percent burns after the incident in front of the lower house of parliament – the Chamber of Deputies – in central Rome during the early hours of August 11, Italian media reported.
Police on duty nearby put out the flames with fire extinguishers and took him to hospital.
The widower was facing economic difficulties after losing his job and had struggled for years before that with temporary work contracts that offered little protection or benefits, according to media reports.
This is the true face of austerity, the grinning mask of death.
Austria calls for a eurozone exit law
They want a mechanism to kick out those undesirables and the country’s foreign minister says he has support from another country or two to the north and west.
From Istanbul’s Hürriyet Daily News:
Austria’s foreign minister called on Aug. 17 for the eurozone to create a legal mechanism to facilitate member states that don’t live up to their promises being kicked out of the currency union.
“We need to create ways to be able to eject someone from the eurozone,” Michael Spindelegger, who is also deputy chancellor, told the Kurier daily in an interview due to be published on Friday but already available online.
This mechanism, which he said would need to be created by changing European Union treaties — a process that he says could easily take five years — would be for countries “that don’t meet their commitments.” “If we already had this … then we would already have drawn the consequences,” he said in what the newspaper said was a clear reference to Greece, which has already secured two bailout packages and could need more.
The centre-right Spindelegger said that creating an exit mechanism would bolster market confidence in the euro, and that it would be supported by euro members including Germany, Luxembourg, Finland and the Netherlands.
In other words, the countries that profited so much from the euro now want to keep it all, and if that means kicking out the countries their own banks leant so much to, then so be it — leaving them five years to seize everything.
Meanwhile, eurobank forms plan to but debt
The basic idea is to buy up bonds from debtor nations if interest rates rise too high.
Naturally, there’ll be opposition, as well as the inevitable memoranda.
The European Central Bank is considering setting interest rate thresholds for any purchases of struggling euro zone country’s bonds so that it would buy such bonds if their interest rates exceeded a certain premium over German bonds, a German magazine reported.
Germany’s weekly Spiegel magazine, which did not name its sources, said on Sunday that the ECB would decide whether to implement such thresholds at its September meeting.
The measure would signal to investors what interest level the ECB considers appropriate. That would discourage speculators from pushing yields above the level set by the euro zone’s central bank, the magazine said.
The ECB said it had no comment on the report.
German hopes for a Finnish euro exit
Hard core conservatives in the country that’s profited most from the euro are nursing hopes that the threatened pullout of one of the zone’s newer members can set the stage for Gerxit.
From Ambrose Evans-Pritchard of the London Telegraph:
German eurosceptics quietly hope that Finland will become the first creditor state to storm out of monetary union in disgust, opening the way for others to break free.
Once Finns break the taboo, it would be easier for Germany to extricate itself from an escalating national disaster without inviting opprobrium from across Europe, or so goes the argument.
“Membership of the EU and the euro is all about getting as far away as possible from Moscow. That has affected how we think for the past 20 years,” said Professor Tapio Raunio from Tampere University. The strategic imperative is to enmesh Finland as deeply as possible into every part of the Western system.
True Finn leader Mr Soini says the euro remains the “state religion” upheld by Finland’s elites. Their governing credibility is inextricably linked to EMU project. Most will die in a ditch to defend it.
So the Russians are the sticking point?
German euroskeptics push for Gerxit
The intensification of the eurocrisis has provoked a riotous debate inside Germany, and Christopher Booker of the London Telegraph reports that it may prove the straw that breaks the euro’s back:
Reported daily in such papers as Die Welt, Handelsblatt and Der Spiegel, a succession of politicians, financiers and commentators have concluded that, with Greece about to go bankrupt and Spain and Italy to follow, enough is enough. Certainly, they argue, Greece must be allowed to leave the euro. But so, many add, must Spain, Italy and others. Indeed, so dire has this crisis become – with one senior politician estimating Germany’s potential liability at more than $1 trillion – that voices are now being raised to say that the only practical solution to this mess would be for Germany itself to abandon the euro. The rest of the eurozone could thus be left to sink or swim with a currency which, without Germany’s backing, would face a massive devaluation.
Anyone wanting to see the kind of headlines which have been reflecting this drama – “Greece must go bankrupt”, “Multiple countries must leave the euro”, “Germany’s trillion-dollar liability”, “The current imbalances will blow Europe apart”, “Germany must withdraw from the euro” – can find them on my colleague Richard North’s blog, http://www.eureferendum.com, where he has been reporting on it daily.http://www.eureferendum.com/
According to North (formerly a research director in the European Parliament), one of the oddest features of this crisis is how little it has been reported outside Germany. Britain is far from alone in being oblivious to the huge significance of what is happening. This is partly because so much is fogged by the public show put on by other European players, notably the Commission and the head of the European Central Bank, to promote the idea that “the euro cannot be allowed to fail”. It was always intended to be the supreme symbol of the European project’s overriding aim, to weld the countries of Europe together in full fiscal and political union. But this would now require a major new treaty, with a further massive surrender of national sovereignty.
Evictions plague unemployed in Spain
A video report from the GlobalPost on the harsh laws that have forced more than 400,000 families from their homes:
Spain pools worst assets of busted banks
And they’re creating something they call a “bad bank.”
Which begs the question: Why adopt a title that could be honestly bestowed on most of the species?
From Bloomberg’s Angeline Benoit:
Spain will put its bank rescue fund in charge of the bad assets separated out from the nation’s struggling lenders that are receiving a European bailout.
The FROB fund will be the main shareholder in a so-called bad bank, according to a proposal that will be approved by the Cabinet on Aug. 24, Economy Minister Luis de Guindos told the Efe news agency in an interview today.
All the banks receiving loans from European rescue funds will have to transfer their non-performing assets to the bad bank, he said. The comments were confirmed by a Spanish official, who asked not be identified, citing government policy.
Prime Minister Mariano Rajoy is struggling to avoid a second bailout after his government signed off on 100 billion euros ($123 billion) of loans from EU rescue funds on July 24 to recapitalize banks amid its second recession since 2009 and surging borrowing costs.
Mortgage delinquencies to spike in Ireland
The highest delinquencies are recorded by owners of rental housing.
From Pamela Newenham of The Irish Times:
Mortgage arrears among owner occupiers in Ireland could peak at 16.5 per cent according to a new report by Davy Stockbrokers.
Owner occupier arrears were at 13.4 per cent in the first quarter of this year.
The report also raises concern about arrears on buy-to-let mortgages, which Davy see running at more than twice the rate of the owner-occupier category.
“Restructured mortgages have had limited success in restoring loan performance, with interest only and principal payment modifications prevalent. A remarkable feature of the Irish housing market principal write-downs and repossessions,” the company said.
Irish banking mortgage losses will exceed the €9 billion assumed in the worst case scenario used in last year’s stress test, according to the Dublin-based securities firm.
Irish finance minister calls for welfare cuts
It’s classic neoliberalism: Better to screw the poor than tax the rich.
Mary Minihan of The Irish Times:
The coalition row over PRSI contributions reignited yesterday as a Fine Gael Minister suggested cutting social welfare rates would be better than raising taxes in the budget.
Minister of State for Finance Brian Hayes became the latest senior politician to voice objections to Labour Minister for Social Protection Joan Burton’s plan to increase PRSI.
“A general reduction in social welfare might well be the way to go,” Mr Hayes said.
An actuarial review to be presented to Government is expected to warn that the social insurance fund that provides for social welfare payments will face a significant shortfall.
Yeah, cutting help to those in most needs is “the way to go.”
British minister says BBC pees on business
Yep, the Conservative secretary’s filed a formal brief, alleging the Beeb’s economics reportage is being toio hard on those poor corporadoes.
From Sam Lister of The Independent:
Work and Pensions Secretary Iain Duncan Smith’s department has made a formal complaint to the BBC claiming its coverage of the Government is biased, it has emerged.
The former Tory leader launched a scathing attack on the corporation and singled out the broadcaster’s economics editor Stephanie Flanders for the harshest criticism, accusing her of “peeing all over British industry”.
BBC officials last night defended the organisation’s record of impartiality and Ms Flanders’ reporting.
But Mr Duncan Smith claims the broadcaster diminishes the role of the Government in good news stories but “dumps” on it when the story is bad.
The minister appeared to be particularly angered by coverage given earlier this week to unemployment figures after there was an unexpected drop in Britain’s jobless.
His department has formally complained to head of news Helen Boaden about the broadcaster’s “carping and moaning”. He told the Mail on Sunday: “The BBC is locked to the reading of the economy that is run out of Ed Miliband and Ed Balls’ office. They think if only you spend and borrow more money you can create growth everywhere.
Yeah, pity those poor privateers, getting “dumped on” [as in “taking a dump,” we presume, following up urination with defecation].
Eurobank to drop rates again?
Given that the current rate is zero, that means they’ll be paying banks to take their money.
From Alan Wheatley of Reuters:
[T]he European Central Bank might have to lower interest rates further to revive growth. Business surveys this week are likely to show the euro zone economy remaining flat on its back in August after contracting by 0.2 percent in the second quarter.
But the ECB has already cut to zero the interest it pays banks on excess reserves. So driving the deposit rate into negative territory — charging banks for the privilege of parking surplus funds — would force lenders to weigh up the alternative of withdrawing cash and stashing it somewhere safe.
The idea sounds outlandish. Not so. ECB Executive Board member Benoit Coeure addressed it back in February.
“Given the costs associated with holding large amounts of banknotes, it is likely that significantly negative interest rates would be required to trigger a switch from money holding to investment in banknotes,” Coeure said.
And now, on to Greece. . .
Greek ordered to cut even more?
That’s the report coming out of Germany’s leading news magazine, and if true, the demand will lead to even more discord with Prime Minister Antonis Samaras’s already shaky coalition.
From Agence France-Presse:
Greece’s creditors say it must cut 14 billion euros ($17 billion) from its budget in the next two years, 2.5 billion euros more than they originally demanded, German weekly Der Spiegel reported Saturday.
The amount was revised upward as a result of the most recent audit mission by the country’s so-called troika of bailout lenders, the European Union, the International Monetary Fund and the European Central Bank, Der Spiegel said.
Der Spiegel said the troika had ordered the extra cuts because planned privatisations were not shaping up to be as lucrative as hoped and tax revenues were falling short of forecasts as the economy struggled through its fifth year of recession.
The auditors also said in a report that the government had so far been unable to show how it planned to reach the 11.5 billion euros in savings it had already pledged to find for 2013 and 2014.
Yet another German says ‘No mercy for Greece’
The story begins with a major whopper, identifying the conservative New Democracy leader Samaras as “leftwing.”
From The Guardian:
As Greece’s leftwing prime minister, Antonis Samaras, prepared to meet eurozone leaders this week for the first time since taking office, a senior ally of German chancellor Angela Merkel has insisted there is no room for concessions to Greece on the conditions of its aid programme and no appetite for a third rescue package.
“The Greeks must stick to what they agreed to,” Volker Kauder, the parliamentary leader of Merkel’s conservative bloc, told the weekly Der Spiegel. “There is no more latitude, either on the timeframe or the matter itself, because that would again be a breach of agreements. It is just that which led to this crisis.”
He said Greek bankruptcy would be expensive for Germany, “but agreements must be kept to”.
And the German finance minister says ‘No more for Greece’
Wolfie’s been the most vocal of Merkel’s ministers when it comes to dissing Greece, and he’s getting more explicit all the time.
From Bloomberg’s Rainer Buergin and Brian Parkin:
German Finance Minister Wolfgang Schaeuble ruled out another aid program for Greece even though the country is in a “very difficult situation” with a shrinking economy.
“It can’t be helped — we can’t make yet another new program,” Schaeuble told visitors today at his ministry’s open day in Berlin. “There are limits.”
While the prospect of the euro failing is “nonsensical speculation” and would be very expensive for Germany, the region’s debt crisis won’t be solved in just a few months, and “it will take time” for confidence to return to financial markets, Schaeuble said.
“Many are telling us now to turn a blind eye to debt reduction” to save the euro, Schaeuble said, rejecting the option to let the ECB finance government debt. “That would only postpone the problem to tomorrow.”
Coalition agrees on cuts package
But that’s before the additional two-and-a-half billion Spiegel says has been ordered, and it took them a long time to come up with the package they finally settled on Friday, with is still €700 million short, cuts they’re supposed to decide on Monday..
The bulk of the cuts, some 4 billion euros, will come from pensions and welfare benefits. In terms of the social payments, some will be reduced and others scrapped altogether and the government will introduce stricter income and assets criteria for those who will be eligible for benefits in the future.
In terms of reduction to pensions, the government has yet to decide on which of two sliding scales will be used to calculate the cuts, which will range from 2 to 15 percent. In either case, retirement pay below 700 euros per month will not be affected. Supplementary pensions, however, are to be slashed by up to 35 percent.
This would be the fourth cut to pensions since 2010, when Greece signed up to the EU-IMF bailout. Pensions have been reduced by up to 40 percent since then.
Hefty cuts to salaries at public enterprises, or DEKOs as they are known, are also being lined up. Sources said that the reduction is likely to reach between 30 and 35 percent. The average annual salary at DEKOs is currently 31,000 euros but will be reduced to about 21,000, which will save the public coffers 250 million euros.
Greek money minister: Euros a must
Basically, he’s telling the Troika that he’s their man.
From Agence France-Presse:
Greece must remain in the eurozone, Finance Minister Yannis Stournaras said in an interview published Sunday ahead of a week of crucial meetings between the prime minister and EU officials.
“We have to stay alive and remain under the umbrella of the euro, because that is the only choice that can protect us from a poverty that we have not experienced,” Stournaras told the Vima tis Kyriakis weekly.
“If we don’t take the measures … then our stay in the euro is threatened,” Stournaras said.
The unpopular cuts, expected to come mostly from salaries, pensions and benefits, are the source of friction within the country’s new coalition government, but Stournaras described it as a difficult but necessary choice.
“We have the most expensive welfare state in the eurozone,” he told the newspaper. “We can no longer maintain it with borrowed money.”
And the political heat ramps up
The war of words between Syriza, the number two party in parliament, and number one New Democracy is generating more heat, with New Democracy in a snit because the left coalition is calling for a renegotiated memorandum.
In a sign that political tension is building up again after a brief summer lull, New Democracy seized on comments by SYRIZA MP Dimitris Stratoulis in which he suggested that Greece should stop repaying its debt and demand it be restructured.
“Based on United Nations regulations, international experience and what has been proved in other countries based on international law, Greece can get out of this miserable, catastrophic situation,” he told Flash Radio on Friday.
“The country can be declared to be in a state of fiscal emergency so it can choose between its people’s survival or continuing to pay its huge debt, which under no circumstances can be deemed sustainable.”
Stratoulis went on to repeat SYRIZA’s position that although the party favors Greece remaining in the euro, the well-being of Greeks must come above any concerns about remaining in the single currency.
“We have stated very clearly that the currency is not an obsession for us, for us the obsession is the survival of the Greek people and the country’s economic recovery,” he said.
Islanders drive tax collectors into the arms of police
The Troikas’s demands include a crackdown on tax evasion, but when Greek tax collectors arrived on the island of Hydra, they got more they bargained for.
From Greek Reporter’s Areti Kotseli:
After a crackdown on tax evasion on Greek islands showed as much as 100 percent in flagrant violations, a sweep by tax inspectors on the popular Hydra, which attracts many wealthy visitors, led to the arrest of a tavern owner who was not issuing receipts – only to lead to the inspectors being forced to stay in a police station until reinforcements arrived because islanders were furious at them.
The tax inspectors landed on Hydra on Aug. 17, the high season for tourism, and an island that has a strong yachting and maritime tradition, and many wealthy and celebrity visitors and residents, such as Canadian singer Leonard Cohen. One restaurant owner was caught for tax evasion (she was not issuing the necessary receipts) and fainted. Tax inspectors arrested her son and led him to the local police station.
Protesting locals besieged the police station where he was kept. The tax inspectors were forced to remain in the station until the morning, when special police units arrived from Athens to set them free. Citizens and various representatives of the Municipality threw accusations against the police and asked: “How did they dare to set foot on the island?”
We’d like to know more about precisely who was protesting? The island’s rich, or the people who work the jobs that keep the tourist destination working. And who were the tax collectors targeting: The rich or the wait staff and others who are frequently targeted here by the I.R.S.
Balkan universities benefit from Greek crisis
For families with some money, Balkan universities are the growing choice for college educations. And the reasons are economic.
From Greek Reporter’s Marianna Tsatsou:
Despite a burdensome economic crisis, many Greek families are deciding to pay extra to send their children to study at foreign universities, mostly in Italy and the United Kingdom, but more are turning to schools in neighboring Balkan countries, with data showing a 30 percent upswing.
The fact that UK universities announced higher tuition fees this year is an extra reason for many Greek families to search a cheaper academic institute somewhere else in Europe. According to a Kathimerini report, tuition fees at Balkan universities are much lower than those of British, and range from 800-5,000 euros per year while monthly expenses are estimated between 300-400 euros.
Balkan universities have realized that inexpensive living conditions could play a major role in someone’s decision where to go to college and many have taken that into account, pitching their lower costs as a lure. Many also offer English-speaking courses in order to attract even more students. While Greek universities are free, they rate poorly in world university listings, providing another incentive for Greek students to look elsewhere for an education.