Econowrap: Greece balks, euro falls, more

Another globe-encompassing report on the latest news from the world of dollars and [non]sense.

Greek technos decide to delay election

With their country in near-revolt over the austerity program demanded by financial houses and the European Union, the bankster-imposed government of technocrats in Athens has decided that holding an election might be something best delayed.

And given that the Greek people had no say in the creation of their current government, we can’t say we’re all that surprised at both their discontent and the government’s decision.

From euronews:

There is uncertainty over when elections will next be held in Greece after the interim government’s finance minister said the ballot would be delayed.

Evangelos Venizelos made the announcement at an internal socialist PASOK party meeting, giving himself more time for critical talks with eurozone countries and banks over the debt crisis.

The party is also pressuring former prime minister George Papandreou to initiate a leadership contest, indicating they will not be happy if he stays at the helm of the party without one.

The end of April is being touted as the likely time for a general election, as the caretaker coalition government led by technocrat Lucas Papademos remains divided.


Louise Cooper, a financial analyst with BGC Partners, explained why the government has been so ineffective: “Greek riots rather strangely has been quite a big series of moments for  me because it reminds us all that we’re all democracies and politicians can only impose or do what their electorates want them to do.”

Read the rest.

Gee, imagine that.

Meanwhile, Greek politicians split on key issues

Given that the only way a government could be formed was an alliance between the socialist [in name only] party and a party led by a near-fascist once renowned for beating dissidents with a hammer, we’re not surprised at the news reported by Spiegel’s Ferry Batzoglou:

The Socialist PASOK party, the conservative-liberal New Democracy party and the far-right LAOS party formed a transitional government six weeks ago under non-partisan former central banker Lucas Papademos. They vowed to avert a looming state bankruptcy. But they remain as divided as ever.

Instead of getting down to business, they are absorbed in policy wrangling that seems absurdly trivial given the scale of the tasks they face. At a cabinet meeting last Thursday, Finance Minister Evangelos Venizelos and Transport Minister Makis Voridis of LAOS fell out over a draft law to accelerate amicable divorces. Marriage, Voridis argued, was “a central component of our value system” — therefore LAOS could not agree to the law. Papademos remained silent.

This isn’t the first time the LAOS minister has blocked a decision. Recently he resisted the complete liberalization of the issue of taxi licenses, and publicly threatened to resign.


The sticking points appear to be the levels of interest rates that Greece will have to pay for new bonds and the size of the voluntary debt cut. Even if an agreement is reached, there is doubt about whether all private creditors will stick to it. Spanish hedge fund Vega, for example, has already pulled out of the talks and threatened legal action if the losses amount to more than 50 percent. If the debt swap fails, the entire 2012 budget will be null and void because it depends on drastically reduced interest payments on Greece’s government debt.

Read the rest.

Greek tax collectors stage a walkout

After a wave of general strikes, Greece is experiencing a second wave of more limited actions, with the latest being a walkout by the staff of the nation’s tax collecting agency.

From the Associated Press:

Tax offices shut down for the last two working days of the year, prompting hundreds of Greeks on Wednesday to rush to settle last-minute issues before the strike. Many handed over their car license plates, preferring to keep their vehicles off the road rather than paying an increased tax.

Greece has been surviving since May 2010 on multibillion euro rescue loans from other eurozone countries and the International Monetary Fund after years of government overspending left it with an unsustainable public debt.

In return for the euro110 billion ($144 billion) bailout, the previous Socialist government imposed harsh austerity measures, increasing taxes and retirement ages, cutting pensions and salaries, and suspending tens of thousands of civil servants on reduced pay.

“As a result of the austerity measures putting some tax officers on reduced pay, we have 5,500 fewer tax office jobs,” said tax officers’ union head Charalambos Nikolakopoulos.

Tax evasion has been rampant in Greece, despite repeated efforts to crack down on the practice.

The strike comes a day after the sudden resignation of two prosecutors heading the judicial task force charged with fighting tax evasion. The two, Grigoris Peponis and Spiros Mouzakitis, claimed they were being sidelined and implied government interference in their work.

Read the rest.

And for a report on another Greek strike action, see here.

Brits fear riots from prison cutbacks

In the wake of the massive arrests of young people during the high street protests and subsequent riots, British authorities are warning of threats of riots in the nation’s prisons, in part because of major cuts in staff and facilities mandated under the country’s austerity regime.

From The Independent’s Oliver Wright and Nigel Morris:

The threat of riots in Britain’s jails is mounting rapidly due to a shortage of staff on duty, budget cuts and the closure of facilities, prison officers have warned.

The Prison Officers Association has written to ministers to say it fears the safety both of officers and inmates is being put at risk as the population behind bars reaches unsustainable levels.

The number being held in jails in England and Wales has increased by almost 4,000 in the past year to 87,393 this week – the highest ever total at Christmas. This is just 2,084 short of the usable operational capacity. The figure is expected to continue to rise next year, potentially requiring some prisoners to be held in police cells.

The surge – partly fuelled by convictions following the summer riots – comes as the Ministry of Justice faces a spending squeeze of 28 per cent over the next three years. Four jails have been shut by Kenneth Clarke, the Justice Secretary, as the previous Government’s prison-building plans have been put on hold.

An analysis of the latest Prison Service figures reveals that two-thirds of prisons are now so crowded that they cannot provide a “decent” standard of accommodation. Several of the country’s largest jails, including Brixton, Wandsworth and Preston, are running at 50 per cent above their “certified normal accommodation”.

More than 80 are above the baseline figure – meaning most prisoners have to double up in cells designed for only one inmate – with just 46 running at normal capacity. At the same time, many prisons are operating without a full complement of staff. In total last month there were 1,805 vacancies for staff across the prison system.

Read the rest.

Britain’s poor hardest hit by tax “reforms”

Once upon a time “reform” mean a change in government to reduce corruption and better ensure the well-being of the citizenry.

These days, the word means just the opposite: Measures designed to nurture corruption by the real, unelected rulers, while inflicting misery on the populace.

Consider, for example, the impact of the latest tax “reforms” in Great Britain, as reported by Andrew Grice of The Independent:

Tax cuts for low and middle-income families in April will be dwarfed by hidden reductions in tax credits, according to a study for The Independent.

The analysis found that the £1bn of tax cuts in April will be outweighed by reductions of more than £2.5bn in the complex tax-credit scheme.

Most of the cuts to credits, which top up the wages of low-income families in work, will take effect from April and could catch families unaware.

The Government’s flagship policy of raising income-tax thresholds has been trumpeted by the Liberal Democrats as their main achievement since the Coalition was formed last year – and a major boost for the low-paid.

But the Resolution Foundation think tank, which undertook the study, questions the fairness of the changes.


The foundation said the biggest winners will be those with middle to high incomes: “Overall, the measure remains regressive in the lower half of the distribution… Not only is the change huge overall; it is not widely understood or known about – being made up of a number of small changes to both the child tax credit and working tax credits.”

The study concluded: “Low to middle-income households receive 56 per cent of all tax credits in cash terms – and so will be hit disproportionately.”

Read the rest.

French high court affirms regressive tax

Perhaps the most regressive of all taxes is the sales tax — called the value added tax [VAT] in Europe.

The reason its regressive is simple. While the rich can invest the largest share of their earnings, those at the lower end of the economic spectrum are forced to spend a far larger portion of their income of the necessities of life, the over-the-counter purchases directly impacted by the VAT.

The Sarkozy government wants to impose a higher VAT to cover budget shortfalls, and the French Senate, the only branch of French government dominated by the [nominally] socialist party rejected it.

But it was all in vain, as reported by Sarah Elzas of Radio France Internationale:

France’s highest court, the Constitutional Council, has approved the main points of the 2012 budget, which was rejected by the Socialist-dominated French Senate last week.

The Constitutional Council approved the main parts of the 2012 budget and the revised 2011 budget on Wednesday

Opposition Socialist lawmakers last week asked the council to look into the constitutionality of several measures of the budget, notably one that would raise the reduced VAT tax from 5.5 per cent to 7.0 per cent.

They said that measure violated the constitutional principle of equality. The council disagreed.

It also approved 2012 budget’s proposed tax on fizzy drinks, another measure contested by the Socialists.

Read the rest.

The euro takes another hit

Traders expressed their opinion on the alleged salvation of the euro yesterday by sending the currency to the lowest level in a deacde.

From Agence France-Presse:

The euro fell to a 10-year low against the yen on Wednesday on eurozone debt fears in thin holiday week trading.

At 1700 GMT the euro bought 100.73 yen, its lowest level since June 2001.

The Guardian’s John Hooper adds:

The euro weakened about 1% percent against the dollar and the yen on Wednesday, the day before an important auction of long-dated Italian debt, while US stocks slid more than 1% on concerns about the economy in early 2012.

The European single currency hit a fresh 11-month low against the dollar of $1.291 and a 10-year low against the yen as data showed banks were hoarding the cash recently injected by the European Central Bank rather than lending it out – a bad omen for the European economy in 2012.

“If European banks are still this concerned, it’s not a good sign,” said Karl Schamotta, senior markets strategist with Western Union Business Solutions. “That underlines the possibility that this liquidity crunch is getting worse and will continue into the new year.

Read the rest.

And the reason for euro skepticism?

Consider this from Deutsche Welle’s Bernd Riegert:

During the first few months of 2012, crisis-ridden eurozone countries will need around 200 billion euros of fresh capital to replace government bonds and refinance themselves.

The interesting question will be whether or not they succeed in doing that with manageable interest rates. The eurozone rescue fund, which has been topped up to a total of 500 billion euros, could still be too small to prevent a widening of the eurozone debt crisis to large economies such as France.

Attempts to bolster Europe’s rescue capacity by encouraging Europe’s central banks to lend additional funds to the IMF have so far been unsuccessful. The President of the German Federal Bank, Jens Weidmann, has voiced his opposition to the proposal.

Yet the threats from US credit ratings agencies to downgrade European states hangs over every attempt to manage the debt crisis. Should this threat materialize in the spring, interest rates for government bonds, including German bonds, could rise.

Read the rest.

New developments in Afghanistan

With the war still underway, two countries have just announced major agreements with the American-installed government of Afghanistan.

And which countries? Well, how about Iran and China?

From Agence France-Presse:

Iran has signed a deal with Afghanistan to supply its neighbor with a million tons of fuel oil, petrol and aviation fuel a year, Iranian media reported yesterday without putting a value on the agreement.

The accord was signed on Dec. 26 by the Afghan trade and industry minister, Anwar Ul-Haq Ahady, and Iran’s deputy oil minister, Alireza Zeyghami.

Two-thirds of the export deal was for fuel oil, a category that includes diesel and fuel for agricultural, industrial and heating uses, according to Zeyghami. A quarter was for petrol and around 10 percent was jet fuel, he said.

The agreement was announced as Iran is subject to Western sanctions against its oil and gas sectors over Tehran’s controversial nuclear program. The United States and Europe are poised to increase sanctions in coming weeks.

Read the rest.

And Radio France Internationale reports on the Chinese accord:

China has signed Afghanistan’s first major oil exploration contract, a deal that could earn the wartorn country five billion euros over 25 years. China already has Afghanistan’s biggest foreign investment – a 2.6-billion-euro copper-mining contract.

Afghan mining minister Waheedullah Shahrani and China National Petroleum Corporation (CNPC) president Lu Gong Xun signed the deal in Kabul on Wednesday.

It will develop three oil fields in the relatively peaceful north of the country, along the Amu Darya river on Afghanistan’s border with its central Asian neighbours.

Afghanistan will take 70 per cent of the net profits and CNPC will pay 15 per cent corporation tax and hundreds of jobs are expected to be created.

The joint-venture is being launched with an Afghan company, the Watan Group, which is owned by the Popal brothers who are cousins of the Afghan president, Hamid Karzai.

Read the rest.

And meanwhile, closer to home

While housing in the San Francisco Bay Area took a major hit during the real estate implosion, one sector is recovering better than the others.

And it’s not housing for the poor and middle class.

From Jenny Pisillo of the San Francisco Chronicle:

While the overall figures looks dismal, our friends at SocketSite dug further into the Bay Area numbers and uncovered some variations within the market.  Higher priced homes are faring better in this real estate downturn.  Homes in the $600,000+ range showed a 1 month increase and the yearly figure, which was still down, is not nearly as bad as lower priced homes.

The bottom third (under $319,767 at the time of acquisition) fell 0.9% from September to October (down 9.1% YOY); the middle third was unchanged from September to October (down 8.1% YOY); and the top third (over $599,697 at the time of acquisition) rose 0.3% from September to October, down 1.6% year-over-year (versus down 3.1% in September).

The recent stats follow the overall trend of single family homes in San Francisco.  The homes in the top third have dropped 25% from their peak values while the bottom third and middle third of the market has seen price decreases of 60% and 41%.

Read the rest.

Aren’t you shocked?

The lucrative benefits of failure at the New York Times

The nation’s leading paper has been struggling of late, and was forced to resort to an investment from a mysterious Mexican billionaire to stay in business.

Most recently, the paper has sold off its collection of regional papers — including the nearby Santa Rosa Press Democrat and conducted a newsroom layoff-by-buyout.

The executive who helmed the company during the downturn is taking a buyout too, but under considerable better terms than those who bought out in the newsroom.

From Peter Lauria of Reuters:

Janet Robinson, who will step down as chief executive of the New York Times Co on December 31, will receive an exit package in excess of $15 million, according to people familiar with the situation.

In addition to a $4.5 million consulting fee, the Times Co will pay Robinson $10.9 million in pension benefits that she accrued over 28 years of service, they said.


A Times Co representative declined to give any more details on Robinson’s departure beyond the statement issued last Thursday, and did not make her available for comment.

Taken together, Robinson is walking away with just under $15 million exclusive of the value of the stock options she accumulated over her tenure with the company. The details of her severance agreement, which would also include her base salary, performance bonus, and stock options, are expected to be disclosed in the Times Co’s 10K regulatory filing in March.

News of Robinson’s severance agreement comes during the same week that a wave of buyouts hit the newsroom of the flagship New York Times and the company disclosed that it was in talks to sell 16 regional newspapers to Halifax Media Holdings. More than a dozen newsroom staffers reportedly took buyouts, among them well-known bylines including sports writer George Vecsey, metro columnist Clyde Haberman, and business reporter Diana Henriques.

Read the rest.


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