Econowrap: Is the Greek debt deal nearly done?

That’s the question of the day as that meeting of Greek party leaders and the prime minister finally gets underway three days late and six days after the supposed deadline to have a deal in hand.

Then there are two major strikes underway, with airline employees walking out in France and a general strike in Israel.

Plus news of the Germany economy, and a good news item, at least if you’re a one pernter homeowner in Los Angeles.

Greek debt deal meet finally begins

From the BBC:

Greek Prime Minister Lucas Papademos is meeting coalition parties in an attempt to seal an austerity agreement to secure a new EU/IMF bailout.

The three parties were handed the draft after final touches were agreed between the PM and EU, ECB and IMF officials.

The accord is likely to include a 20% minimum wage reduction, pension cuts and 15,000 civil service lay-offs.


According to unconfirmed reports in the Greek media, the measures were aimed at trimming 3.2bn euros:

  • Minimum wage to be cut by 22% from 751 euros per month to 600 euros.
  • Supplementary pensions to be reduced by 15% but basic pensions also likely to be cut
  • 15,000 public sector jobs to go by end of 2012
  • But holiday bonuses, known as 13th and 14th month salaries, expected to be saved

If the parties give the text their “agreement in principle” it will then be put before the Greek parliament.

As part of Greece’s new 130bn euro ($170bn; £110bn) bailout deal – Greece’s second international bailout – Mr Papademos and Finance Minister Evangelos Venizelos have also been engaged in a separate strand of negotiations with private creditors over a write-off of up to 70% of the value of the money owed by the Greek government.

Read the rest.

The Guardian’s report on the meeting begins like this:

Remarkable news from Greece — the meeting between the Greek prime minister and the leaders of the country’s three biggest parties is about to begin.

George Papandreou, Antonis Samaras and George Karatzaferis have just arrived at Lucas Papademos’s office.

Just 53 hours later than Monday’s deadline to give the EU an answer, but who’s counting, eh?

Now the waiting begins – will the quartet swiftly endorse the draft agreement for the €130bn bailout, or is there more drama ahead?

Read the rest.

More details on the package from Ekaterimini in Athens:

The leaders of Greece’s three coalition parties received on Wednesday morning the text of the outline agreement for a new bailout and are due to meet in the afternoon in an effort to reach consensus on the measures the government will have to adopt.

The drafts, which contain 32 pages setting out the reforms and fiscal targets the leaders will have to agree to, were delivered to the headquarters of PASOK, New Democracy and Popular Orthodox Rally (LAOS) at about 9 a.m. The document also contains some extra pages explaining some of the measures proposed.

A meeting between PASOK’s George Papandreou, ND’s Antonis Samaras and LAOS chief Giorgos Karatzaferis with Prime Minister Lucas Papademos had initially been scheduled for 3 p.m. but this was pushed back to give the leaders more time to assess the document.

Papademos was involved in talks late on Tuesday with the representatives of the European Commission, the European Central Bank and the International Monetary Fund — known as the troika — on the steps it would take to save some 3 billion euros.

One of the stumbling blocks that emerged on Tuesday was the troika’s new demands for cuts to basic pensions, which start at 360 euros per month, as well as supplementary ones.

New Democracy had wanted auxiliary pensions to drop no lower than 300 euros but it is believed that the troika proposed that if this level is to be maintained then basic pensions should be cut. The reductions on basic pensions may apply just to those above a certain level.

Read the rest.

And this from Athens News:

Pension funds could suffer losses totalling 2.2bn euros from a proposed 20 percent cut in lower wages and social insurance contributions, a leading labour expert said on Tuesday.

The cuts are among proposals that the troika has said the government must approve in order to secure a second, 130bn euro bailout.

Savvas Robolis, an economics professor and director of the Labour Institute (INE) of the country’s largest private- and public-sector union federations, said this burden would further exacerbate the huge deficits of the pension funds.

He said that unemployment and flexible employment pension were already costing social insurance fund €6.5bn euros, while he put the value of social insurance contribution evasion at 8bn euros.

The funds are also under pressure by the protracted economic recession and the volume of debt owed by enterprises (estimated at around 11bn euros).

He said the 9.2bn euros cut in wages since 2009 has cost pension funds 4.2bn euros annually, while pension funds have also suffered heavy losses, of around 3.5bn euros, from a fall in bond prices included in their investment portfolios.

This excludes any losses that will result from a haircut in Greek state bonds.

Robolis stressed that cutting pensions was not a solution to the problem and said that a 15 percent cut in supplementary pension would result in a 450m euro benefit.

Read the rest.

And the EU’s central bank floats a proposal

It’s more of that “we’ll pay you so you can pay us” stuff.

From EurActive:

Even though Greece’s government missed another deadline to come up with a list of painful reforms, the European Central Bank (ECB) has signalled it will exchange its Greek bond holdings in order to reduce the country’s debt.

The ECB has agreed to exchange Greek bonds it bought last year for bonds of the European Financial Stability Facility (EFSF), the eurozone’s temporary rescue fund, the Wall Street Journal reported, citing anonymous sources.

The idea is that ECB will exchange €50 billion of Greek bonds it bought for €39 billion to the EFSF, which will not hold the bonds on its balance sheet. The EFSF will return the bonds to Greece, which will then agree to repay the EFSF for the purchase price of the bonds, in effect reducing its debt by as much as €11 billion, the paper reported.

However, the exchange won’t take place unless Greece’s ongoing debt restructuring talks end successfully.

Read the rest.

Meanwhile, an airline strike in France begins to hurt

Two somewhat contradictory reports out of France, where an airline strike called over proposed changes in labor rules enters its second day.

From Deutsche Welle:

Air France on Wednesday said it was expecting to cancel up to 40 percent of its long-distance flights and up to 30 percent of shorter flights, as a pilot strike entered its third day.

The airline ran about half of its long- and medium-range flights on Tuesday, but said it managed to re-route many passengers on alternative flights.

Most passengers were notified of Wednesday’s cancellations on Tuesday, although there were some last-minute cancellations as well, the Paris airport authority ADP said.

The strike action, which is to continue through Thursday night, is in protest to a bill in the French parliament that would require 48 hours advance notice on any walkout in the airline industry. The SNPL pilots union says the law would infringe on labor rights.

The bill was approved in the lower house of parliament last month and is scheduled for debate in the Senate later this month.

Read the rest.

A more recent report from Radio France Internationale says that half of Air France flights have now been canceled:

The strike in France by airline pilots, flight attendants and ground staff has entered its second day with significant disruptions to Air France long-haul flights and signs the industrial action is gaining speed.

On Tuesday morning nine Air France long-haul flights were cancelled over a three hour period compared with just four on Monday.

The pattern was repeated elsewhere in France with cancelled flights at Paris’ Orly and Nantes airports. Air France says it can only guaranteed 50 per cent of long-haul and 70 per cent of short-haul flights on Tuesday.

Other airlines are also feeling the effects of the strike. Low cost operator easyJet was forced to cancel several incoming flights to France on Monday.

Read the rest.

A general strike erupts in Israel

The key issue is outsourcing.

From Haaretz:

Israel’s main labor union declared a strike on Wednesday that caused delays at Ben Gurion airport, and affected banks, hospitals, government offices, trains, the stock exchange, and more, after talks with the government failed to produce an agreement on the status of workers employed through labor contractors.

Finance Minister Yuval Steinitz called the strike unnecessary, saying it could cost the economy billions of shekels if it continues. He accused the Histadrut labor federation of being entrenched in its positions.

Histadrut chairman Ofer Eini said that the length of the strike now depends on the Prime Minister Benjamin Netanayhu and Minister of Industry, Trade and Labor Shalom Simhon.

Steinitz and Eini met on Tuesday in Jerusalem in a bid to reach an agreement over outsourced workers’ conditions – but both said they did not believe a general strike the Histadrut planned for Wednesday could be avoided.

Netanyahu has been kept updated on negotiations and is reportedly considering intervening to end the crisis.

The High Court of Justice rejected a petition by the Federation of Israeli Chambers of Commerce against the strike on Tuesday. The court said it did not see a reason to intervene at this time in the ruling of the National Labor Court to allow the strike to go ahead, despite the heavy damage it would cause.

Read the rest.

More from Agence France-Presse:

Histadrut accused the government of failing to agree to improvements to the rights of contract workers that the private sector has said it will adopt.

Histadrut chief Ofer Eini said the association had reached an agreement in principle with the private sector on “the total alignment of conditions for full employees and contract workers.”

“If a similar measure is adopted by the public sector, with the agreement of the prime minister, the strike will be halted immediately,” the statement said.

The issue of contract workers has been simmering for months, with Histadrut staging a four-hour general strike over the same disagreement in November.

The association claims employment of contract workers, who can be fired without notice and receive few benefits, has mushroomed, particularly in the public sector.

They want to see contract workers receive the same benefits as others, and have called on the government to hire some of the contract workers as full employees.

Read the rest.

Germany’s economy continues to soar

The one thriving economy in Europe set new records last year, and so far, there’s no sign of a letup.

From the BBC:

In Europe, Germany’s trade surplus reached 158bn euros (£132bn; $209bn) in 2011 on record exports that rose 11.4% to top 1tn euros for the first time.

The national statistics office also said that imports rose 13.2% to reach an all-time high of 902bn euros.

In 2010, the trade surplus for Europe’s biggest economy was 155bn euros.

Read the rest.

But one German carmaker is in trouble

And it’s a company owned by General Motors.

From Spiegel:

GM may be regretting its 2009 decision not to sell Opel.

US automaker General Motors is reportedly losing its patience with its European unit Opel/Vauxhall. Steep losses may now result in factory closures and layoffs, including the Opel factory in Bochum, Germany, according to media reports. The labor conflict could be reminiscent of 2009, when GM elected not to sell Opel.

In 2009, General Motors had a deal in hand to sell its European unit Opel/Vauxhall. But at the very last moment, despite months of negotiations facilitated by the German government, the America automaker backed away, deciding to restructure the company itself. It was a decision that infuriated Berlin and led many in Germany to doubt the company’s trustworthiness.

Now, it appears that GM is suffering from a bout of non-seller’s remorse. According to a report in the Wall Street Journal, the carmaker is frustrated with mounting losses at Opel/Vauxhall and is considering significant job cuts and plant closures.

“There is increasing frustration with Opel and a feeling the cuts two years ago did not go nearly deep enough,” the paper quotes an unnamed GM official as saying. “If Opel is going to get fixed, it is going to get fixed now and cuts are going to be deep.” The official told the newspaper that GM’s patience is running out and revealed that, in addition to GM’s $580 million worth of losses in the first nine months of 2011, fourth-quarter losses, which will be officially announced next week, were “horrendous.”

Opel’s works council, an elected body within the company that represents employees’ interests, on Wednesday issued a statement saying that it had heard nothing about approaching cuts or factory closures. The statement noted that existing contracts prohibit layoffs and closures through 2014. The article in the Wall Street Journal specifically mentioned factories in Bochum, Germany, which employs 3,100 workers, and in Ellesmere Port, England, with 2,100 employees, as candidates for shuttering.

Read the rest.

And good news for L.A.’s elite

At least the ones looking to sell their homes in the the region’s tonier neighborhoods.

From Lauren Beale of the Los Angeles Times:

In a battle of the beach cities, Hermosa Beach was the big winner last year where median home prices were concerned and Malibu the biggest loser.

But first appearances can be deceiving. Los Angeles County luxury communities that showed the most price gains last year were largely just regaining previously lost ground.

Hermosa Beach 90254 was the big gainer with prices up 15.8% to a median of $1.1 million among ZIP Codes with medians above $1 million and where at least 50 existing single-family homes sold, according to DataQuick statistics. But the increase barely offset the previous year drop-off when prices lost 15.4%.

The 90077 L.A./Bel-Air ZIP had a 14.3% price increase from 2010 to 2011, but it came off a 10.5% loss in the 2009-to-2010 tally. The 147 recorded sales included the $85-million Spelling mansion mega-deal, which claimed the highest-priced-sale mark for Southern California.

Also on the plus side was West Hollywood 90069, up 8.4% year over year. That median had been down 10.4% in 2010.

Beverly Hills 90210 prices were up 7.3% compared with a 1.7% drop the year before. But the median at the end of 2009 had been down 17.2%.

Rounding out the top five gainers in 2011 was the Palos Verdes Peninsula 90274 ZIP Code, which was up 4.2% on top of a 1.6% gain in 2010. The area experienced a 15.8% price drop in 2009.

Read the rest.


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