We’ve been a bit ill, so we’ll dispense with the prologue and get right to the latest.
We begin with the latest downgrade, and the target’s no surprise.
Fitch downgrades Spain
The ratings agency strikes again, reducing Spanish government bonds to near-junk status, qa move that will both hasten the destruction of the nation’s economy and force the European Union into yet another round of bailouts as the contagion inevitably spreads.
Just how the troika can impose still more austerity on a nation devastated by massive unemployment and capital flight without inflicting still more damage remains to be seen.
Indeed, it’s simply impossible.
From Larry Elliott, Heather Stewart, and Josephine Moulds of The Guardian:
The ratings agency Fitch delivered a strong rebuke to Europe’s policy elite tonight when it sharply downgraded Spain’s creditworthiness and moved the eurozone’s fourth-biggest economy a step closer to an international financial bailout.
Fitch said mistakes at a European level that had allowed the debt crisis to escalate were in part to blame for its decision to cut Spain’s credit rating by three notches to just above junk bond status.
The move – which follows the pattern that led to Greece, Ireland and Portugal needing help from Europe and the International Monetary Fund – makes it harder and more expensive for Spain to borrow money on the world’s financial markets.
Fitch, which also served notice to George Osborne that the UK faced losing its AAA status if the double-dip recession intensified, cited the ballooning cost of bailing out Spain’s struggling banks and a longer-than-expected slump for the downgrade from A to BBB.
The Iron Chancellor grows more explicit
Members of the European Union must hand over their sovereignty — or else. The Iron Chancellor declares.
Without political control consolidated in Brussels, Merkel implies, there’s no hope for Europe. Implicit in her demand is that the strong but weakening Germany economy will simply go its own way.
But she also wants a two-tier EU, with the stronger states protected from the troubled economies of the weaker states — which is an odd sort of “union” indeed.
Merkel’s vision recalls the strange condition of labor in her own country, where the relatively well paid majority of the workforce is supported by a lesser class of menials who are exempted from Germany’s minimum wage laws.
From Honor Mahony of euobserver:
German Chancellor Angela Merkel has said she will use the gathering of EU leaders at the end of the month to push ahead with plans for a political union, including more sweeping powers to Brussels.
“We do not just need a currency union but also a so-called fiscal union – more common budget policy,” she told Germany’s ARD television early Thursday (7 June).
She emphasised that a political union was also necessary: “That means that step-by-step in the future we have to give up more powers to Europe and grant Europe more oversight possibilities.”
While there has been a concerted effort over the last two years to make sure that all 27 member states are on board when it comes to further integration steps, Merkel said ambitious states should not be held up by recalcitrants.
While it should be made possible that all member states take part “we should not stay still because one or other [member state] does not yet want to join in,” said the Chancellor, making the clearest case yet for a two-speed Europe in matters of economic integration.
Merkel’s growth program follows the two-tier model
While we contend the whole notion of endless growth is a prescription for disaster, the main debate in Europe these days is who will reap it’s benefits, with French President François Hollande insisting on growth for all and Angela Merkel demanding that two-tier strategy.
From Radio France Internationale:
Germany’s finance ministry has released a discussion paper examining options to boost growth within eurozone countries and those favoured by French president François Hollande are given short shrift.
French centre-left newspaper Le Monde’s Friday edition dubs the document an “economics lesson for the European Left” and notes that Berlin looks set to reject Hollande’s demands for Europe-wide measures to stimulate growth.
“The responsibility for promoting sustainable growth rests primarily with the member states” says the German document.
It has been drawn up ahead of a meeting with German opposition parties including the Social Democrats and the Greens, both parties who say they favour more emphasis on growth to be included in the fiscal pact, up for ratification in Germany shortly.
And now for the latest from that bottom tier.
Greece’s afflictions continue without letup
Lots happening in the Cradle of Democracy as elections draw nearer.
The latest unemployment numbers, just out, reveal a continued descent, as Capital.gr reports:
Greece’s jobless rate scaled a new record high of 21.9 percent in March from a revised 21.4 in February as the debt crisis and a deep recession continued to take a toll on the labor market, the country’s statistics service said today.
Meanwhile, yet another major money is giving odds on the Grexit, this time from Japan.
Michael Kurtz, Hong Kong-based head of global equity strategy at Nomura Holdings Inc., Japan’s largest brokerage, comments on Europe’s debt crisis. He spoke in an interview at an equity forum in Singapore, according to Bloomberg.
On likelihood of Greece leaving the euro:
“We think that there is a very large chance that the Greek elections will produce a government that is committed to rejecting Greece’s obligations to its international creditors and if that happens, it will probably be forced out” of the euro bloc.
“We accept that possibility” that Greece will exit. “Let’s call it a 50/50 chance.”
Israeli journalist beaten filming attack on immigrants
Jerusalem Post reporter Gil Shefler was treated in an Athens emergency room Tuesday night after he was assaulted by a band of youths staging an attack on immigrants near the National Archaeological Museum.
The assault began after he tried to photograph a gang using sticks and clubs to attack several dozen immigrants.
From Athens News:
“I snapped a photo and one guy came up and told me ‘Listen, don’t take a photo. They’ll beat the hell out of you.
“Seconds later, I was being chased by five of these people. They caught me and beat me with sticks for around five minutes, I reckon.”
He said the beating stopped when his assailants – who appeared to be in their late teens or early 20s – appeared to have a discussion over his bloodied body on whether it was right to have attacked him.
Schefler, who suffered a gash to the head in the attack, said the mob – who were wearing motorbike helmets, masks or scarfs – went about its business without a care in the world.
“They weren’t worried about anything. And for good reason, as the police did not show up until about 20 minutes later,” he said.
He said an ambulance arrived on the scene some minutes beforehand but could not treat him as the mob were still milling around “leisurely with sticks”.
In his video report for the conservative Jerusalem Post, Shefter is disingenuous, saying he doesn’t know if the assailants were members of Golden Dawn or the Left. Given that attacks on immigrants have been conducted solely by Golden Dawn, according to numerous reports we’ve read, Shefter’s comment struck us as odd.
But the platform of Syriza, the Left coalition which has been scoring in first or second place in opinion pols, has one plank that’s not very popular in Israel:
Abolition of military cooperation with Israel. Support for creation of a Palestinian State within the 1967 borders.
Syria is also calling for a Grexit from NATO, the closing of all foreign military bases in Greece, and normalization of diplomatic relations with Turkey, which also can’t be too popular with the Israeli government.
Here’s the report:
Greek political debate canceled
What might have been a compelling piece of television drama, a debate between the leaders of the two political parties topping Greek public opinion polls in the runup to the new parliamentary elections, has been killed.
The problem was a failure to agree on the format of the debate, specifically the number of candidates to be included and the journalists who’d be asking the questions.
[T]he debate between Antonis Samaras and Alexis Tsipras — which could play a key role in shaping the election outcome — has been canceled, allegedly due to a disagreement as regards the participating journalists.
SYRIZA said Alexis Tsipras wants a free televised debate that would cover all subjects, protothema.gr reports. They say that Antonis Samaras’ associates are seeking to lead the processes to a dead end in order to cancel the debate. In addition, they explain that their wish is for the debate to escape the narrow limits to which it were held in previous years and have a dialogue in which every political leader will be able to reply directly to his interlocutor or even interrupt him.
According to Kathimerini, ND claimed it had agreed with SYRIZA almost all the details for a Samaras vs Tsipras debate but that the leftists scuppered the deal by issuing two statements outlining their positions on the discussions. SYRIZA said it wanted two debates: one between Samaras and Tsipras based on the format of the French presidential debate and another between the leaders of all the parties, apart from Chrysi Avgi (Golden Dawn).
ND states that although the name of journalist Nikos Hatzinikolaou had been agreed on for carrying out the debate, suddenly SYRIZA tabled another journalist as well (Elli Stai). Earlier, SYRIZA had proposed conducting two debates, one between Samaras and Tsipras and another with the participation of all leaders except Golden Dawn’s N. Michaloliakos.
Syriza’s Tsipras tells G20 he’ll renegotiate debt
The head of coalition that stunned the eurocrats with his party’s strong showing in the last parliamentary election has been acting like a leader of late, most recently in his meetings with leaders of the G20.
Despite the claims his Greek rivals, Tsipras hasn’t called for a write-off of the country’s debt, but he did tell the G20 he wants new terms — and that he’s ready to negotiate them himself.
From Greek Reporter’s Andy Dabilis:
Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras has told leaders of the world’s G20 – finance ministers from the world’s top economies – that he can renegotiate terms of Greece’s bailout with international lenders without jeopardizing its standing.
With the critical June 17 elections looming, he told the ambassadors that, “We want to try and reach a solution with our partners but such a solution must definitely put a stop to an ongoing catastrophic situation.” Greece is surviving on $152 billion in rescue loans from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika, which is withholding a second bailout of $173 billion until after the elections. Critics, including New Democracy leader Antonis Samaras and PASOK Socialist leader Evangelos Venizelos, have warned that Tsipras will get Greece kicked out of the Eurozone, although they, too want to change some of the bailout terms they backed.
Tsipras insisted that SYRIZA’s program “is the only way for Greece to exit the crisis and become an equal and worthy member state of the European Union and the Eurozone,” and pointed out his party’s strong second-place finish in the stalemated May 6 elections and that it’s in a dead heat with New Democracy to win on June 17. He said he would privatize banks and would try to increase tax revenues by 1 percent of Gross Domestic Product (GDP) with the aim of bringing Greece closer to the EU average in four years and would crack down on tax evasion and increase levies on the wealthy.
On foreign policy, Tsipras said that his party — if called on to lead a government — would pursue a “multifaceted and pacificist” policy but would strongly defend the country’s rights within the EU and strive to contribute to regional alliances in the Balkans and Mediterranean. He added that SYRIZA was in favor of the Middle East becoming a denuclearized zone.
Tsipras’s growing gravitas
An interesting anaylsis of the candidate’s transformation as the election draws nigh from Demetris Kamaras, editor of AlYunaniya:
Alexis Tsipras’ moves in the last 6 months have been quit effective. He is supported by some brainy political advisors and strategists as well as -rumour has it- Andreas Papandreou’s personal strategist Kostas Laliotis, who, while he issued an announcement to dismiss a right wing newspaper story that referred to his involvement, he appeared very generous in the way he complimented Tsipras’ close associates. It was almost as the leak was planted just to legitimize a meaningful announcement by PASOK’s enfant gâté.
Two weeks before the elections, Alexis Tsipras is turning heavier in his appearance, lowers the voice and stresses his words as an experienced leader, whose crowd keeps increasing. According to all indications, he will spend the remaining pre-election days investing on a leadership profile that will come in handy if the future of the country will be handed to him.
The climax moment could be the television debate with ND leader Antonis Samaras, that -in my opinion- could benefit the young politician, killing all hopes for the centre-right leader. But is seemed that New Democracy’s second thoughts have been wiser than the initial careless call that invited young Alexis to a beauty contest with his senior ND counterpart.
Desperate family delivers quadriplegic to insurer
One of the deepest tragedies of the austerian regime in the Hellenic republic has been the destruction of the nation’s health system.
Keep Talking Greece reports on a dramatic example of just how deeply the cuts have struck as some of the country’s most afflicted:
Under the burden of heavy economic hardships and cuts in social welfare benefits, the family of a quadriplegic man saw no other solution: they loaded the 43-year-old man in a borrowed carrier and transported him from Plomari village to the island’s capital city. There, the family briefed the IKA directors, that it cannot come up for the expenses of the chronic-ill man. “We hand him over to you” the relatives told the directors.
According to the man’s family, Greece’s biggest insurance fund IKA cut the social benefit three months ago with the effect that the family cannot afford to buy neither medicine, nor dippers, not other basic goods essential for him.
Local news portal LesvosNews.gr spoke with the local IKA director who said that the Health Ministry recently changed the procedures for granting social benefits.
“Patients won’t appear before health committees, but they will be checked at home by assigned physicians first” Kladogennis told the news portal.
On the island of Mytilene there are some 53 patients awaiting for to be checked for social benefits, however the shortage of personnel makes them struggle to live without benefits for more than five months.
After the family’s radical action, Kladogennis intervened, the quadriplegic man was checked by an assigned physician, who submitted his report to the relevant committee.
Druggists launch fund to attract donations
With austerity cutting off funds to the health systems and drug manufacturers and payrolls slashed by up to 40 percent thanks to the Troika’s diktat, many Greeks are doing without needed medications.
The pharmacists have come up with a stopgap measure.
Athens News reports:
The head of the Attica Pharmacists’ Association Kostas Lourantos on Thursday announced that the association intends to open a bank account where people can donate money for the purchase of expensive drugs needed by patients, after pharmacists stopped supplying them on credit to those insured by the National Organisation of Health Service Providers (EOPYY).
Lourantos said the association was receiving dozens of calls a day from desperate patients at a special phone line set up to report the lack of medication.
He said the money collected would be used to buy drugs to deal with urgent cases, based on the evaluation of an expert committee.
Lourantos explained that the move aimed to show Greek society that pharmacists were not responsible for the lack of drugs on the market but had been forced into their mobilisation by the actions of EOPYY, which was months behind with payments.
Before Spain was downgraded
Fitch announced their downgrade at the end of a day when Spain had actually been able to sell bonds, albeit for a premium.
Wonder how Friday’s sales will go?
From the BBC:
There was strong demand for Spanish bonds at an auction on Thursday, which was seen as a key test of the country’s ability to raise funds, but it had to pay a higher interest rate.
The rate on the 10-year bonds was 6.044%, up from the 5.743% paid when bonds were last sold in April.
Spain sold 2.1bn euros ($2.6bn; £1.7bn) in medium and long-term bonds.
It comes as European authorities are said to be working on a way to help Spain’s troubled banking sector.
Portugal suffers in silence
With all the media attention directed at Greece and Spain, Portugal continues to suffer as the crisis spins its way to the next stage of global economic disaster.
Pedro Rodríguez of Spain’s ABC writes about the situation in Portugal via a Pressurop translation by Anton Baer:
[T]he sacrifices have only been piling up since the government decided last year to apply a 50 percent excise tax on the Christmas bonus of all those Portuguese with incomes above 485 euros per month, which is equivalent to the minimum wage.
From that moment on the crisis and the adjustment stopped being merely theoretical. Cuts hit home everywhere else too: in health, education, public transport… There also came a painful hike in taxation, with a VAT of 23 percent at the higher end.
Although the terms of the bailout were negotiated with the troika by the outgoing Socialist government, implementing them is the job of the new cabinet, headed by Prime Minister Pedro Passos Coelho. This is the youngest and smallest Portuguese government since the Carnation Revolution.
Despite having done everything it was asked to do, Portugal’s economy remains in critical condition. This year GDP is expected to fall between 3.1 to 3.5 percent, with an unprecedented unemployment rate that is already above 15 percent, and for youth at over 36 percent. At the start of the bailout the ratio of debt to GDP was 107 percent. At this rate, however, that will climb to 118 when the bailout ends in September 2013.
Professor Cantiga Esteves argues that Portugal’s problems have little in common with the banking crisis of Ireland or the lies Greece told about its deficits. In Portugal’s case, the key is that “our economy grew at an annual average of 0.7 percent over the last decade, and all our public and private consumption has been leveraged on an unsustainable debt.”
Given the controversy around the model patient and the need for a second bailout, the sociologist Jorge de Sá insists with the characteristic irony of his countrymen: “Tell me, please, when the IMF has ever cured something in a democracy.” Nicola Santos, deputy director of Expresso, is among those who believe that a second operation will be very difficult to avoid: “We need more time, more money and better conditions.”
Cyprus: It’s lookin’ like a bailout
It was just yesterday we said the “serious but soluble without a bailout” bluster being bandied about Cyprus was the surest possible sign that a bailout would be happening soon.
Now comes more confirmation.
From the Anatolia News Agency:
Eurozone member Greek Cyprus conceded that there is a serious possibility it may need an EU bailout to save its banking system, which is heavily exposed to Greek debt.
“The possibility of addressing the financial stability mechanism to support the banking system, due to the problems created by excessive exposure of banks to Greece, is a serious possibility,” deputy government spokesman Christos Christofides told reporters.
He said the government was looking at various ways to support the banks, which included finding a loan “from elsewhere.” Greek Cyprus has already secured a 2.5 billion euro ($3.2 billion) low-interest loan from Russia to cover its refinancing needs for this year.
The recession-hit economy is struggling with record unemployment, austerity measures and trying to rein in a deficit twice the EU accepted limit of three percent of GDP.
More from Capital.gr:
“Cypriot banks were pretty much OK all the way up to 2010. They were quite conservative, never lent more than their deposits and never invested in toxic assets. Then they lent money to the Greek government, and those assets became toxic,” said Fiona Mullen, an economist at Sapienta Economics.
With the Greek election on June 17 hanging in the balance, and scenarios mounting about the possible exit of Greece from the euro zone, bankers say that this is discouraging potential investors in Popular.
“That is the single most important factor that is keeping people, strategic investors, funds and others, from investing in the Group,” Michael Sarris, Popular Bank’s non-executive chairman, told Reuters in an interview.
“They (investors) are comfortable in helping cover the existing capital requirements, but they are not comfortable at the idea that it may end up being a lot more.”