Category Archives: Debt

Quote of the day: On the looting of Europe’s South


From Pal Craig Roberts, Assistant Secretary oif the Treasury under Ronald Reagan and Associate Editor of the Wall Street Journal, writing in Counterpunch:

Greece is being destroyed by the EU that it so foolishly joined and trusted.  The same thing is happening to Portugal and is also underway in Spain and Italy.  The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false.  No “creditor” has yet agreed to write off one cent of the debt.  All that the IMF has been given by so-called “creditors” is unspecific “pledges” of an unspecified amount of debt writedown two years from now.

The newspaper headlines are nothing but fluff that provide cover for the IMF to succumb to presssure and violate its own rules. The cover lets the IMF say that a (future unspecified) debt writedown will enable Greece to service the remainder of its debt and, therefore, the IMF can lend Greece the money to pay the private banks.

In other words, the IMF is now another lawless Western institution whose charter means no more than the US Constitution or the word of the US government in Washington.

Today in Euroausterity: € for Greece, Spain warned


First, the good news for greece. . .

Following adoption of yet more pay and pension cuts plus some take hikes and the promise to sell off more of the national resources, the Troika finally coughs up the cash.

From To Vima:

After an 11-hour meeting in Brussels, the Eurogroup finally concluded and came to a decision regarding the bailout review, funding and Greece’s debt.

According to the Eurogroup chairman Jeroen Dijsselbloem, 10.3 billion euros will be paid out to Greece in two installments; one for 7.5 billion euros in June and one after the summer, when a number of prior actions have been implemented.

In relation to Greece’s public debt, the Eurogroup chief stated there was an agreement for a solution in three stages, with short and long-term measures, as well as a long-term mechanism.

eKathimerini covers the downside for the coalition government:

[G]overnment officials admitted in private that the deal fell short of what they had been hoping for, particularly because the eurozone had resisted the IMF’s call for immediate and unconditional debt relief for Greece over the course of the program.

Another concern for the coalition is the lenders’ demand that it make changes to the legislation passed through Parliament on Saturday, such as lifting the restriction on the sale of nonperforming loans that are backed by state guarantees, before any funds can be disbursed.

Athens was also told that it would have to reach reform milestones in the fall before it could receive the second tranche of bailout funding. The first installment, which is set to be released in the coming weeks, will be 7.5 billion euros, while the second one will reach 2.8 billion.

The prospect of having to vote through more measures was not at all well received by SYRIZA MPs as they feel they have already taken on a considerable burden over the last few weeks, when they passed two multi-bills containing a wide range of measures.

Then on to Spain and that warning, via El País:

As if the European economy did not have enough to deal with, with stunted growth levels, a seemingly endless crisis in Greece and a global slowdown, the European Central Bank (ECB) has detected another risk: the populist movements mushrooming across the continent.

In its latest Financial Stability Review, the agency headed by Mario Draghi has alerted that growing popular support for these movements could delay what it views as necessary reforms. And the three countries where the political risk is higher are Spain, France and Greece.

“Reform implementation may have become more difficult, as political risks have increased considerably in almost all euro area countries since the onset of the global financial crisis,” reads the report, which was released on Tuesday.

“These rising political risks at both the national and supranational levels, as well as the increasing support for political forces which are seen to be less reform-oriented, may potentially lead to the delay of much needed fiscal and structural reforms,” adds the document.

Spanish Prime Minister’s secret Troika promise


Spain’s prime minister is the target of outrage today after one of the country’s leading newspapers revealed a secret promise he’d made to the a Troika member promising to inflict yet another round of austerity on a country already wracked by high unemployment and a stumbling economy.

The Troika, comprised of the European Commission, the European Central Bank, and the International Monetary, disperses funds to bail out countries effectively bankrupted by the collapse of their banks at the start of the Great Recession.

From El País:

The Spanish political scene was in turmoil on Monday after EL PAÍS revealed the contents of a letter that acting prime minister Mariano Rajoy sent to the European Commission.

In the letter, Rajoy said that if he is re-elected at the upcoming elections of June 26, he is “prepared to adopt new measures, if required, in order to meet the [deficit] target.”

In public, Rajoy, of the Popular Party (PP), has denied that Spain will require any further spending cuts following a raft of unpopular measures that were taken at the height of the economic crisis.

Spain’s population has already been hit with pay and pension cuts and selloffs of public property in previous rounds of austerity, yet the promised economic recovery has failed to transpire.

From the National Institute of Statistics, here are the latest jobless percentages for Spain’s provinces, with the national rate represented by the darker bar:

BLOG Spanish jobless

IMF issues a call for major Greek debt relief


One of the three members of the Troika administering post-crash debt relief loans to Greece is calling for major concessions to the austerity-wracked nation, including outright loan balance cuts of up to half.

The call comes the day after the Greek government passed yet another round of pay and pension, cuts, tax increases, and further sell-offs of the national commons.

From Greek Reporter:

The International Monetary Fund (IMF) released its preliminary draft Debt Sustainability Analysis (DSA) on Monday, May 23. the DSA was prepared by the fund staff in the course of policy discussions with the authorities and the European institutions in recent months.

The report, published a day ahead of the crucial Eurogroup on May 24, calls for an “upfront” and “unconditional” debt relief. Without immediate debt relief the recession-ravaged country would deteriorate dramatically over the coming decades. In fact, at the current pace debt would eat up 60 percent of the budget by 2060.

The report states that “providing an upfront unconditional component to debt relief is critical to provide a strong and credible signal to the markets about the commitment of official creditors to ensuring debt sustainability, which in itself could contribute to lowering the market financial costs. An upfront component can also help garner more ownership for reforms.”

The report states that public debt was projected to surge from 115 percent to 150 percent of the GDP because of the expected internal devaluation. A deeper-than-expected recession necessitated significant debt relief in 2011-2012 to maintain the prospect of restoring sustainability. Serious implementation problems caused a sharp deterioration in sustainability that raised new doubts on the realism of policy assumptions from mid-2014 onwards.

More from the ANA-MPA news agency:

The measures recommended included a reprofiling of existing loans, necessary to cut funding needs to 20 pct by 2040. In this framework, the Fund recommends an extension of repaying loans received by the EFSF (130.9 billion euros) by 14 years, another 10 years for the loans received from ESM (186 billion) and another 30 year of bilateral loans from EU countries (52.9 billion).

The IMF also recommends extending a grace period for ESM loans by six years and a 17-20 year extension of EFSF and bilateral loans, respectively. This action would cut the funding needs by 17 pct of GDP by 2040 and by 24 pct by 2060.

The Fund also recommends a reduction in the margin (0.5 pct) added on a floating interest rate in bilateral loans and introducing an 1.5 pct ceiling on interest rates for the other two types of loans by 2040. This would reduce public debt by 53 pct of GDP by 2040 and by 151 pct by 2060 and the country’s funding needs by 22 pct by 2040 and 39 pct by 2060, safeguarding debt sustainability.

The IMF significantly reduced privatization proceed targets to 5.0 billion euros.

As the IMF summary notes:

Greece continues to face a daunting fiscal consolidation challenge. After seven years of recession and a structural adjustment of 16 percent of GDP, Greece has only managed to achieve a small primary surplus in 2015, and this due to sizeable one-off factors. This is still far away from its ambitious medium-term primary surplus target of 3½ percent of GDP. Reaching this target still requires measures of some 4½ percent of GDP. Low-hanging fruit have been exhausted, and the scope for new significant measures is limited.

The full report is here [PDF].

Greece surrenders to the troika, more austerity


As thousands of Greeks demonstrated in Syntagma Square outside the national legislature, the national parliament drank the Kool-Aid and passed the austerity measures demanded by the Troika of international lenders, a move that may foreshadow the end of the Syriza Party’s term at the helm of the national government.

Alexis Tsirpras and his party emerged as the victors last year on a promise to overwthrow the yoke of imposed austerity.

Instead, they have embraced it.

From eKathimerini:

Greek MPs approved on Sunday night a multi-bill containing a range of measures, including another 1.8 billion euros in tax hikes and the framework for a vast new privatization fund, paving the way for the Eurogroup to release more loans to Athens.

Prime Minister Alexis Tsipras saw 152 of his 153 MPs back the controversial package of legislation, meaning the government’s slim parliamentary majority was not put at risk.

Vassiliki Katrivanou voted for the legislation “in principle” but against the articles regarding the privatization fund and an automatic mechanism applying fiscal cuts if the primary surplus target is not met.

Eurozone finance ministers are due to meet in Brussels on Tuesday to decide whether Greece has done enough to complete the first review of its latest bailout program. If the green light is given, Athens is set to receive a minimum of 5.7 billion euros in fresh funding. However, there are still questions regarding whether the eurozone creditors and the International Monetary Fund will agree on how to reduce Greece’s debt or whether this will prove an obstacle to the next disbursement.

Some of the reaction to the vote and more on the measures embraced from the Guardian:

“They are with the exception of the Acropolis selling everything under the sun,” said Anna Asimakopoulou, the shadow minister for development and competitiveness. “We are giving up everything.”

The multi-bill, which also foresees VAT being raised from 23% to 24%, is part of a package of increases in tax and excise duties expected to yield an extra €1.8bn in revenue. Earlier this month, Tsipras’s leftist-led coalition endorsed pension cuts that were similarly part of an array reforms amounting to €5.4 bn, or 3% of GDP.

At the behest of the EU and International Monetary Fund, the government has agreed to adopt tighter austerity in the form of an automatic fiscal brake – referred to as “the cutter” in the Greek media – if fiscal targets are missed.

Despite official claims that goals will be achieved, there is a high degree of scepticism as to whether this is feasible. The Greek economy has seen a depression-era contraction of more than 25% since the outbreak of the debt crisis in late 2009, and with high taxes likely to repulse investment, economic fundamentals are also unlikely to improve.

The Associated Press examines the causes and more of the effects:

Greece now hopes the creditors will complete the first assessment of its third bailout program, freeing loan disbursements that will allow Greece to meet its obligations and avoid default.

>snip<

[I]t will have to navigate differences between the International Monetary Fund, which call for a generous debt cut albeit with more austerity measures, and the Europeans, chief among them German finance minister Wolfgang Schaeuble, who want no such cuts.

At the end of an acrimonious four-day debate, including in committee, Prime Minister Alexis Tsipras blasted the main conservative opposition and other centrist parties for having supported last August’s third bailout deal, but not the laws that have been voted on as prerequisites for concluding the assessment.

Opposition leader Kyriakos Mitsotakis countered that the bailout terms never included the superfund, which will expire in 2115. He said the precise terms were the results of Tsipras’ failure to negotiate reforms he and his leftist party have never believed in. He said he would prefer spending cuts to higher taxes and would negotiate with the creditors for lower annual levels of budget surpluses (2 percent of GDP instead of 3.5 percent) from 2018 onward.

The government majority was momentarily shaken Saturday when the junior partner, right-wing Independent Greeks, objected to freezes in pay hikes for so-called “special categories” of civil servants, including military, police, diplomats, judges, public health service doctors and university professors.

The pay cuts, which would have saved about 120 million euros ($135 million), were shelved and will be partly replaced by bringing forward taxes on Internet users and beer.

There’s more, after the jump. . . Continue reading

Graduation graphic: The mortarboard says it all


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Former ally lashes out at Greek prime minister


Zoe Konstantopoulou — Via Wikipeda.

Zoe Konstantopoulou — Via Wikipeda.

At 39, attorney and Syriza Party activist Zoe Konstantopoulou became the youngest president of the Greek legislature in the nation’s history, elected with the wave of discontent that brought the government of Syriza leader Alexis Tsipras to the prime ministership.

Tsipras had been elected on the promise to refuse to surrender to the sovereignty regime imposed by Troika regime of the IMF, European Central Bank, and European Commission with its demands that Greece repay the reckless loans granted by German bankers and others.

When Tsipras knuckled under to the Troika demands, including the ouster of anti-austerity Finance Minister Yanis Varoufakis and the rejection of the results of a national referendum in which the majority of Greek voters declared their opposition to further bailout measures.

She has since left to found her own party, and in a radio interview Saturday she laid into the leader of her former party, as To Vima reports:

The former President of Parliament Zoe Konstantopoulou was scathing in her criticism of Prime Minister Alexis Tsipras in a radio interview she gave for the Parapolitika station.

“He chose to become the puppet of the creditors and their commissioner in Greece. He is the colonel of the coup against the Greek people. I am deeply disappointed in my former friends and political comrade” she noted.

Mrs. Konstantopoulou further argued that Prime Minister repeatedly deceived the Greek people to rise to power. She also slammed PM Tsipras over the referendum he called and distorting its outcome.

Her remarks echoed those reported 10 May by CounterPunch:

“The Greek people have been living through hell during the last six years, and unfortunately they trusted that Tsipras [PM] would put an end to the extreme austerity measures, which are combined with a total undemocratic regime. Unfortunately, instead of putting an end, he put his signature to a third memorandum, which is even worse than the previous two… People are back on the streets protesting for their rights and dignity because right now they’re being asked to pay taxes which amount to almost the totality of their revenue. They’re asked to give up their homes… They’re asked to surrender public property, which is privatized at very, very low prices. And, they’re also asked to give up democracy.”

In a 15 April story, Greek Reporter covered the launch of her new party:

With words like “democracy,” “justice,” “clarity,” “rights” and phrases like “debt erasure” and “claim of German debts,” the former Parliament President, Zoe Konstantopoulou, launches her new party/movement, which will “rise through society and people who do not bow their heads.”

“We are acting with open, and immediate democratic procedures, having the web as our instrumental tool of communication. We count on our own powers and society,” she says in the announcement/call of her party “Course of Freedom.”

>snip<

“We are beginning our collective struggle for the liberation of the people and our country from the shackles of the memorandum. We are setting full sail towards a future of freedom, democracy and justice. With clarity and respect to human rights and fundamental freedoms. For the erasure of the debt. For the claim of German debts in every assertion of the country. For the vindication of our people and its struggles and the redemption of democratic nomination. We are creating a party that wants to constitute a basic cell of a movement and a front where we will meet with social and political powers, that will be connected through common values and goals […]” the announcement reads.