Category Archives: Debt

Greek misery continues, no crash recovery yet


We begin with a dramatic graphic from Kathimerini, dramatic evidence that despite three rounds of bailout loans an ever-harsher austerity measures, the European economy hardest hit by the Great Recession is showing no signs of recovery as yet still more austerity is demanded:

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The Greeks were left holding the string when the bubble popped, unable to pay loans to foreign banksters a lot of them in Germany. And the lenders wanted their money, even though the economy had crashed, unemployment skyrocketed, and the Greek industrial machine had ground to a halt.

To enable Greece pay the loans back, a Troika formed of the European Central Bank, th European Commission, and the International Monetary Fund imposed harsh austerity measures perfectly designed to ensure that the Greek people were reduced to serfs, sacrificing layoffs, pay, pension, and healthcare cuts for those lucky enough to keep their jobs.

Then there was the massive selloff of national assets, ranging from transit and power grids to ports and islands.

And still the troika wants more in exchange for another round of bailout loans.

From the London Telegraph:

Greece will need a fourth bailout as its debts remain utterly unsustainable despite years of austerity and attempted reforms, according to George Papaconstantinou, a former Greek finance minister.

A “radical liberalisation of the economy” is also necessary as the country needs to attract foreign investment because Greece lacks the domestic resources needed to grow its industries, he told an audience at the London School of Economics.

“Pretty much everyone agrees that Greek debt is not sustainable,” he said. “Is there a prospect of a fourth bailout? Yes. Even in the best case… I doubt that Greece will be able to stand on its own feet.”

Mr Papaconstantinou, who was Greece’s finance minister from 2009 to 2011, said that these measures have to be accompanied by serious economic reforms.

“Radical liberalization of the economy”?

Translate that as “more misery for the average Greek.”

The IMF lays down the law

Before taking the helm at the IMF, Lagarde served as Finance Minister for French President Nicolas Sarkozy.

In December a French court found her guilty of criminal negligence in her old job for arranging a payout of more than $400 million for businessman Bernard Tapie’s share of Addidas under questionable circumstances — though the court declined to impose either a jail sentence or a fine, rendering the guilt verdict moot.

The affair didn’t seem to bother either the French government or the IMF, so Lagarde kept her job.

More on her stance on the latest Greek bailout round from Bloomberg:

IMF Managing Director Christine Lagarde signaled that Greek debt restructuring can wait and the country should focus on overhauling its economy for the duration of its latest bailout, which expires in 2018.

Speaking in a German television interview after meeting Chancellor Angela Merkel in Berlin, Lagarde said “the volume of restructuring will clearly depend on how much reform, how much progress, how strong the Greek economy is” when the aid program ends.

What will probably be needed is a “significant” extension of maturities on Greek bailout loans and a “significant interest rate capping,” Lagarde told ARD television on Wednesday. “That will have to be discussed in greater detail later on” and “implementation of the debt restructuring will have to take place at the end of the program.”

The Washington-based fund is demanding additional debt relief measures as a condition for participating in the Greek bailout. Its participation, in turn, is a condition set by Germany when it agreed to help underwrite the latest aid package in 2015.

So who benefits?

Therein lies the rub.

Because much of the money won’t go to the banks who lent it to Greece.

Any of those lenders sold off their delinquent funds at a deep discount to that unique breed of banksters called “vulture funds,” speculators who buy up sovereign debt, then set about collecting it using all the ruthless ploys they can martial.

From the Committee for the Abolition of Illegitimate Debt:

The experience of the Greek debt restructuring of 2012 serves as a good example to show how vulture funds operate and the costs they can impose in a country and its population. The Greek case is quite interesting as not only involved the first major debt restructuring in Europe since 1953 but also it was the largest operation of its kind. The remarkable aspect of this episode is that the country decided to continue paying holdout creditors, and specifically vulture funds, in full. This was the case even though the process was organized with the support of the official creditors of the country. In this regard, it created yet another damaging precedent regarding the viability of the profits by litigation strategy followed by vulture funds.

>snip<

Just a month after the debt restructuring was completed, the government made an initial payment of 436 million Euros to a group of holdout investors led by Dart Management. This hedge fund, which had a long story of suing governments to get paid in full going back to the Brady plan in Latin America in the late 1980s, made a massive profit as it had bought the bonds on prices estimated between 60 to 70 cents on the Euro. By making that initial payment, the Greek government set a negative precedent as the rest of the holdouts were now able to use that decision to claim for equal treatment under a foreign court. The payments to holdouts continued uninterrupted afterwards parallel to the implementation of harsh austerity measures. For example, during 2013 the country paid a total of 1.7 billion Euros to holdout creditors. To date, most of the holdout claims have been paid in full by Greece. It is estimated that private investors currently have a total of 36 billion euros in government bonds that were either issued under the debt exchange of 2012 or in the debt issuance that took place in 2014.

As the Greek population continues to struggle under the imposition of harsh austerity measures and the debt burden of the country remains “highly unsustainable”, as the IMF characterizes it, it is evident that the decision to continue paying the holdouts was a mistake. It represented nothing short of rewarding dangerous speculators while transferring the costs of their actions on to the Greek people. Even more troublesome is the fact that the relationship between Greece and the vulture has not ended yet. In the aftermath of the debt restructuring of 2012, it is estimated that hedge funds have bought nearly 15 billion Euros in government bonds. As a new debt restructuring, or even unilateral default, is simply a matter of time is worth nothing that the country can still set a precedent against the actions of vulture funds. The country could begin by enacting a law, similar to that adopted in Belgium in 2015, to limit the actions of vulture funds. Furthermore, given the dire social situation in the country, it should declare the non-application of the 3rd memorandum and non-payment of all illegal, odious, illegitimate and unsustainable debts. After all it is never too late to state that sovereignty and the respect of human rights will always precede debt.

So the troika is really all about making sure predatory speculators collect their pound of flesh.

Austerity bites: Greeks sink deeper into poverty


Poverty rate changes in the European Union, 2008-2015. From Reuters.

Poverty rate changes in the European Union, 2008-2015. From Reuters.

When the greed and unprosecuted crimes of Wall Street banksters and their allies in London brought the world to the brink of financial ruin nine years ago, it was the world’s poorer nation who paid — and are continuing to pay — the highest price.

Greece isn’t the only nation in the eurozone to see a poverty increase since the start of the Great Recession, but it’s the only one to see a near-tripling of the number of its citizens in poverty, a direction result of the austerity regime implemented by the austerity regime forced on Europe’s nations with the highest debt levels.

As part of that austerity, the Troika of the Euroippean Central Bank, the European Commission, and the Washington-based International Monetary Fund have mandated massive layoffs of public workers, pay and pension cuts, and the higher costs associated with the privatization and sell off of public transit and power systems.

The Troika has been holding off on its latest bailout loan, demanding yet more austerity measures. But when it comes, most of the money will go right back to lenders on Wall Street, London, and Germany.

More from Reuters:

[R]egardless of who is to blame for the collapse in living standards, poverty figures from the EU statistics agency are startling.

Greece isn’t the poorest member of the EU; poverty rates are higher in Bulgaria and Romania. But Greece isn’t far behind in third place, with Eurostat data showing 22.2 percent of the population were “severely materially deprived” in 2015.

And whereas the figures have dropped sharply in the post-communist Balkan states — by almost a third in Romania’s case — the Greek rate has almost doubled since 2008, the year the global crisis erupted. Overall, the EU level fell from 8.5 percent to 8.1 percent over the period.

>snip<

International organizations, including the Organisation for Economic Co-operation and Development, have urged the government to prioritize tackling poverty and inequality.

Unemployment has slipped from a peak of 28 percent of the workforce to 23 percent but the rate remains the highest in the EU. Since the crisis began, the economy has shrunk by a quarter and thousands of businesses have closed for good.

>snip<

Better living standards seem as far away as ever. Over 75 percent of households suffered a significant income reduction last year, a survey by business confederation GSEVEE and Marc pollsters found. A third had at least one unemployed member and 40 percent said they had to cut back on food spending.

And with the latest round of austerity now in negotiation, things can only get worse.

Remember that, just as in the U.S., the employment numbers don’t reflect totals paid in salaries and benefits.

With rising costs for healthcare, transportation, and other necessities, coupled with pay cuts, living standards have been drastically reduced even for those who are working.

But, hey, a banskster’s gotta make a living, right?

Greek crisis deepens; bad loan rate spikes


Greece, the nation hardest hit by the Great Recession, continues to stagger under the burdens imposed by the European Central Bank, the European Commission, and the International Monetary Fund.

The Troika, operating as the European Stability Mechanism, has imposed onerous pay and pension cut, mandated layoffs, forced the sale of billions in national assets [including power grids, healthcare institutions, toll roads, railways, ports, and even islands], while Greeks continue to suffer from massive unemployment.

And now the crisis is getting worse.

From Kathimerini:

Nonperforming loans last month posted a major spike of almost 1 billion euros, reversing the downward course set in the last few months of 2016. This has generated major concerns among local lenders regarding the achievement of targets for reducing bad loans, as agreed with the Single Supervisory Mechanism (SSM) of the European Central Bank for the first quarter of this year.

Bank sources say that after several months of stabilization and of a negative growth rate in new nonperforming exposure, the picture deteriorated rapidly in January, as new bad loans estimated at 800 million euros in total were created.

This increase in a period of just one month is considered particularly high, and is a trend that appears to be continuing this month as well. Bank officials attribute the phenomenon to uncertainty from the government’s inability to complete the second bailout review, fears for a rekindling of the crisis and mainly the expectations of borrowers for extrajudicial settlements of bad loans.

Senior bank officials note that a large number of borrowers will not cooperate with their lenders in reaching an agreement for the restructuring of their debts, in the hope that the introduction by the government of the extrajudicial compromise could lead to better terms and possibly even to a debt haircut.

Austerians threaten more cutbacks in Greece


This is one of those good news/bad news stories.

Greece was the European nation hardest hit by the greed of Wall Street banksters who brought the world to its knees eight years ago, triggering a Great Recession which still hasn’t ended and threatens to worsen yet again, as the United Nations noted in a report last month:

Although a modest global recovery is projected for 2017-18, the world economy has not yet emerged from the period of slow growth, characterised by weak investment, dwindling trade and flagging productivity growth, according to the United Nations World Economic Situation and Prospects (WESP) 2017 report launched today.

The report states that the world economy expanded by just 2.2 per cent in 2016, the slowest rate of growth since the Great Recession of 2009. World gross product is projected to grow by 2.7 per cent in 2017 and 2.9 per cent in 2018, a slight downward revision from the forecasts made last May.

For Greece, that means an unparalleled crisis may be imminent as the nation and its citens are still reeling from the current crisis the onerous costs of the current bailout.

The bailout package from the troika — the International Monetary Fund, the European Central Bank, and the European Commission — has eased the impacts on Greece, though at a huge price. The nation’s ports, transportation infrastructure, and energy grid have already been sold off to multinationals, pay and pensions have been slashed repeatedly, healthcare benefits cut, and much, much more.

And employment, though improved, still reaches staggering levels, especially for young workers, as indicated in the latest numbers from the Hellenic Statistical Authority:

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The current bailout isn’t done, and the troika is demanding still more cuts, though a deal may be near.

From Kathimerini:

Representatives of the country’s international creditors are expected to return to Athens this week for a resumption of bailout talks despite continuing tensions between Greece and its lenders, highlighted by Prime Minister Alexis Tsipras over the weekend.

In a speech before SYRIZA’s central committee on Saturday, Tsipras lashed out at Greece’s creditors, calling on them to revise their “irrational demands” of Greece.

“We will not agree to demands that are not backed up by logic and numbers,” he said.

He called on the International Monetary Fund in particular to revise its recent assessments of Greece’s economic prospects so that stalled bailout negotiations can resume at the technical level.

Tsipras also called on German Chancellor Angela Merkel to rein in Finance Minister Wolfgang Schaeuble and his “constant hostility” towards Greeks, accusing him of trying to create a “two-speed eurozone” and comparing him to a “pyromaniac… playing with matches in a warehouse full of explosives.”

More from Deutsche Welle [emphasis added]:

The new agreement would release a new tranche from its 86 billion euro ($91.5 billion) bailout fund. That, in turn, would enable Greece to meet a major debt repayment of 7.2 billion euros that is due this summer.

EU and IMF lenders want Greece to make 1.8 billion euros — or 1 percent of gross domestic product — worth of new cuts by 2018 and another 1.8 billion euros after that on measures focused on broadening the tax base and on pension reductions.

New cuts — especially to pensions, which have already been reduced 11 times since the start of the crisis in 2010 — are difficult to sell to a public worn down by years of austerity.

>snip<

Breaking the deadlock in the coming weeks is considered paramount, with elections in the Netherlands on March 15 and in France in the spring threatening to make a resolution even more difficult.

But [Eurogroup chief Jeroen] Dijsselbloem warned that the next meeting of eurozone ministers on February 20, which is seen as an unofficial deadline ahead of the votes, would still be too early for a breakthrough.

Greek Christmas trees are dying of austerity


If there is one single story that epitomizes neoliberalism and its ruthless agenda, consider this one from the nation hardest hit by the Wall Street-bankster initirated Great Recession and the austerity regime imposed by the International Monetary Fund, European Central Bank, and the European Commission.

From Kathimerini:

Demand for real Christmas trees has been declining steadily since the start of the crisis in Greece, and this year the Environment Ministry has approved the felling of around 17,000 fewer firs than last year, figures show.

Last year, 124,976 fir trees were cut down in the country, and in 2014 the number was 153,728. This shows a marked reduction from before the crisis, when the number of Christmas trees harvested came to above 200,000 a year on average.

The majority of the Christmas trees sold (85,935) last year came from cultivated forests around the country and the remainder from private farms.

And see the comments below for more.

Troikarchs continue to ramp up heat on Greece


No extra help for pensioners, they declare, even though a series of more than ten pension cuts have pushed half of elderly Greek below the poverty line,

From Kathimerini:

The institutions involved in Greece’s aid program have issued a “critical” report assessing whether unilateral measures announced by Athens are compatible with its bailout obligations, a German Finance Ministry spokesman said on Friday.

“The report is preliminary and it is quite critical,” spokesman Dennis Kolberg said, adding that the German government would evaluate the content in detail next week.

Germany had asked the institutions involved in Greece’s aid program on Wednesday to assess whether a planned pre-Christmas payout to poor pensioners was compatible with Greece’s bailout obligations.

More from Reuters:

Under Greece’s latest bailout, Athens can spend more on social programs if it exceeds its fiscal targets, provided it consults its creditors first. Earlier this year, Greek lawmakers approved a social justice bill providing health insurance to vulnerable citizens and offering jobs for the unemployed.

But political experts say the bonus was calculated to garner public support ahead of a big showdown with Greece’s emergency lenders, the European Union and International Monetary Fund.

>Snip<

Almost a dozen pension cuts have pushed nearly half of Greece’s elderly to below the poverty line with income of less than 665 euros a month. After rent, utility bills and health care, they barely make ends meet.

Troikarchs demand still more austerity from Spain


Spain, one of the European nations hardest hit by the Wall Street-created Great Recession, must apply more austeirty, declared the International Monetary Fund, one of the three pillars of the troika overseeing loans to the most-afflicted European nations.

Austerity, of course, means yet more draconian measures inflicted on those least able to afford them, and n the case of Spain,, mandated measures include yet more cuts to education and continuation of hikes in valued-added [sales] taxes, that most regressive of all measures of mining the populace for wealth.

From El País:

The International Monetary Fund (IMF) has called on Spain to raise reduced rates of value-added tax (VAT), special taxes and environmental levies, including those on fuel. What’s more, it is calling on the government to look into the efficiency of spending on education and health. The aim of all of these changes is to bring down the deficit and public debt, the size of which, says the global organization, is leaving the Spanish economy “highly vulnerable to external disturbances.”

“We are not suggesting austerity,” said Andrea Shaechter, the IMF economist in charge of monitoring the progress of the Spanish economy, at a press conference at the Bank of Spain on Tuesday. “The adjustment can be gradual and be carried out via tax hikes,” he added, using the example of sales tax. “Compared to the rest of Europe, there is a large margin in terms of the reduced rates of Value Added Tax [in Spain], such as the rate collected by restaurants.”

In its analysis of the Spanish economy, the institution headed up by Christine Lagarde says that the country’s public deficit could end up coming in above original forecasts. “Immediate attention should be focused on restarting a gradual fiscal consolidation with the aim of setting the high volume of public debt on a steady descending course,” the IMF concludes.

The way to do this, according to the IMF, is through tax rises. “Spain can allow itself a rise in revenues,” the report argues. “By gradually reducing the number of VAT exemptions, the amount it collects would approach those of other EU countries. What’s more, and especially in these times of low energy prices, there is room to raise special taxes and environmental rates, as well as dealing with the inefficiencies and differentiated treatment of the tax system,” it argues. The IMF believes that this would see the tax burden pass from work to consumption, which would help growth.