Category Archives: Wealth

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.

Brit paper exposes possibly illegal Trump tax dodge


The London Telegraph lobbed a bombshell at The Donald today, reporting that he took a $50 million investment from Iceland investors, then subsequently signed off on documents that misrepresented the funds as a loan — thus evading $20 million in New York real estate taxes.

When the newspaper showed the documents to tax experts, they alleged “the deal amounted to fraud.”

From the London Telegraph:

The allegations centre on Mr Trump’s business alliance with Bayrock Group, the property company that was building Trump SoHo, the mogul’s prized New York building  – as well as two other projects to which he had licensed his name.

In 2007 Bayrock struck a deal with FL Group, an Icelandic company that had agreed to invest $50 million in four of Bayrock’s subsidiary partnerships. However, the deal was later relabeled as a loan.

In New York, the sale of a stake in a partnership would make the existing partners liable to pay more than 40 per cent in tax on their ‘gain’, based on the highest tax rate.

However, if the investment is classified as a loan no tax would be payable.

Former employees of Bayrock have alleged in a case against the company that the deal was intended to fraudulently evade some $20 million in tax through a disguised sale of partnership interests.

Map of the day: Metro area income changes


And they’re mostly not looking very good.

From America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas[PDF] a new report from the Pew Research Center:

BLOG Income

Tape proves Rousseff ouster really was a coup


Anyone with the slightest doubt that the impeachment of Brazilian President Dilma Rousseff is anything other than a coup should be disabused of their credulity by events coming out of that Latin American nation today.

The scenario unfolding in Brasilia has elements of the Nixonian [tapes], touched with good old-fashioned corruption.

We open with the Independent:

Brazil’s interim leader Michel Temer is facing his first full-blown political crisis following the release of tape recordings seemingly showing that the suspension two weeks ago of President Dilma Rousseff was the result less of legitimate constitutional complaints and more of a plot.

After a day of frantic speculation in the capital, Brasilia, the country’s barely installed planning minister and top Temer ally, Romero Juca, announced he was temporarily stepping aside after admitting earlier in the day that his was one of two voices heard on the tape.

>snip<

Mr Temer became interim president of Latin America’s largest economy earlier this month after the upper chamber of the National Congress voted to suspend Ms Rousseff and begin an impeachment trial against her on charges she fiddled the nation’s books to paper over a dire budget deficit.  She and her allies contended however that she was in fact a victim of a “coup”.

The bomb was dropped on the Temer team early Monday when one of Brazil’s leading papers, the Folha de São Paulo, released chunks of a 75-minute conversation from early March between Mr Juca, who was then a Senator, and Sergio Machado, also a former senator and the head of a state oil company.  Who made the tape and why is not clear.

Al Jazeera English examines the timing and identifies the suspected Taper, whose motivations weren’t exactly Nixonian:

The scandal threatens Temer only 11 days after taking power from Rousseff, whom the Senate suspended as president on May 12 at the start of an impeachment trial on charges of breaking government accounting rules.

The Folha newspaper released what it said were recordings of conversations in March between Juca and Sergio Machado, a former oil executive.

The recordings were allegedly made secretly by Machado who, like Juca, is the target of an investigation into massive embezzlement centred on state oil company Petrobras.

In the conversations, Juca is heard calling for a “national pact” that he appears to suggest would stop the investigation, known as Operation Car Wash, in which dozens of top-ranking politicians from a variety of parties, as well as business executives, have been charged or already convicted for involvement in the Petrobras scheme.

MercoPress covers embarrassment:

Juca’s decision to take a leave from his post to defend himself is a huge blow for Interim President Michel Temer, who counted on the experienced senator to secure legislative support for key economic measures and reforms.

The new scandal also raises fears of further political instability in Brazil less than two weeks after President Dilma Rousseff was suspended to stand trial in the Senate for allegedly breaking fiscal laws.

>snip<

In recorded comments made before Rousseff was suspended and published by newspaper Folha de S. Paulo on Monday, Juca told an ally he agreed on the need for a “national pact” to circumscribe the probe known as “Operation Car Wash.”

Asked for help by a friend and former senator under investigation in the probe, Jucá replied, “The government has to be changed in order to stop this bleeding.”

There’s a whole lot more after the jump. . . Continue reading

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].