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Posts tagged ‘Economy of Greece’

Why Bank Bail in and Bail out Wont Work. Case study Iceland and Greece

By: Sam_Chee_Kong

As  most of us can remember that Iceland was the first country that went down  during the last Global Financial Crisis in 2008. During that time Iceland had  done something remarkable and that is during the five years prior to the crisis,  managed to transform its economy from a fishing industry to a mega hedge fund  country. Many of its citizens left their traditional trade which is fishing to  become fund managers and salesman. As a result Iceland’s banking assets  (physical assets + Loans + Reserves + Investment securities) grown to more than  10x its GDP of $14 billion.  With such  high leverage, when the financial crisis struck it is unable to defend its  economy and hence its house of cards collapsed.


The  purpose of this article is a post-event analysis of the performance of the Icelandic  economy that refuses a bailout as compared to Greece which went for a bailout  with the injection of funds from Troika. To simplify matters, we shall coin the bail-in and bail-out as (BIBO) for  short. Of course in the short term it helped stabilized the Greek economy for a  while but we want to know to what extent it had transformed the Greek economy  in the long run with the accompanying terms and conditions and austerity  measures. In this article we shall compare the performance of both the  economies of Iceland and Greece with the economic indicators or metrics below  from the year 2002 to the present. We believed we have been fed with too much  toxics by the mainstream medias which are also own by them that capitalized on the age old investment axiom of good-to-good……………………..

full article at source: http://www.marketoracle.co.uk/Article39892.html

Don’t piss down my back and tell me it’s raining!

By Thomas Clarke

A finance ministry draft shows that Berlin is preparing a fresh bail-out to stabilise the Greek economy and stem EMU-wide contagion after a return to the drachma, should the country reject EU austerity demands. The funds would come from Europe’s rescue machinery but costs would be shared among all 27 EU members – not just the eurozone – on the grounds “that Greece has a right to Brussels crisis funds, like any other member state with its own currency”. The scheme aims to contain fallout from a Greek exit and “limit the losses of the European Central Bank” on the country’s bonds.’

The Big money men arranged to have the last government taken out in order to put in the new face  of so called change ,Not one red cent more to the Banks, Labours way or no way!  But what did we really get ??  Twiddle dumb and twiddle Dee political musical chairs as foretold by myself . One political party loses in the general election the other parties gets in ,The policies of the first party are still been carried out by Faceless Bureaucrats who owe their alliance to the people who got them their vastly overpaid salaries .All of the main political parties in Ireland are bought and paid for! Just look at my posting (Meet the real Taoiseach of Ireland “Peter Sutherland) the financiers have infected and infested Irish politics over the past 70 years and no one gets into high office in Ireland without the help from these unelected puppet masters. The political system is totally corrupt the party system is infested by people who are out to hold on to power and rule out change of any kind within the established system!

We the Irish voters are been warned we will be left out in the cold and will not be able to get any financial backing ,funds, or loans from anybody(hence the labour parties poster using the word “Stability”) unless we say yes in the coming referendum. This is now proven to be total hogwash. This treaty will only create instability by legally obliging any Irish government to impose even harsher austerity on our people in order to pay the interest on ever rising debts an unelected autocratic ECB financial dictatorship will accumulate


Don’t piss down my back and tell me it’s raining!

Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months

By: Nadeem_Walayat

This analysis continues on from my last articlein light of the recent French and Greek elections where voters rejected economic austerity in favour of money printing Inflation stealth debt default as politically an smoke and mirrors Inflationary depression is being seen as far more palatable for populations than a deflationary depression slow motion economic collapse. However to be able to print money inline with the true state of the respective  competitiveness of euro-zone economies, then these countries governments have no choice but to exit the euro-zone, or be forced out as they one by one fail to follow through on agreed austerity measures.

Greece Slow Motion Economic Collapse in Progress

What may be lost in the noise that is the mainstream press is the fact that Greece has not been in a recession or even a depression, Greece has been in a state of slow motion economic collapse on the scale of past economic collapses such as that of Argentina but so far without the ability to default, devalue and inflate.

As the below graph illustrates that following the financial crisis of 2008, Greece had been following a similar economic trend trajectory to that of most western economies including that of the UK, US and Germany, however the real crisis began in late 2009 when the economic recovery from the pit of the Great Recession of 2008-2009 evaporated and the Greek economy began a slow motion collapse that has  so far seen Greek GDP in real terms contract by 16% since the 2008 peak, with no end in sight Unlike the V shape of the more regular debt default economic collapses such as that of Argentina’s of 2001 and more recently Iceland.

full article at source: http://www.marketoracle.co.uk/Article34625.html


Thoughts from the front line

By John Mauldin

Sarkozy: “Problem Solved”, Or… Germany to Sarkozy: “It’s Not Over”

Greece  is having an “orderly” default. The taxpayers of Europe are in theory going to lend €130 billion to Greece to pay back €100 billion in Greek debt that is owed to private lenders. Greece has to pass several difficult tests in order to get the money. €100 billion of debt to private lenders will be written off. Thus the net effect will be that they owe €30 billion more. How does this help Greece, except that they get €30 billion more they cannot pay?

The”new” debt is already trading in the market, even though it has not actually been issued. (Don’t bother traders with messy details, just do the deal.) This page from Bloomberg is just too delicious not to print, sent to me courtesy of Dan Greenhouse of BTIG. It shows the new Greek bonds trading at over a 71-79%discount, depending on the length of maturity.

Note this is AFTER the 53% haircut already imposed. That reads to me like the market value of original Greek debt is now between 12 and 14% of the original face value. Didn’t I write in this letter early last year that Greek debt would ultimately get a 90% haircut? Let me suggest to my critics that what was pessimistic back then may prove to have been optimistic at the end of the day.

Full article at source:http://www.johnmauldin.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline

So, the Greece Deal is done – at least mostly done

By Constantin Gurdgiev

So, the Greece Deal is done – at least mostly done – following riots and Parliamentary approval. What now?

Well, nothing.

First, Germany, the Netherlands and Finland – the only three still fully solvent economies of the euro area – will huff and puff through the next week or so, in the end approving the new deal. The final tally for this latest bailout, to be set by the euro group, will come in at €130-billion. Or, or it might come in at €145-billion to account for deterioration in the Greek economy from last July through December, 2011. It might even include few billion more to cover losses on continued recession, plus riots, since the New Year. Very close to the March deadline, Greece will receive the vital €14.5-billion in funds needed to repay its bondholders, thus averting or delaying the immediate threat of default

full article at source: http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/international-experts/greece-the-jig-is-just-about-up/article2337889/

Austerity is killing the economy in Greece!

March 25 - Greece Independence Day

Image by Aster-oid via Flickr

Wednesday, January 11, 2012 – by Staff Report

In Greece, fears that austerity is killing the economy … Deeply indebted and nearly bankrupt, this Mediterranean nation was forced to adopt tough austerity measures to slash its deficit and secure an international bailout. But as Greece’s economy slides into free fall, critics are scanning the devastated landscape here and asking a probing question: Does austerity really work? Unemployment has surged to 18.8 percent from 13.3 percent only a year ago. Overburdened public hospitals are facing acute shortages of everything from syringes to bandages because of budget cuts, with hiring freezes forcing the mothballing of operating rooms even as more unemployed are relying on the public health system. Rates of homelessness, suicide, crime and HIV cases from intravenous drug use are jumping. “Conditions have deteriorated so dramatically that doctors in this country now believe that the Greek crisis is no longer just a financial crisis but a humanitarian crisis,” said Dimitris Varnavas, the president of the Federation of Greek Hospital Doctors’ Unions. – Washington Post

Dominant Social Theme: Greece needs to “get its act together.” But will the pain be too much to bear?

Free-Market Analysis: The almost genocidal nature of modern “austerity” as interpreted by the current crop of European one-world technocrats has come in for some mild criticism in the pages of the Washington Post.

Surprise! It must be really bad in Greece for this august, mainstream mouthpiece to publish such an article. Look on it as a limited hangout of sorts. With the Greek economy continuing to collapse as suicides pile up, a responsible mainstream paper must provide some sort of realistic reporting. And so it does.

full article at source:http://www.thedailybell.com/3482/Post-Admits-Austerity-Killing-Greece



There is no doubt that this is the case in Ireland and the Irish Government, because of their incompetence  are guilty of allowing this depression  to continue longer than it should. This belligerence on their part is costing the citizens dearly. They are no more  than stooges for  the new landlords in Berlin .Austerity without  a currency devaluation is just plain stupid!

Merkozy continuing to ignore Greek realities

Today’s meeting between Sarkozy and Merkel is being framed in the context of continued pressures across the euro area (see report on the meeting here). More ominously – within the context of the euro area leadership duet ignoring the latests warning signs for Greece.
Per Der Spiegel report, IMF has changed its analysis of the Greek rescue package agreed in July 2011 in-line with IMF changes in forecasts for Greek economy in the latest programme review in December 2011. Specifically, IMF lowered its forecast for growth from -3% to -6% GDP.
Der Spiegel cites IMF internal memo in claiming that the Fund is viewing existent Greek programme (including to 50% ‘voluntary’ haircut on Greek bonds currently under negotiations) as insufficient to stabilize the Greek economy and fiscal situation

full article at source:http://trueeconomics.blogspot.com/2012/01/912012-week-opener-merkozy-continuing.html

Greece and its decision tree to decide what happens next

Greece and its lenders are locked in discussion. The
“Troika” of lenders – the European Union, International Monetary Fund and
European Central Bank – say Greece must take more painful steps to cut its
borrowing. But Greece faces riots and mass protests on the streets of Athens.
The government could lose its grip on parliament – only 155 of 300 MPs backed
the last round of austerity in June. At stake is the next 8bn euro tranche of
bailout money, which Greece desperately needs to avoid total crisis. Starting
from the top, follow the decision tree to decide what happens next.


  • Does Greece meet the Troika’s austerity demands?
    YES or NO
  • Recession deepens: Greece has to
    cut its borrowing to a target set by the Troika. But austerity deepens Greece’s
    recession. Along with mass tax evasion and strikes by tax collectors, this has
    already made Greece over-shoot its target twice.
    Does Greece miss its borrowing target again?

    NO YES

  • Impasse: Greece has failed to
    deliver promised austerity and the Troika has threatened to stop releasing
    bailout loans. But without the cash, Greece faces a crisis.
    Does the Troika release the bailout money?

    YES NO

  • Greece has a funding shortfall:
    Despite the austerity, Greece still needs more cash. The Troika can lend it, or
    else Greece has to make more cuts.
    Should the Troika…

    demand more austerity?
    or give another bailout?

  • Greece has a cash crisis: The
    government does not have enough money to pay for public services and must choose
    which payments to skip.
    Does Greece stop repaying its


  • Austerity succeeds: After years
    of painful cuts Greece does not need to borrow any more to fund government
    spending. But Greece still has huge debts to repay.
    Does Greece renegotiate its debts?

    YES NO

  • The Troika blinked: Greece has
    won the stand-off. The Troika is evidently too afraid of the conse- quences to
    let Greece go bust.
    Does Greece continue with

    YES or NO

  • Banking crisis: Default leaves
    Greek banks bust and risks a Europe-wide banking crisis.
    Does the Troika bail Greece

    YES or NO

  • Severe cash crisis: The
    government cannot make basic payments like employee wages, benefits and public
    services, and risks major civil unrest.
  • Greek banks collapse. Even after halting
    debt repayments, the government still can not pay all its bills.
  • Economic
    Speculation may rise that Greece will leave the euro, prompting a
    run on the Greek banks.
    Does Greece exit euro?

    NO YES

    Greece forces its lenders to write off most of its debts,
    which probably bankrupts the Greek banks (its biggest lenders), meaning they
    must be nationalised. Greece still may face years of low growth as its economy
    is uncompetitive inside the euro.
    Greece may face years of grindingly low growth as its economy
    is uncompetitive inside the euro. In addition, the government probably has to
    pass even more growth-sapping austerity to cover the cost of its debt
    Greece has its lenders over a barrel, earning kudos with the
    Greek public, and allowing it to slow down painful austerity. But Italy and
    other high-debt countries may copy Greek tactics. Germany – which is now seen as
    on the hook for bailing out the entire eurozone – may find it much more
    expensive to borrow, and may consider leaving the euro.
    The Greek economy may face total collapse, with banks closed
    and the government unable to pay for basic public services. This is likely to
    cause massive civil unrest and a collapse of the government. Greece has already
    seen rioting and the takeover of government offices. The CIA has warned of a
    possible military coup.
    Switching back to the drachma leads to a huge financial and
    legal mess. Italy and Spain may be unable to borrow and face a run on their
    banks amid fears they may also leave the euro. Major European banks could
    collapse sparking another global financial crisis. In Greece the drachma is
    likely to plummet in value, boosting the economy, but causing painfully high

source: http://www.bbc.co.uk/news/business-14977728


Greece is facing an economic and social disaster

Greece is facing an economic and social disaster, the result of its so-called rescue by the “troika” of the EU, the International Monetary Fund and the European Central Bank. Greece must change course to avoid a grim future for its people: it must default on its debt and exit the eurozone.

Consider first the scale of the crisis. After contracting in 2009 and 2010, GDP fell by a further 7.3% in the second quarter of 2011. Unemployment is approaching 900,000 and is projected to exceed 1.2 million, in a population of 11 million. These are figures reminiscent of the Great Depression of the 1930s.

The causes clearly lie with the programme of the troika. In early 2010 Greece was effectively bankrupt. In its wisdom, the troika imposed policies of severe austerity and deregulation consistent with the neoliberal ideology of the EU. Quite predictably, demand collapsed and banking credit became scarce, with the result that the core of the Greek economy was crushed.

full article at source: http://www.guardian.co.uk/commentisfree/2011/sep/19/greece-must-default-and-quit-euro

The Great Global Debt Depression: It’s All Greek To Me

by Andrew Gavin Marshall

In late June of 2011, the Greek government passed another round of austerity measures,
ostensibly aimed at getting Greece “back on track” to economic progress, but in
reality, implementing a systematic program of ‘social genocide’ in the name of
servicing an endless and illegitimate debt to foreign banks. Right on cue,
protests and riots broke out in Athens against the draconian measures, and the
state moved in to do what states do best: oppress the people with riot police,
tear gas and bashing batons, leaving roughly 300 people injured.

Is Greece simply a case of a country full of lazy people who spent beyond their means and are now paying for their own decadence? Or, is there something much larger at stake
– and at play – here? Greece is, in fact, a microcosm of the global economy:
mired in excessive debt, economically ruined, increasingly politically
repressive and socially explosive. This report takes a look at the case of the
Greek debt crisis specifically, and places it within a wider global context.
The conclusion is clear: what happens in Greece will happen here.

This report examines the Greek crisis, as well as the larger global economic crisis,
including the origins of the housing bubble, the bailouts, the banks, and the
major actors and institutions which will come to dominate the stage over the
next decade in what will play out as ‘The Great Global Debt Depression.’

An Olympian Debt

With the global economic crisis rampaging throughout the world in 2008, Greece experienced major protests and riots at government reactions to the crisis. The
unpopularity of the government led to an election in which a Socialist
government came to power in October of 2009 under the premise of promising an
injection of 3 billion euros in order to revive the Greek economy.[1] When the
government came to power, they inherited a debt that was double that which the
previous government had disclosed. This prompted Greece’s entry into a major
debt crisis, as the debt was roughly 127% of Greece’s GDP in 2009, and thus,
the costs of borrowing rose exponentially. In April of 2010, Greece had to seek a bailout by the EU and the IMF in order to pay the interest on its debt. However, by taking such a bailout from the EU and IMF, Greece ultimately incurred a larger long-term debt, as the money from these institutions simply added to the overall debt, and thus, actually increased eventual interest payments on that debt. Thus, we see the true nature of debt:
a financial form of slavery. Debt is designed in such a way that, like a fly
caught in a spider’s web, the more it struggles, the more entangled it gets;
the more it struggles to break free, the more it arouses the attention of the
spider, which quickly moves in to strike its prey – paralyzed – with its venom,
so that it may wrap the fly in its silk and eat it alive. Debt is the silk, the
people are the fly, and the spider is the large financial institutions – from
the banks to the IMF. The nature of debt is that one is never meant to be able
to escape it. Hence, the “solution” for Greece’s debt problem – according to
those who decide policy – is for Greece to acquire more debt. Of course, this
new debt is used to pay the interest on the old debt (note: it is not used to
pay OFF the old debt, just the interest on it). However, the effect this has is
that it increases the over-all debt of the nation, which leads to higher
interest payments and thus a greater cost of borrowing. This, ultimately, leads
to a need to continue borrowing in order to pay off the higher interest
payments, and thus, the cycle continues. For all the “bail outs” and aims at
addressing Greece’s debt, this prescription inevitably results in greater debt
levels than those which induced the debt crisis in the first place.

So why is this
the prescription?

Not only does this prescription incur more debt to pay interest on old debt, but the process of borrowing and “consolidating” debt has devastating social and political
consequences. For example, in the case of Greece, in order to receive loans
from the IMF and EU, Greece was forced to impose “fiscal austerity measures.”
This blatantly ambiguous economic nomenclature of “fiscal austerity” is in fact
more accurately described in real human terms as “social genocide.” Why is this

FiscalAusterity’ means that the state – in this case, Greece – must engage in “fiscal
consolidation.” In economic parlance, this implies that the state must cut
spending and increase taxes in order to “service” its debt by reducing its
annual deficit. Thus, the ‘conditions’ for receiving a loan demand “fiscal
austerity” measures being implemented by the debtor nation. This is supposedly
a way for the lender to ensure that their loans are met with appropriate
measures to deal with the debt. The objective, purportedly, is to reduce
expenditure (spending) and increase revenue (income), allowing for more money
to pay off the debt. However, as with most economic concepts, the reality is
far different than the theoretical implications of “fiscal austerity.”

In fact,‘fiscal austerity’ is a state-implemented program of social destruction, or
‘social genocide’. Such austerity measures include cutting social spending,
which means no more health care, education, social services, welfare, pensions,
etc. This directly implies a massive wave of layoffs from the public sector, as
those who worked in health care, education, social services, etc., have their
jobs eliminated. This, naturally, creates a massive growth in poverty rates,
with the jobless and homeless rates climbing dramatically. Simultaneously, of
course, taxes are raised drastically, so that in a social situation in which
the middle and lower classes are increasingly impoverished, they are then
over-taxed. This creates a further drain of wealth, and consumption levels go
down, further driving production levels downward, and (local) private
businesses cannot compete with foreign multinational conglomerates, and so
businesses close and more lay-offs take place. After all, without a market for
consumption, there is no demand for production. In a country such as Greece,
where the percentage of people in the employ of the state is roughly 25%, these
measures are particularly devastating.Naturally, in such situations, the masses of people – those who are doomed to suffer most – are left greatly impoverished and the middle classes essentially vanish, and are absorbed into the lower class. As social services vanish when they are needed most, life expectancy rates decrease. With few jobs and massive
unemployment, many are left to choose between buying food or medicine, if those
are even options. Crime rates naturally increase in such situations, as
desperate conditions breed desperate actions. This creates, especially among
the educated youth who graduate into a jobless market, a ‘poverty of expectations,’
having grown up with particular expectations of what they would have in terms
of opportunities, which then vanish quite suddenly. This results in enormous
social stress, and often, social unrest: protests, riots, rebellion, and even
revolution in extreme circumstances. These are exactly the conditions that led
to the uprising in Egypt.

The reflexive action of states, therefore, is to move in to repress – most often quite
violently – protests and demonstrations. The aim here is to break the will of
the people. Thus, the more violent and brutal the repression, the more likely
it is that the people may succumb to the state and consent – even if passively
– to their social conditions. However, as the state becomes more repressive,
this often breeds a more reactive and radical resistance. When the state
oppresses 500 people one day, 5,000 may show up the next. This requires, from
the view of the state, an exponentially increased rate of oppression. The risk
in this strategy is that the state may overstep itself and the people may
become massively mobilized and intensely radicalized and overthrow – or at
least overcome – the power of the state. In such situations, the political
leadership is often either urged by a foreign power to leave (such as in the
case of Egypt’s Mubarak), or flees of their own will (such as in Argentina), in
order to prevent a true revolution from taking place. So, while the strategy
holds enormous risk, it is often employed because it also contains possible
reward: that the state may succeed in destroying the will of the people to
resist, and they may subside to the will of the state and thereby consent to
their new conditions of social genocide.

Social genocide is a slow, drawn-out and incremental process. Its effects are felt by poor
children first, as they are those who need health care and social services more
than any other, and are left hungry and unable to go to school or work. They
are the ‘forgotten’ of society, and they suffer deeply as such. The
reverberations, however, echo throughout the whole of society. The rich get
richer and the poor get poorer, while the middle class is absorbed into
poverty.The rich get richer because through economic crises, they consolidate their businesses and receive tax breaks and incentives from the state (as well as often direct
infusions of cash investments – bailouts – from the state), purportedly to
increase private capital and production. This aspect of “fiscal austerity” is
undertaken in the wider context of what is referred to as “Structural

This term refers to the loans from the World Bank and IMF that began in the late 1970s
and early 1980s in their lending to ‘Third World’ nations in the midst of the
1980s debt crisis. Referred to as “Structural Adjustment Programs,” (SAPs) any
nation wanting a loan from the World Bank or IMF needed to sign a SAP, which
set out a long list of ‘conditionalities’ for the loan. These conditions
included, principally, “fiscal austerity measures” – cutting social spending
and raising taxes – but also a variety of other measures: liberalization of
markets (eliminating any trade barriers, subsidies, tariffs, etc.), supposedly
to encourage foreign investment which it was theorized would increase revenue
to pay off the debt and revive the economy; privatization (privatizing all
state-owned industries), in order to cut state spending and encourage foreign
direct investment (FDI), which again – in theory – would create revenue and
reduce debt; currency devaluation (which would make foreign dollars buy more
for less), again, under the aegis of encouraging investment by making it
cheaper for foreign companies to buy assets within the country.However, the
effects that these ‘structural adjustment programs’ had were devastating.
Liberalizing markets would eliminate subsidies and protections which were
desperately needed in order for these ‘developing’ nations to compete with the
industrialized powers of America and Europe (who, in a twisted irony, heavily
subsidize their agriculture in order to make it cheaper to foreign markets).
For example, a small country in Africa which was dependent upon a particular
agricultural export had heavily subsidized this commodity, (which keeps the
price low and thus increases its demand as an exported commodity), then was
ordered by the IMF and World Bank to eliminate the subsidy. The effect was that
foreign agricultural imports, say from the United States or Europe, were
cheaper not only in the international market, but also in the nation’s domestic
market. Thus, grains imported from America would be cheaper than those grown in
neighbouring fields. The effect this had in an increasingly-impoverished nation
was that they would become dependent upon foreign imports for food and
agriculture (as well as other commodities), while the domestic industries would
suffer and be bought out by foreign multinational corporations, thus increasing
poverty, as many of these nations were heavily dependent upon their
agricultural sectors as they were often still largely rural societies in some
respects. This would accelerate urbanization and urban poverty, as people leave
the countryside and head to the cities looking for work, where there was none.

Please read full article here at source: http://www.globalresearch.ca/index.php?context=va&aid=25648

***Andrew Gavin Marshall is an independent researcher and writer based
in Montreal, Canada, writing on a number of social, political, economic, and
historical issues. He is co-editor of the book, “The Global Economic Crisis:
The Great Depression of the XXI Century.” His website is http://www.andrewgavinmarshall.com

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