[sydney3000]

recession we had to have, on 30 January 2010 - 11:26 PM, said:

George Papandreou, the Greek prime minister, has announced wage freezes for all civil servants on more than €2,000 (£1,700) a month — but promised increases in line with inflation to everyone else.

I like George Papandreou. He has balls. I like balls.

[Bernard L. Madoff]

Reducing deficits involves raising taxes and cutting spending*. Weak leaders equate this to wage freezes.

So you like weak interventionist policies with a likelihood of deflation AND scrotums?

Anyone here remember the attempted 'wage freezes' of the 70s?

What did they achieve? Industrial stoppages, strikes and f*ck all.

George Papandreou is the President of Socialist International . This should be interesting - watching a commie balance a budget.

*on discretionary capital items and wasteful non-productive departments/operations.

[boz]

sydney3000, on 31 January 2010 - 12:05 AM, said:

I like George Papandreou. He has balls. I like balls.

With a 12% deficit, unemployment soaring and gdp shrinking the wage freeze is far from enough to contain costs. Also I am pretty sure prices are or will drop in greece and that will make those wage freeze not that unpopular. But the good thing is that they have to stand up against the unions in revising previos signed contracts, the real alternative is just no money and more unemployment.
In the 70's was different as inflation was much higher then

[Bernard L. Madoff]

An outstanding piece on Greece and alternative outcomes....
http://www.zerohedge...arting-dominoes

and

http://www.zerohedge...d-flight-safety

[Bernard L. Madoff]

http://www.zerohedge...rizing-what-ifs

[Bernard L. Madoff]

http://www.telegraph...altogether.html

Quote

Should Germany bail out Club Med or leave the euro altogether?

Germany faces a terrible dilemma. Either Europe's paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union, or the euro will start to unravel, and with it Germany's strategic investment in the post-war order.

The spike in yields on 10-year Greek bonds to 400 basis points above German Bunds has been shockingly swift – a warning to Britain, too, that markets can suddenly strike any country that takes creditors for granted.

We can argue over whether Greece, Portugal, or Spain are at risk of being forced out of the euro. But there is another nagging question: whether events will cause Germany and its satellites to withdraw, bequeathing the legal carcass of EMU to the Club Med bloc.

This is the only break-up scenario that makes much sense. A German exit would allow Club Med to uphold contracts in euros and devalue with least havoc to internal debt markets. The German bloc would enjoy a windfall gain. The D-Mark II would be stronger. Borrowing costs would fall. The North-South gap in competitiveness could be bridged with less disruption for both sides....

[savagegoose]

christ the 1st little disaster the whole world trade stability is down the poop hole. man if euro goes the way of the dodo , that leaves only the USD to handle world trade, or the gold standard?

This post has been edited by savagegoose: 03 February 2010 - 06:31 AM

[Darth Vader]

savagegoose, on 03 February 2010 - 06:30 AM, said:

christ the 1st little disaster the whole world trade stability is down the poop hole. man if euro goes the way of the dodo , that leaves only the USD to handle world trade, or the gold standard?

I have a terrible feeling that they guy's and gal's in power are even more clueless than you or i. I think i was happier when i thought it was all a one world currency conspiricy.

[Bernard L. Madoff]

My 2c worth is that I support the supposition.

If I was a German, I'd be asking the Chancellor and Bundestag why we (The FDR) are carrying these basket cases when WE are the economic powerhouse (and to a lesser extent France) of the EU.

I see widespread protests etc in Germany in 2010.

Deutsche Mark Longs anyone?

[recession we had to have]

Linket

Greek PM orders tough austerity measures

PHILIPPE PERDRIAU
February 3, 2010 - 9:24PM The Greek prime minister ordered a public salary freeze, a higher retirement age and a hike in petrol prices in a desperate bid to tame a debt crisis ahead of a verdict Wednesday on his efforts from the EU.

Socialist leader George Papandreou urged political rivals to back his crisis budget as he launched a new bid to reassure the international finance community. The scope of Greece's debt and its 12.7 percent public deficit have shaken the euro and put pressure on Greek sovereign bonds.

"We must act in an imminent and efficient manner and it is for that reason that I called on the political parties to support this national effort," he said in a nationally televised address late Tuesday.

"It is a national duty not to leave the country on the edge of an abyss."

The government has already ordered major cuts in public spending and vowed to clampdown on corruption which Papandreou has admitted is "rampant", waste and tax avoidance.

Among the new measures was a total freeze on the salaries of public servants, a rise in the legal retirement age and a higher petrol tax. He gave no details on the retirement age or tax rises.

The Greek plan sent to the European Union only foresaw a freeze on wages above 2,000 euros a month and the same age for men and women retiring.

The European Commission will on Wednesday give its verdict on Papandreou's measures to cut debt estimated at 294 billion euros (412 billion US dollars) and to cut the deficit to 8.7 of gross domestic product this year.

Under EU rules, government deficits have to be below three percent to be a member of the euro zone.

European Commission chief Jose Manuel Barroso said on Tuesday that Greece's programme was "feasible but subject to risks". He said the commission would recommend that the EU endorse the Greek plans, though keep the country under "intense surveillance".

"A deficit of such a magnitude must be decisively corrected. Moreover the government debt in Greece is excessively high," he said.

Right-wing opposition chief Antonis Samaras and the far-right indicated they would support the measures, but the radical left and the communists opposed them, saying they "serve the speculators".

The Greek media called the new austerity measures "hardline".

The pro-business Kathimerini daily said Papandreou had been forced to act by the "asphyxiating pressure of the markets". The left-wing Ethnos daily ran a front page headline saying: "Shock Measures Ordered by Brussels".

EU approval of the budget would help ease market pressure on Greece, which has grown drastically amid investor doubts about the government's ability to tackle the debt.

The yield gap or spread between Greek and German bonds, which are considered the safest in the eurozone, last week hit the highest levels in a decade.

Greece is among a growing number of EU countries hit by growing debt and Papandreou expressed support on Tuesday for the idea of a eurozone government bond.

"Eurobonds could be used to lend member states at a lower spread, a lower interest rate compared to the international market, particularly in this environment of speculation," he said at a conference in Athens.

"When Greece talks about eurobonds it unfortunately works negatively, it is seen as a weakness. The issue of the bonds will hopefully happen," he said.

At the conference, Nobel-winning economist Joseph Stiglitz, a former chief economist at the World Bank and an adviser to several governments hit by the economic crisis, called for a system to aid debt-hit EU states.

"(There is) a lack of European macroeconomic structure to help countries with particular difficulties," he said, noting that in the United States the national budget can be used to help states in trouble.

While the European Central Bank regularly lends money to national banks at interest rates lower than the international market, the same option is not available to governments, Stiglitz said.

[Chimerica]

http://www.telegraph...d-Portugal.html

Quote

Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal

The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
By Ambrose Evans-Pritchard
Published: 7:29PM GMT 04 Feb 2010

Spain is going through a "deep crisis" in its housing sector. Photo: AFP Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”

Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.

More on link.

[Bernard L. Madoff]

Soveraign Debt Defaults

Highest Default Probabilities
Entity Name Mid Spread CPD (%)

Venezuela 1054.04 51.62

Argentina 1056.80 50.39

Pakistan 870.48 45.19

Ukraine 913.93 43.81

Iraq 477.50 34.52

Iceland 636.06 34.46

Dubai/Emirate of 525.37 30.57

Greece 426.87 30.23

Latvia, Republic of 489.57 28.35

California/State of 328.97 25.27
----------------------------------------------------------------
Sovereign Wideners
Entity Name 5 Yr Mid Change (%) Change (bps) CPD (%)

United States of America 57.42 +22.93 +10.71 4.89

France 64.59 +20.95 +11.19 5.52

Germany 45.76 +20.89 +7.91 3.95

Australia 64.66 +20.56 +11.03 5.52

New Zealand 75.65 +18.88 +12.01 6.42

Netherlands 42.50 +17.79 +6.42 3.69

Portugal 229.56 +16.99 +33.34 18.12

Italy 152.30 +16.26 +21.30 12.45


http://www.cmavision...t-data#riskiest

[boz]

yesterday Trichet had an interesting point:

Quote

Trichet said the “solidity” of the euro area “is not necessarily very well known” and its situation compares “very flatteringly with a number of other industrialized countries.” He said that according to the International Monetary Fund, in 2010 the average deficit for the entire euro region should be around 6 percent of GDP.

“Can I mention what it is for other major industrialized countries,” Trichet said. “The U.S., a little bit more than 10 percent, Japan, a little more than 10 percent, and you can find out other industrialized countries that are even higher than 10 percent.”

link
then you get this article on newsweek

Quote

The Euro Zone Won’t Fail

Why crisis will only make it stronger.


By Stefan Theil | NEWSWEEK Published Feb 5, 2010 From the magazine issue dated Feb 15, 2010

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SPONSORED BY Speculators have begun betting on an early euro-zone exit by Greece, a politically corrupt, basket-case country that has long cooked its government-debt figures and now faces years of stagnation—if not deflation and depression—as it slashes public deficits and shrinks wages in an attempt to regain competitiveness. In a confidential paper leaked last month, the European Commission warned that "imbalances" between stronger and weaker euro states risk the very existence of the euro itself.

SUBSCRIBE Click Here to subscribe to NEWSWEEK and save up to 88% >> They are wrong. Currency unions don't collapse because weaker members leave them. Were Greece to start printing new drachmas, they would immediately plummet in value against the euro. A super-weak drachma would make Greek wines and vacations very cheap for foreigners, but that gain for Greek competitiveness would be more than offset by bank runs, rampant inflation, and the burden of having to pay back old euro-denominated debts and mortgages with a newly worthless currency. Even if Greece's inept political class decides to take the risk—not unthinkable, since it might be a way to shift blame to outsiders—it would not break the euro zone. The euro would hardly be less stable without Greece, or even without Spain and Portugal. (Together, the three make up only 18 percent of euro-zone GDP.) On the contrary, a euro centered on Germany, France, and a few of the more advanced Central European economies like Poland would make the union stronger, not weaker. The risk of this is not so much the result but the financial and political upheavals in getting there.

The euro zone would break up not when weaker members leave, but when stronger ones no longer see gains from the arrangement. Today, that cornerstone is Germany. Europe's largest economy has emerged from the crisis bruised but with comparatively healthy public finances and an economic model unquestioned by its people. With the German political class so thoroughly invested in the common currency—and German companies dominating Europe more than ever—that scenario seems highly unrealistic.

On the contrary, Germany is working hard to impose its monetary and fiscal discipline on the rest of Europe. At home, it already has a new constitutional amendment prohibiting deficits starting in 2016. Chancellor Angela Merkel vetoed EU bailouts of weaker economies, forcing countries like Latvia and Hungary to seek the tough love of the IMF. The Frankfurt-based European Central Bank, unlike America's Federal Reserve, has a strict inflation-fighting mandate and is prohibited from using monetary policy to jump-start the economy. It has pumped far less money into the EU economy than the Fed has done in the U.S., even at the cost of allowing the euro to rise against the dollar by 20 percent since the start of the crisis. ECB chief Jean-Claude Trichet has told Greece that it must reform on its own, and denied there would be a bailout. Now Merkel is pushing to install German Bundesbank chief Axel Weber to succeed Trichet when his term ends next year to make sure the ECB doesn't soften its course.

As the focus of the economic crisis shifts from the financial to the public sector, there will be more risk and pain. In Latvia, whose currency is pegged to the euro, slashed public spending has accelerated the country's path to depression; GDP is down 24 percent in the last two years. Ireland, which is paring back its deficit with across-the-board cuts in civil-servant salaries, has seen GDP slide by more than 8 percent in the same period. Back in Greece last week, farmers rioted against a planned freeze in their subsidies.

It's no accident that the countries with bubble and deficit problems have also lost labor competitiveness, especially within the euro zone. Ireland, Spain, and Greece have let their wages rise about 20 percent faster than Germany's since the euro's introduction. With Germany now so much more competitive, it has accumulated China-style trade surpluses with weaker euro-zone members. Without the currency safety valve, those countries will have to make deep wage cuts, along with tough product- and labor-market reforms that help raise productivity.

Working out these problems could leave Europe stronger as a political institution. Just as the Great Depression forced the U.S. to impose a tighter federalism, today's economic crisis will likely force Europe into a closer union. Already last week, the EU Commission began pushing reforms on Greece. Through the back door of an economic crisis, the euro zone might then get the kind of political governance that skeptics always warned was necessary for a currency union to work. At the end of the tunnel could be a more integrated Europe, reformed problem economies, and ultimately a more competitive Europe.

May be Trichet is right and the euro is solid and strong but not many know about it....

[sydney3000]

How does Germany leaving the Euro erase the debts of another nation? It doesn't.

If Germany left the Euro the entire EU would collapse. It doesn't take a bailout to fix the mess. It takes Greece (and all others) to become a proficient nation to fix the mess.

This post has been edited by sydney3000: 05 February 2010 - 10:36 PM

[boz]

sydney3000, on 05 February 2010 - 10:36 PM, said:

How does Germany leaving the Euro erase the debts of another nation? It doesn't.

If Germany left the Euro the entire EU would collapse. It doesn't take a bailout to fix the mess. It takes Greece (and all others) to become a proficient nation to fix the mess.

May be the difference bewteen australia and EU is that if a state over here get into debt trouble kevin or the PM at the time can choose to bail it out (probably same thing with US), this is even if some state is against it. In europe and EU any membar can veto any bailout, and EU central bank doesn't have pumping up growth as mandate but just inflation and economy stability

[Bernard L. Madoff]

Proficient? As in good/competent?

Whats competency as a nation (how do you define it?) got to do with balancing budgets, wage restraint and reducing trade deficits?

Germany has a recent history of marching on its neighbours (although getting defeated every time). In comparison I think cutting themselves off and resurrecting the DM is small bananas if a 30s depression unfolds.

On another point, lets see if the NPD can raise its membership from 7000 and win a seat in the Bundestag in 2013. It will be a good measure of public feeling. Loony right always do well in bad times.

[Bernard L. Madoff]

German, Italian, French and Eurozone GDP out next Friday evening.

ECB published monthly report on Thursday.

German trade balance, current account and CPI on Tuesday.

Might see some EURO yo yo action next week!

[wulfgar]

Quote

We can argue over whether Greece, Portugal, or Spain are at risk of being forced out of the euro.

Why? if they leave the Euro, they'll be more broke not less broke. Do think their resurrected national currencies will sell on the world market?

Or they're going to mysteriously conjure up enough gold for a currency? I think not?

This is a joke!

This post has been edited by wulfgar: 06 February 2010 - 11:04 AM

[spark]

(Not being an expert): Can't they just let the struggling countries leave the Euro, go back to their local currencies, and devalue them, like it was always done?

[savagegoose]

yeah i liked the bit about greece leaving the UE as being a good thing for the EU and bad for greece. sure makes for less temptations to try a dummy spit at any meetings. " ok bye dont let the door hit your ass on the way out, CUZ I NOW OWN YOUR ASS AND I DONT WANT IT DAMAGED. "


[MOD: I HAVE MERGED 3 EURO DEFAULT TOPICS INTO ONE]