Tag Archives: Financial Crisis

Greece under the yoke

English: Various Euro bills.

Reuters reported that:

Greece must surrender control of its budget policy to outside institutions if it cannot implement reforms attached to euro zone rescue measures, the German economy minister was quoted as saying on Sunday.

The fact that the German Economic Minister made this already credible statement indicates that Greece lacks control over its budget. The issue at hand is whether the European Union would exercise direct or indirect control over the Greek budget, not whether Greece would control its own budget.

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Berlusconi to walk like a Grecian pol?

Berlusconi, bloodied, but not yet out

It appear so:

Italy’s stock and bond markets endured a volatile session on Monday as Silvio Berlusconi was reported to have denied reports that he intended to resign as prime minister.

Fabrizio Cicchitto, head of the parliamentary group of Mr Berlusconi’s People of Liberty party, said in a statement that the prime minister had told him that “rumours of his resignation were baseless”.

Ansa news agency also quoted Mr Berlusconi as telling people close to him that the reports were not true. A page on Facebook under the name of the prime minister quoted him as dismissing the rumours.

Franco Bechis, deputy editor of Libero, a pro-Berlusconi newspaper, had said earlier on Monday that Mr Berlusconi would resign on Monday night or Tuesday. Mr Bechis later said on Twitter that the prime minister had decided after talking to his family in Milan to call a vote of confidence in his government on the basis of its mandate to pass reforms requested by the European Union.

A financial source close to the prime minister told the Financial Times that Mr Berlusconi intended to step down later on Monday.

The reasons for Berlusconi’s latest humiliation?

European efforts to solve a growing sovereign debt crisis have failed to quell market unease on the Continent, and the skepticism over Greece points to continued volatility this week.

Among fresh warning signs, Italy’s cost of borrowing has jumped to the highest rate since the country adopted the euro.

And:

The yield on 10-year Italian notes has surpassed that on Spanish debt by nearly a full percentage point, reaching 6.51 percent on Monday after leaders at a meeting last week of the Group of 20 nations failed to come up with details on how to stop the European crisis from spreading. The rising yield is troubling because once the interest rates on the debt of Greece and Portugal surpassed 7 percent they shot up far higher, requiring those countries to turn to outside sources of financing. Rates on their debt remain in double digits.

At the end of last month, Italy issued 3 billion euros worth of bonds at an interest rate of more than 6 percent, about 1.5 percentage points higher than it had had to pay as recently as the summer. The extra bond yields are adding as much as 3 billion euros (about $4.1 billion ) annually in additional interest payments, estimates Tobias Blattner, a former economist at the European Central Bank who is an economist at Daiwa Securities in London.

Analysts are concerned that if interest rates on Italian debt keep rising, the country may no longer be able to afford to borrow on the open markets and instead would have to turn to official lenders like the European Union or the International Monetary Fund.

The latest rate “is a warning,” said Mark McCormick, currency strategist at Brown Brothers Harriman. “Seven percent would be a point of no return.”

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Quote of the day

Paul Krugman, once again:

Financial markets are cheering the deal that emerged from Brussels early Thursday morning. Indeed, relative to what could have happened — an acrimonious failure to agree on anything — the fact that European leaders agreed on something, however vague the details and however inadequate it may prove, is a positive development.

But it’s worth stepping back to look at the larger picture, namely the abject failure of an economic doctrine — a doctrine that has inflicted huge damage both in Europe and in the United States.

The doctrine in question amounts to the assertion that, in the aftermath of a financial crisis, banks must be bailed out but the general public must pay the price. So a crisis brought on by deregulation becomes a reason to move even further to the right; a time of mass unemployment, instead of spurring public efforts to create jobs, becomes an era of austerity, in which government spending and social programs are slashed.

This doctrine was sold both with claims that there was no alternative — that both bailouts and spending cuts were necessary to satisfy financial markets — and with claims that fiscal austerity would actually create jobs. The idea was that spending cuts would make consumers and businesses more confident. And this confidence would supposedly stimulate private spending, more than offsetting the depressing effects of government cutbacks.

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Quote of the day

Greece remains roiled by the imposition of an austerity regime on the country. This regime has been and will continue to be harsh medicine for most Greeks. Greece’s political elite have shown themselves to be impotent when confronting the crisis, as Patrick Cockburn illustrated in this report:

The general strike and the parliamentary vote on reforms demanded by international creditors came before a European Union leaders’ summit, when Greece should receive €8bn — without it, the country will run out of money by November. In parliament the Finance Minister Evangelos Venizelos told MPs that Greece had no choice but to accept fresh hardships. “We have to explain to all these indignant people who see their lives changing that what the country is experiencing is not the worst stage of the crisis,” he said.

“It is an anguished and necessary effort to avoid the ultimate, deepest and harshest level of the crisis. The difference between a difficult situation and a catastrophe is immense.”

But for many Greeks, the catastrophe has already happened and protests increasingly involve the well-educated middle class. The strike yesterday involved air-traffic controllers, tax officials, pharmacists and doctors — as well as taxi drivers, dock workers and garbage collectors. Schools were closed and hospitals were only open for emergency cases. Every street in Athens has a heap of rotting rubbish on it despite a court order to the public service union to end its strike.

What Mr. Venizelos seems unable to understand is the nature of the disturbance in the streets of Athens. The strikes and street fighting are not features marking the final phase of Greece’s political crisis. They are manifestations of an insurgency that spans the globe and promises to endure long into the future.

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Quote of the day

Writing for In These Times, Michelle Chen reports:

Everyone knew it was a losing battle, but everyone showed up anyway. In an uprising virtually unprecedented in its size, scope and diversity, malcontents united across Greece to push back against the government’s assault on working people.

This week’s 48-hour strike drew workers from both public and private sectors, students, the unemployed — just about everyone about to get smacked with the austerity measures that the Parliament has approved under pressure from IMF and Eurozone officials. With tens of thousands of civil service jobs to be downsized, pensions and wages to be gutted, and labor and civil rights under siege, the people’s upheaval has proven as severe and persistent as the fiscal butchery that politicians keep ramming down their throats.

People took to the streets because they had nothing to lose. As one protester, civil engineer Vagelis Filezis, told CNN, “We have no hope. The only hope we have is the strength of the people.”

Greeks defend their society against the EU

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Quote of the Day

Andrew Cockburn wrote:

“If the Occupiers start chanting ‘Mark to Market,’” an attorney highly conversant with the darker workings of the Wall Street-Washington complex told me, “we’ll know they’re serious.” Such a call would quickly presage the collapse of our “too big to fail” banks, for it would highlight the fact that a huge proportion of the assets of Bank of America, Wells Fargo, JP Morgan, and Citigroup consist of loans that will never be paid back and are therefore essentially worthless. The so called “recovery” of our leading financial institutions from the post-Lehman abyss has depended on a fraudulent valuation of these assets, but stripped of the fiction, the banks are insolvent.

What does ‘Mark-to-Market’ mean? The Wikipedia definition states:

Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market price of the asset or liability, or for similar assets and liabilities, or based on another objectively assessed “fair” value. Fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early 1990s, and has been used increasingly since then.

If America’s major banks were forced to use the Mark-to-Market rule when reporting their financial status, it would become clear that they are undercapitalized and insolvent.

Quote of the day

Rebecca Solnit has the floor:

As you knew at the outset, it’s [the impetus for the lesser to take to the streets] all about economics. This wild year, Greece boiled over again into crisis with colossal protests, demonstrations, blockades, and outright street warfare. Icelanders continued their fight against bailing out the banks that sank their country’s economy in 2008 and continue pelting politicians with eggs. Their former prime minister may become the first head of state to face legal charges in connection with the global financial collapse. Spanish youth began to rise up on May 15th.

Distinctively, in so many of these uprisings the participants were not advocating for one party or a simple position, but for a better world, for dignity, for respect, for real democracy, for belonging, for hope and possibility — and their economic underpinnings. The Spanish young whose future had been sold out to benefit corporations and their 1% were nicknamed the Indignados, and they lived in the plazas of Spain this summer. Occupied Madrid, like Occupied Tahrir Square, preceded Occupy Wall Street.

In Chile, students outraged by the cost of an education and the profound inequities of their society have been demonstrating since May — with everything from kiss-ins to school occupations to marches of 150,000 or more. Forty thousand students marched against “education reform” in Colombia last week. And in August in Britain the young went on a rampage that tore up London, Birmingham, and dozens of other communities, an event that began when the police shot Mark Duggan, a dark-skinned 29-year-old Londoner. Young Britons had risen up more peaceably over tuition hikes the winter before. There, too, things are bleak and volatile — something I know you would understand. In Mexico, a beautiful movement involving mass demonstrations against the drug war has arisen, triggered by the death of another young man, and by the grief and vision of his father, leftwing poet Javier Cicilia.

The United States had one great eruption in Wisconsin this winter, when the citizenry occupied their state capitol building in Madison for weeks. Egyptians and others elsewhere on the planet called a local pizza parlor and sent pies to the occupiers. We all know the links. We’re all watching. So the Occupy movement has spilled over from Wall Street. Hundreds of occupations are happening all over the North America: in Oklahoma City and Tijuana, in Victoria and Fort Lauderdale.

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Ahhhhh, Andrew Ross Sorkin

I found it noteworthy that Mr. Sorkin, currently a New York Times financial ‘journalist,’ quickly responded to a lament made by a member of his key audience (h/t to Yves Smith of Naked Capitalism):

“I think a good deal of the bankers should be in jail.”

That is what Andrew Cole, an unemployed 24-year-old graduate of Bucknell University, told me Monday morning in Zuccotti Park, the epicenter of the Occupy Wall Street movement. Mr. Cole, an articulate young man dressed in jeans, a sweatshirt and with a blue wool beanie on his head, had just arrived by bus from Madison, Wis., where he recently lost his job.

There was nothing particularly menacing or dangerous about Mr. Cole. He said he had come to participate in Occupy Wall Street because he believed in its “anticapitalist” message. “I see Wall Street as responsible for the mess we’re in.”

I had gone down to Zuccotti Park to see the activist movement firsthand after getting a call from the chief executive of a major bank last week, before nearly 700 people were arrested over the weekend during a demonstration on the Brooklyn Bridge.

“Is this Occupy Wall Street thing a big deal?” the C.E.O. asked me. I didn’t have an answer. “We’re trying to figure out how much we should be worried about all of this,” he continued, clearly concerned. “Is this going to turn into a personal safety problem?”

As I wandered around the park, it was clear to me that most bankers probably don’t have to worry about being in imminent personal danger. This didn’t seem like a brutal group — at least not yet.

Well, I do wish the protest will not turn into a personal safety problem for this Bankster or for any other Bankster. After all, illegal killing is wrong when a mob commits the act or when a President authorizes the act.

That said, my strongest wish has the #OccupyWallStreet protest creating the conditions under which the Banksters will eventually confront a serious legal-political problem, one specific to their situation. This problem would include prison-time for those Banksters found guilty of crimes by legally rational courts. Although it should not need to be said but I shall say it anyway that wanting jail time for those Banksters guilty of crimes is a much different wish than wanting them guillotined or sent to reeducation camps, as suggested by Roseanne Barr, a celebrity given to hyperbole whom Sorkin quoted in order to focus attention on and thus to enhance the physically menacing features present in any protest movement seeking justice for institutional crimes. Thus does a ‘responsible journalist’ (“lapdog to bankers,” Yves Smith) recklessly impute criminal motives and a capacity for violence to a protest action that has been peaceful till now and remains committed to seeing justice done. Sorkin furtively sought to achieve this transformation by a sleight-of-hand trick: It’s the uppity unemployed, not the Banksters, who are dangerous. Well…. No!

“Lapdog to bankers” — it’s good work if you can get it.

Cross posted to Fire Dog Lake