Tag: Greek economy


Νύχτα των Κρυστάλλων ?

“Greeks are lazy, Greeks are corrupt, Greeks are dishonest, Greeks refuse to obey the rules……”

Are they? Do they?

Hearing that certain countries are already thinking about “doing something” about future Greek immigration sent a shiver down my spine.

The Eurozone  states and their limp politicians are beginning to treat Greeks like pariahs – in the same way that the Nazis treated the Jews in the 1930s.

What will be the the natural conclusion? Make no mistake – it could be tragic.

Is there going to be the modern equivalent of the 1938  Kristallnacht ?

Will Greek-owned shops and businesses all over Europe be vandalised because of negative anti-Greek Eurozone propaganda?

Kristallnacht was the starting point for intense economic and political persecution of Jews – with the end game being played-out during WW2.  No  further reminders needed.

Then,  as now, it all started with an excuse. In 1938, it was the assassination of German diplomat by a Polish Jew.

The 2012 excuse is nothing more than an anticipated refusal of Greece to comply with over-strict German-inspired ” necessary” austerity rules.

Anticipated refusal.

Propaganda is a very powerful device. Let us hope therefore that the gradually amplifying and insidious vilification of the Greek people does not result in yet another European catastrophe.

New Predictions 2010/2013

Alistair Darling has never looked so relaxed. David Cameron observed that if Darling and and the Prime Minister sat any closer to each other on the front bench yesterday, they would be kissing. The Labour front bench has never  looked so “at ease” and with good reason. There’s absolutely NOTHING that they can now do about the economy, NHS or any of the other major conundrums of State. They are in a good place and enjoying the rapid approach of Spring and what it will bring – the dissolution of Parliament.

The crippled economy appears to have been left to its own devices as it staggers and bumps along from crisis to crisis. The politicians, bankers and economists seem to have been reduced to the role of observers, purveyors of increasingly convoluted euphemisms and “guessers” who still have not grasped the difference between two fundamental Theories: Keynes and Chaos.

It may be an idea to try to slash a path through the current economic goings-on in order to see if we can make any sense of it all.

Our Chancellor’s current laid-back demeanour means one of two things. It means that either he has adopted the fatalistic attitude of one who cannot wait to put his hands on the severance pay, begin his memoirs  and give Gordon Brown the shafting that he has been deserving of for the last 13 years OR  maybe he really doesn’t understand the problem.

The Winter Olympics, Christine Pratt, Gordon Brown and the Coles may be hogging the front pages but perhaps that’s all for the best because what could be on the front pages is strictly Certificate X. In fact, some of what is about to happen to the world’s economy would never pass the scrutiny of the British Board Of Film Censors.  We are heading for a cross between a social  Exorcist and an economic Armageddon. So let’s begin.

I have either observed or worked within the Financial Services Industry for over 30 years and remember the days before the present circus of  exotic financial instruments and comedy accounting. Stockbrokers and Fund managers were not riding financial tigers  or unbroken investment mustangs that were impossible to dismount without a great deal of pain. There were long bull markets interspersed with the occasional short sharp shock of a quick bear. There was order with only the occasional panic which would always be sorted out without the aid of the Bank of England’s printing presses. Those were the “My word is my bond” days.

Investment banks would never have cooked a country’s books in order to replicate what the banks themselves were doing in order to hide gargantuan unsustainable debts. They would not have  charged Greece 0ver £190 million for their trouble so that “on paper” Greece woud look financially fit enough to join the Euro.

Four months ago, Greece’s 10-year bond was trading happily, it was stable and rising.  Then,  global investors began to dump Greek bonds in huge volumes and with unprecedented speed. The whole thing was so brutal that the custodians of the Greek economy did not realise the full extent of the disaster until their economy was exhibiting all the symptoms of near-death. Thanks to Goldman Sachs who had (legally) helped them to cook the books, Greece had been living and borrowing in an economic cloud-cuckoo land. Currently, they are standing on of the equivalent of an “event horizon” at the edge of an economic Black Hole.

Three months ago,  Portugal’s 10-year government bond also peaked. That is also being dumped by global investors. Nobody wants it. Portugal’s problem mirrors that of Greece.  To put it very simply: overborrowed with no collateral. Just like our banks.

Investors are dumping Greek and Portuguese paper because they are nearly 100% certain that their current economic positions  are unsustainable and that both countries will default.

Italy is keeping afloat through the medium of creative accounting. The next economy to tumble after Portugal and Greece will be Spain  which is running out of both time and cheques with which to support its 20% unemployment rate. The ship that is probably going to support the sinking rats is the holed twin-hull of France and Germany who both know that they need to bail out Greece. After that is achieved, there is severe danger of a Euro-queue forming.

The Euro is doomed because France and Germany will be breaking that most sacred of rules which states that “Thou shalt not bail out thy Euro neighbour”. That rule was enshrined in statute so that a Euro economy in trouble would never drag down any other Euro-user.

Both the French and the Germans are continuing their own spending orgies and instead of doing something now, they are following the United States’ and United Kingdom’s lead. They are postponing the day of reckoning and merely watching the final death throes of the Greek economy.

It looks as if the Euro is about to be sacrificed.

The American dollar will also soon be needing  some sort of life support. Rating agency Moody’s  has already warned  the States about its giant but still accelerating debt.

Dollars  and Sterling have been pumped rather over-enthusiastically into both the American and British banking systems and that has directly resulted in an overvalued stock-market and the feeling is that we are now about to witness a fall in market values which will continue into 2013. That will be mirrored by the highest-ever percentage rise in the price of Gold, Platinum, Palladium and even silver. Gold may well cross the $2000 per ounce barrier.

The dollar will continue its slide which will accelerate by the middle of 2010 , with its downward journey picking up speed by the end of  the year. The pound sterling will follow because currency speculators will be falling over themselves to buy currencies such as  Australian and Canadian dollars. From flashy and weak to unexciting but solid.

At the front-end of 2011, we will see the beginning of the dreaded second dip in the recession which many commentators  seem to think is gradually exhibiting those iconic green shoots of recovery. Those shoots will turn brown and atrophy.

All this will happen because back  in 2009,  whole states made the decision to sacrifice themselves in order to  save their dead  banking systems. History will probably judge these to be the worst economic decisions ever made.   A country has never sacrificed its economy and welfare of its citizens in order to save a broke and discredited banking system which it had itself allowed to expand without proper control.

By the end of 2011 and into 2012, most countries will follow the Greek economy – which is currently exhibiting the green shoots of a civil unrest which will soon spread throughout Europe and the Americas .  That will happen because of of an exceptional set of events which will all take place more-or-less simultaneously . Western economies will collapse as their GDPs, currencies and stock markets all bottom-out .

That will finally signal the inevitable dawn of the wealth-shift from West to East.

China will begin to call ALL the shots because Western economies will have  been painted  into an economic  corner with no way out.

Our Chancellor knows that after the next election, he will probably be on the Opposition benches. In the unlikely event of a Labour Prime Minister being asked to form a government, Darling will probably be “reshuffled” out of the Treasury.  Either way, he will be able to continue what he has already started to do – observe the  sunset of the Western economies.

The green shoots of economic recovery? We’ve been looking in the wrong place. They’re in China.

It’s all Greek to me.


“We is well an’ truly init, matey peeps.”

We may be thinking that Hector Sants’ late-night departure from the FSA is today’s most important financial news but it seems as if a more worrying storm is brewing on the financial markets – and it will eventually affect us.

The euro is under siege — and the next few days will be crucial.

Financial markets are betting heavily that Greece’s crushing debt could drag down the entire eurozone, and that could force reluctant EU leaders into an embarrassing bailout. The handouts to Haiti will be nothing compared to what the Greeks need and George Michael might as well get into the studio now and start recording the Greek Charity single.

If EU leaders don’t take some kind of decisive action this week at their summit meeting, the euro will continue its slide — and Greece’s economic woes could spread to other flailing countries in the 16-nation eurozone. Countries  like Portugal, Spain or even  heavily indebted Italy and Belgium.

European Union leaders will issue a statement on Greece after the meeting, officials said today, but added that the contents had not yet been discussed and would not say if it would lay out details of a bailout.

This Thursday’s EU summit is the real litmus test  and if it fails to come up with any debt restructuring package or quasi-bailout, then the pressure on the euro will increase.

The Greek experience will highlight exactly how inextricably linked the euro states are.

Investors have turned increasingly pessimistic on the outlook for the euro, so much so that speculative traders’ short positions, or bets against the single currency, have reached a record.

(Borrow one million Euros, sell them for dollars. Watch the price of the euros drop and buy them all back at the cheaper price  with just some of the dollars that you received in the first place. Hand the Euros back to where you borrowed them. That gives you a dollar profit)

A new commission — the EU government — has been formally approved by the European parliament, and must immediately confront a gathering sense that the euro’s fundamental weakness  has been exposed.

The fundamental weakness is quite…. well… fundamental. The countries which have the euro as their currency have no common fiscal policy.

The European Union’s own government-backed lender has said that its rules do not permit it to bail out Greece or any other European country that can’t pay its debts. That certainly  narrows the  leaders’ options and will probably mean either a rule change or perhaps the remaining states will act as some sort of guarantor for the Greek government.

The euro is now trading near an eight-month low . European stocks have inched up slightly on speculation that heads of state and government will have to announce something at Thursday’s summit. 

The bounce in European stocks  followed news that European Central Bank President Jean-Claude Trichet had left a banking conference in Australia to attend the summit, stoking expectations of some kind of bailout  for Greece.

Some were sceptical that the meeting could stop the slide in sentiment.

Jittery markets are piling the pressure on EU nations to state clearly what they would do if a euro member defaulted. There is, as yet, no written-down policy on state defaults.

There have been  repeated assurances from both the EU and the Greek government that Greece can pull itself out of its debt crisis with a harsh austerity program but the markets remain unconvinced. Probably because so far, there has been a lot of talking but not enough of the right kind of action.

A bailout could be expensive, but a default would be worse. The downside of market scepticism is that Greece and other troubled countries will have to pay higher interest rates to borrow, making it even harder to dig themselves out of trouble.

The same will happen when the speculators train their beady eyes on the United Kingdom and the States.

The crisis shows one of the vulnerabilities of the 10-year old currency union, in that it lacks an effective central authority to enforce limits on budget spending by its individual members .

With budgets in the hands of 16 separate governments, the euro relies on a set of rules limiting deficits to 3 percent of gross domestic product. Large deficits can undermine the  currency and that of course  will affect all participating countries.

Greek Prime Minister George Papandreou has held government talks on accelerating cuts to pensions and wages in a desperate effort to show the markets that Greece can and will make long-term spending reductions and not need a bailout. However, it could be too late and speculators may continue to dump the euro. In addition, Papandreou is risking civil unrest which the markets never find comfortable.

The EU’s executive commission has backed the Greek programme and says that no bailout will be needed. European Union nations say the same, rejecting reports that they are talking about possible bailout plans.

The bailout options are limited — but not impossible and everyone’s protestations are doing nothing to ease market jitters.

European Union agencies — such as the European Commission — can’t take on debt for governments.  It is not allowed to do so under its own rules. Neither can the EIB, it said. It has 75 billion euros to lend for infrastructure and economy-related projects, usually to the poorer EU nations. That fund cannot be used as bailout money.

Three EU members that don’t use the euro — Hungary, Latvia and Romania — have secured bailouts from the International Monetary Fund and the EU. But EU officials have said  that IMF help won’t be needed for a euro country.

They may live to regret such macho posturing.

That leaves the ball firmly in the EU governments’ court. Legally, governments can rally round  if a member state “is seriously threatened with severe difficulties caused by … exceptional occurrences beyond its control.”

What remains is deciding how to structure a bail-out — and what taking on Greek debt could do to the richer nations.

EU governments could cut the costs of Greek spreads overnight by agreeing to jointly underwrite Greece’s debt — but this could hike the cost of their own borrowings because technically they will all have taken-on more debt – even if technically, it is not their own.

They could also provide a loan to Greece — but it is uncertain that they could or would provide enough to give Greece long-term relief. Greece is looking to borrow some euro 51 billion from bond markets to plug  its budget gap for this year.

Another option would be bonds (IOUs), issued jointly by European governments to raise money from markets. EU and ECB officials have talked this down but European socialists are keen — including Greece’s current government — because it could ease harsh spending cuts.

What is clear is that EU governments do not want to let Greece off the hook — and that any option would force Greece to make long-delayed reforms to endemic rife tax evasion, rigid labour market rules and an inefficient and high-spending pension and health care system.

Such are the costs  and consequences of  uncontrolled Socialism.

Perhaps the Greeks are wishing that they had held onto the Drachma?

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