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Greek report Greek report
by Euro Reporter
2012-02-19 10:19:23
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Greece may be allowed higher debt level in bailout accord

German Finance Minister Wolfgang Schaeuble said Greece may be allowed to run a higher debt in coming years than envisaged so far as part of the second international aid package for the over-indebted country.  A debt level as high as 123 percent of gross domestic product by 2020 may be permissible instead of 120 percent under the 130 billion-euro ($171 billion) lifeline scheduled for approval at a Feb. 20 meeting of euro region finance ministers, Schaeuble said. Greece’s debt amounted to about 160 percent of GDP last year.

“The 120 percent may be 122 percent or 123 percent,” Schaeuble said at a panel discussion in the southern city of Stuttgart today. “It mustn’t be 130 percent.”  Greece has so far implemented spending cuts and revenue increases that would push its debt to 129 percent of GDP by 2020, the so-called troika of International Monetary Fund, the European Commission and the European Central Bank estimates, according to two people familiar with discussions that involve the troika.

“We need an arrangement that assures in a realistic assumption that Greece will be granted debt sustainability in 2020,” Schaeuble said later in an interview with ZDF public television. “This is only the case if it isn’t much above 120 percent” of GDP.


Thieves loot Greece's Ancient Olympia museum

Armed robbers have stolen dozens of artefacts from a Greek museum dedicated to the history of the early Olympics. Two masked men smashed display cabinets and took more than 60 objects after overpowering a guard at the museum in Olympia, officials said.

The town's mayor said the items, mostly bronze and clay statuettes, were of "incalculable" value. Culture Minister Pavlos Geroulanos has tendered his resignation, but it has so far not been accepted.  He visited the site which is on a forested hilltop in western Greece.


Athens rehearses nightmare of default

On Friday afternoon, Constantine Michalos, president of the Athens chamber of commerce, sat in his office – around the corner from where protesters were hurling chunks of marble at riot police – and contemplated what was once unthinkable: that Greece would default on its debt and then be forced into a messy exit from the euro. “All hell would break loose,” Mr Michalos said, sketching a society that would quickly run short of fuel, food, medicine and necessities. “You would have social upheaval.”

On Monday, eurozone finance ministers gather in Brussels to consider a €130bn bail-out that Greece counts on to avoid such a scenario as early as next month. Since the crisis began nearly two years ago, it has been widely held that a default would prove disastrous not only for Greece but also for the entire European Union, and that it was to be avoided at all costs. This week, that assumption was questioned as never before. Some officials in the Netherlands, Germany and Finland – three of the eurozone’s four remaining triple A governments – now argue that the blowback from a Greek default might not be so debilitating, after all. “I am not advocating a Greek default, hard or soft – but I’m not excluding the possibility of it if the Greeks don’t get their acts together,” Alexander Stubb, Finland’s Europe minister, told the Financial Times.

“Europe is prepared. A hell of a lot better prepared than it was on May 9 2010 – and a hell of a lot better prepared than it was last year, so I think we’ve taken the necessary measures.” That view is by no means unanimous among Greece’s creditors. François Fillon, French prime minister, on Friday had a stinging rebuke for those who would consider it. “To put in play the default of Greece is completely irresponsible,” he told broadcaster RTL. Stéphane Deo, European economist at UBS, warned that a Greek default could wreak havoc across the continent, including bank runs.  In rumour-prone Athens, business leaders, politicians and economists are aghast at open discussion of default. “It would be a nightmare,” said Yannis Stournaras, head of the Foundation for Economic and Industrial Research, an Athens think-tank. “You would see serial defaults ... Banks would collapse completely. There would be no banks.”

An important factor in any default scenario would be the reaction of the European Central Bank. It might be possible to keep Greece in the eurozone and contain the damage if the ECB were to provide a lifeline to the country’s banks, some analysts believe. But it is also possible Frankfurt would decide it could no longer accept Greek government bonds as collateral. Without ECB liquidity – cut-off from financial markets – Athens would have to print drachmas to pay its bills. The new currency would plunge in value against the euro. That would trigger another wave of defaults for businesses and citizens, unable to pay outstanding debts in euros. Litigation, and even deeper recession, would probably ensue.

Platon Monokroussos, research head at Eurobank EFG, believes a Greek default might even cascade into a full-blown EU exit, because government would probably try to impose capital controls, close borders and take measures that violated EU law. Greece’s mainstream politicians appear aware of this. Lucas Papademos, the prime minister, warned MPs that the country faced “catastrophe” if it did not approve a sweeping austerity package tied to the loan. Opinion polls show more than 70 per cent of Greeks determined to remain in the eurozone despite enduring two years of austerity and economic contraction. However, there is a minority – particularly on the far left – that wants out. Their chief argument, endorsed by some well-known foreign economists, is that a devalued drachma would lower wages and instantly make Greece more competitive. They tend to point to Argentina, which broke its peg with the dollar more than a decade ago, defaulted on its foreign debt and has since fared far better than many expected. Yet that comparison overlooks the fact that the Greek economy – unlike Argentina’s – boasts a small production base and few exporters. Most of its companies rely on imports, which would rocket in cost. Sceptical, too, are ordinary citizens. “We are not Argentina,” Mr Stournaras said. “We are not even self-sufficient in agriculture.”

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Emanuel Paparella2012-02-19 13:44:31
Wow! In the land where democracy was born we are now witnessing the incredible spectacle of the dismantling of democracy with unrepresentative non elected governments (Greece and Italy so far) being imposed on the people by the EU, ECB. IMF. In effect, we are witnessing the dictatorship of the financial markets buttressed by an unconscionable contempt for collective bargaining and the callous sacrificing of people to money. The so called “gold rule” is being contemplated for Greece and other people. But there is indeed a golden rule in the ethical realm and it was stated by Immanuel Kant as a categorical imperative: never treat people as a means to an end but as ends in themselves. It appears that the midget politicians of today have never heard of that kind of rule; indeed they seem to be all ethically challenged. What did Jefferson warn us of? Those who privilege the economy over freedom will eventually lose both. Worth pondering by the midget EU politicians.

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