Monday, February 13, 2012

Greece -- The Tragedy; Season 5

Meanwhile, In Downtown Europe


Happy Greeks Enthusiastically Embrace Austerity To Assist
Their European Allies By Vowing To Live On Dog Food For
The Next Ten Years (Photo: Guardian UK / Milos Bicanski)

The Guardian UK:
Greece enacted billions of euros in spending cuts and fresh austerity measures last night in a volatile parliamentary vote aimed at avoiding default on its national debt and keeping the eurozone intact, despite some of the worst rioting and political violence witnessed in the country in years.

More than 40 buildings were set ablaze in an orgy of looting that left scores injured as protesters vented their anger at the caretaker government and parliament's ordering of a further €3.3bn of savings by slashing wages and pensions and laying off public sector workers.

In return, Greece is to receive a second eurozone bailout in two years worth €130bn in addition to a €100bn writedown of debt by the bankrupt country's private creditors.

There was turmoil inside the parliament, too. MPs voted 199-74 in favour of the cutbacks, despite strong dissent among the two main coalition members.

A total of 37 politicians from the majority Socialists and conservative New Democracy party either voted against the party line or abstained. A further six voted against sections of the legislation. After the vote, the government announced that those 43 MPs had been expelled.
In case you haven't been paying attention (or believe that what happens elsewhere doesn't affect you), the European Central Bank / International Monetary Fund bailout of the current Greek government is important, and you may want to keep these points in mind:
  • The "assistance" gives the Greeks money to prevent default on the redemption of bonds, due on March 20th; not being able to do so would cause the Greek economy to implode (sooner than it will, that is);
  • The loan package and debt restructuring makes sure the creditors (primarily major European banks) holding those bonds are paid enough -- some of these banks are Zombies, only kept alive and solvent by the constant motion of money, as in a check-kiting scheme. Without timely payment on these Greek bonds of enough Euros to keep everything in balance, the cash flow would be interrupted, the Zombie banks could suddenly assume full-on Walking Dead Status and default on counterparty obligations, which would Be Bad;
  • The "assistance" to Greece came with a price -- including cutting over 100,000 public sector jobs in the next four years; selling state-owned electric, natural gas and other monopoly businesses to the highest bidders (Look Out! Here Come The Oligarchs!); and slashing government pensions by up to 40%.
And all of this demand for Austerity is just so that Greece will receive a bridge loan to ensure it will not default and affect European banks.

It does not solve Greece's overall deficit and debt problems. More loans and ECB/IMF financing will be needed for that -- and in order for Greece to receive that future assistance, Little Angela and the Austerians are saying that Greece will need to cut public financing and expenditures even more.


Greece's Finance Minister Evangelos Venizelos, One Of The
Largest Humans On Earth, Spots Christine Lagarde Of The IMF
At EU Headquarters In Brussels On Thursday. He Seems Hungry.
(Photo: National Post, Canada; Yves Herman / Reuters)

In this latest round of Voting To Impoverish Your People, I particularly liked the part where members of Greece's parliament who voted against accepting the ECB/IMF's financing terms were thrown out of their political parties. And in Brussels on Thursday, IMF Director Christina Legarde stepped from a BMW limousine to speak briefly to the press in her new red coat and black, two-inch-heel Pradas; so comfortable and fashionable. I'm sure the sight of her quiet luxury inspires Greece's children to want to grow up and be just like her.

But, the EU leaders who believe in Austerity don't see the previous weeks of turmoil around Greece as being about a band-aid for Europe's banks. This is about the survival of the Eurozone and the political entity of the European Union -- to people like Angela Merkel, Finance is the force behind the ideals, but it all seems to come down to money in the end. And unfortunately, at this point the world's financiers are not at all trustworthy.

And, please note that the Zombie banks are still at risk of failing from any event that could interrupt the necessary flow of money; they're balanced that precariously. Any default, any failure on the part of another bank to pay might cause one of them to fail. All this is widely understood if not acknowledged; one reason the results of 'Stress Tests' of European banks last year were greeted with skepticism.

But, this isn't over, just in case you were wondering. "Greek Crisis", Season 6, will start again in the near future -- and expect the Greeks to greet it in the same spirit of cooperation and sacrifice which we've seen on Teevee this weekend.