Greek Bailout Seen as Possible

Stock markets are rallying in expectation that European governments are finally committed to a comprehensive solution to their spreading debt crisis. Two of the most reluctant countries – Germany and Finland – are expected to vote this week for expanding a key bailout fund.

Time is running out for Greece to receive more bailout funds to avoid defaulting on its debt. But expectations are also rising that European governments are finally responding to calls that they take bigger and bolder steps to tackle a spreading financial crisis in the 17 nations sharing the euro currency.

In the coming days, European and International Monetary Fund officials will be assessing Greece’s progress toward pushing through tough austerity measures in return for more funds. Analysts and markets are also zeroing in on Germany, Europe’s biggest economy, where opposition has been growing about bailing out Greece and other debt-strapped countries.

But there is a widespread expectation the German parliament will back expanding the European Union’s bailout fund during a crucial vote, Thursday.

Underscoring the importance of German support, Greek Prime Minister George Papandreou held talks with German leader Angela Merkel on Tuesday. He also appealed for help, in an address to German industries.

“This crisis must unite us to make Europe a stronger Europe – one that lives up to the common aspirations of our citizens. I am confident that Greece will have undergone this same remarkable transformation achieve in Germany during the early 1990s. What we are doing is nothing short than the rebirth of a nation,” he said.

News reports suggest a larger plan for dealing with the debt crisis is being crafted. But European officials have dampened those expectations. And, a number of eurozone governments have yet to ratify a July decision to expand the bailout fund, which they need to do within weeks.

Even if they do, analysts like Simon Tilford, of the Center for European Reform in London, say the expanded fund will not be enough to deal with debt problems in bigger economies, like Italy.

“I think that, at this juncture, they’re certainly far behind the curve,” he said. “They obviously need to agree to what they signed up to in July. But that’s not going to be anywhere near enough to prevent the crisis deepening and perhaps barreling out of control.”

The United States and other countries are increasingly concerned that Europe’s debt crisis will have far-reaching effects. President Barack Obama and his administration have been pressing European leaders for tougher action.

“They have not fully healed from the crisis back in 2007 and never fully dealt with all the challenges that their banking system faced. It’s now being compounded with what’s been happening in Greece. So they’re now going through a financial crisis that is scaring the world,” he said.

Underscoring the international concern, Japan’s finance minister has suggested his government might help in bailing out Greece – if European leaders draft a plan that will calm the markets.

10 Economic Lessons From Michael Lewis’ Boomerang

PHOTO: American best-selling author Michael Lewis talks about his latest book, Boomerang.

Financial breakdowns and schemes can be found anywhere in the world: from the rocky tundra of Iceland, to the public sector of the Golden state, and in a secluded monastery in Greece. American best-selling author Michael Lewis describes the most recent and devastating bubbles and bets in a part-travel, part-investigative financial journalism book, Boomerang: Travels in the New Third World.

Lewis, author of Moneyball, The Blind Side, and The Big Short, crafts his travel tales such that they echo or foretell of problems within American borders. Here are ten lessons for the U.S. that can be gleaned from his book, which will be released Oct. 3.

1. “In Greece the banks didn’t sink the country. The country sank the banks.”

As members of the European Union debate over a bailout package for Greece, which is on the brink of a default, bystanders scratch their heads over the genesis of its debt problems.

Lewis describes cultural and political practices that contributed to the country’s debt problems. Those include a widespread practice of citizens and companies avoiding taxes with nary a slap on the wrist.

“In Athens, I several times had a feeling new to me as a journalist: a complete lack of interest in what was obviously shocking material,” Lewis wrote, describing his many interviews with bankers, tax collectors and a former member of parliament.

PHOTO: American best-selling author Michael Lewis talks about his latest book, Boomerang.

PHOTO: American best-selling author Michael Lewis talks about his latest book, Boomerang.

“Scandal after scandal poured forth. Twenty minutes into it I’d lose interest. There were simply too many: they could fill libraries, never mind a book.”

Lewis wrote that when former Greek minister of finance, George Papaconstantinou, came into office October 2009, he found the country’s 2009 budget deficit was 14 percent, not the previous estimate of 2.7 percent.

In an interview with the finance minister, now minister for the environment, energy and climate change, Lewis asks how the country’s budget figures and other bookkeeping had been fudged.

“We had no Congressional Budget Office,” explains the finance minister, comparing it to the U.S. federal economic agency. “There was no independent statistical service.”

2. Investment banks aren’t off the hook.

Lewis is direct in his criticism of governments’ role in financial collapses, but never fails to point out the sins of the global banking sector.

He seems most direct in describing the involvement of investment bank Goldman Sachs in Greece.

“Here, in 2001, entered Goldman Sachs, which engaged in a series of apparently legal but nonetheless repellent deals designed to hide the Greek government’s true level of indebtedness,” he wrote.

“The machine that enabled Greece to borrow and spend at will was analogous to the machine created to launder the credit of the American subprime borrower – and the role of the American investment banker in the machine was the same.”

3. Fishermen are a lot like American investment bankers.

Lewis describes the origins of Iceland’s economic collapse, which included deregulation and the the privatization of its major banks.

The cornerstone of Iceland’s economy have been fishing and energy, which begged the question how and why Icelandic financiers “who had no experience in finance were taking out tens of billions of dollars in short-term loans from abroad.”

Lewis said the Icelandic financial crisis mirrored how the country’s fishing industry took off in the early 1970s: “they privatized the fish,” in which fishermen were assigned a quota based on past historical catches.

Lewis writes that like bankers, fishers’ “overconfidence leads them to impoverish not just themselves but also their fishing grounds.”

He writes: “The goal is to catch the maximum number of fish with minimum effort. To attain it, you need government intervention.”

Tourist Spending in Greece Rises 14.2 Percent on More Visitors

September 28, 2011, 10:30 AM EDT

By Marcus Bensasson

Sept. 28 (Bloomberg) — Spending by visitors to Greece increased 14.2 percent in the first seven months from a year earlier as the number of tourist arrivals increased.

Tourism receipts from January to July reached 5.5 billion euros ($7.5 billion) from 4.8 billion euros in the same period of 2010, according to a statement on the Bank of Greece’s website. Visitor arrivals to Greece increased 11.4 percent in the first seven months.

Revenue in the important tourist month of July was 2.3 billion euros, a 16.7 percent increase from the same month a year earlier, the statement said.

Tourism accounts for about 16 percent of Greece’s gross domestic product, according to the London-based World Travel and Tourism Council.

–Editor: Peter Branton

To contact the reporter on this story: Marcus Bensasson in Athens at [email protected]

To contact the editor responsible for this story: Craig Stirling at [email protected]

Greece is struggling but is no basket case

DESPITE the horrific and dramatic warnings of the world coming to an end if Greece defaults on its staggering loans, it will not be the catastrophe many predict.

If the default is managed correctly — the so-called “soft default” in which debtors give Greece an extension or simply allow Greece to stop making payments on its debts for a certain period of time — the country will get some breathing room to put its economic house in order.

This might hurt the euro exchange rate against the dollar in the short term, but the benefits of a lower euro to the dollar are actually enormous. European exports will be priced cheaper and boost much-needed revenues in Greece and other European countries.

Since the debt crisis started in Greece in 2009, Greek exports have risen 35 percent. This year saw a record level of tourism in the country, and the new exploration for gas and oil in the eastern Mediterranean may bring in huge revenues.

Greece is not the basket case that many now proclaim.

The worry is that European and American banks will suffer, since they have billions in outstanding loans to the country, and while this is true, the banks themselves have already taken action to deal with this possibility.

If Greece does finally default, which is likely, at least it would mean that the country is facing reality, not hiding behind more loans and kicking the can down the street.

There is fear gripping both the bond and stock markets, however, and the country is now caught up in one of those classical Greek tragedies from which the protagonist is doomed from the start of the play.

Since its founding in 1830, Greece created a state in which political favors were exchanged for jobs and bribing increasingly became a way of life. In the current economic crisis, it has worsened. For the first time in seven years leading study-abroad programs to Greece, I was asked for a bribe.

But the Greek government is actually taking solid steps to deal with the huge economic, political and social steps, even if few give it credit at the moment.

Habits of the gut die hard, and many are resistant to change, but what we witness in Greece is a new chapter as a nation. If it defaults, and it probably will, it will not be first time in its history — it is at least its fifth.

But the hope is that when Greece comes out of its default, which it will surely do, it will be a wiser, stronger more efficient nation able to meet the challenges of the 21st century’s more globally connected reality. It must engage a world that is more economically competitive and financially bonded than ever before.

It is still one of the most beautiful lands in the world, and its people as kind, sincere and hardworking as ever. Let’s give Greece a break and perhaps even think about helping her — like going on a vacation there or buying Greek products. You can find good deals on hotels in Greece and the real Greek yogurt is still the best in the world.

Taso G. Lagos is director of the Athens study-abroad program at the University of Washington and spent the last nine months living in Europe, mostly in Greece.

Immigration, Financial Crisis Cast Doubt on Border-Free Europe

As Europe scrambles to contain the financial crisis in the eurozone, another effort to deepen European unity is also being challenged, the Schengen passport-free travel zone.

Immigration, lax controls, corruption and sovereignty worries are undermining dreams of border-free travel.

Europeans now take for granted using the euro across the 17 countries sharing the currency. They also rarely think twice about crossing the borders of more than two dozen European nations without showing their passport. Launched more than a decade ago, the so-called “passport-free travel” Schengen zone now includes 25 nations, including some, like Switzerland and Norway, which are not part of the European Union.

European Home Affairs Commissioner Cecilia Malmstrom, who wants to set new rules for Schengen, argues its benefits are enormous.

“I think there is a general agreement about the importance of Schengen and the possibilities it gives for the citizens of the European Union and the Schengen member countries to travel freely, and we must really safeguard this fantastic achievement,” said Malmstrom. “It is also something really important for business, and it has facilitated life, and it has brought us huge benefits.”

But today, Schengen’s viability is being questioned. Last week, its members blocked Romania and Bulgaria from joining because of concerns they were not doing enough to fight corruption, crime and illegal immigration. Immigration fears are also eroding support for Schengen in countries that already belong like Spain, Germany, Denmark and France.

France, for example, reinforced controls on its border with Italy earlier this year to staunch a wave of illegal immigrants from North Africa. It joined Spain and Germany in expressing concerns about handing the European Union more say over Schengen.

The bottom line, says Brussels-based immigration expert Hugo Brady of the Center for European Reform, is a lack of trust.

“The politics of the Schengen area is that everyone wants more control over other people’s borders while maintaining the same amount of control over their own… and that’s the paradox of the matter,” said Brady.

Today, anti-immigration politicians like European deputy Bruno Gollnisch of France’s far-right National Front Party, are gaining public support with arguments that Schengen must either be tougher, or scrapped altogether.

“In France, we already have millions of immigrants and many social problems, and I think the country is absolutely crowded now… [in] the suburbs and big cities and we should have a different policy. Not only about people who come, but to try to – by cooperating with the original country – to have some of them at least going back home,” said Gollnisch.

Greece, which is at the heart of the European debt crisis, also has Schengen’s most porous borders. Experts say the vast majority of illegal immigrants cross its border with Turkey. For the moment, the European Union’s Frontex border control agency has been shoring up the Greek border. Athens shares no land border with other Schengen countries, hampering immigrants’ efforts to move on.

Even as Greece’s debt crisis has shaken European confidence, Brady says, so has its immigration problem.

“If the eurozone breaks up – which is now looking like a possibility – the resulting political and economic calamity would also spread to other major projects like Schengen,” noted Brady. “They would say, ‘basically these people (the Greeks) have destroyed the next 10 years, how the hell would we trust them with something so sensitive as borders and immigration policy?'”

Brady believes European nations need to revamp Schengen and establish a better border monitoring system. While the prospects appear unlikely of dismantling the passport-free zone anytime soon, he says doing so would have a devastating impact on Europe’s tourism and economy, just as the region is trying shake off the financial crisis.

My contribution to solving the Euro crisis

They rival the English with red-tape and procedure. They are somewhat tight-fisted, but if there is benefit to the cost, they will expend. At the same time, they are a very precise people, like the items they engineer.

There is no benefit to bailing out Greece and the rest of the Eurozone. It is in every tier-1 institutions’ agenda, well forecast and planned for, that the entire world market will inevitably collapse. To bailout now would provide a bandaid solution to an open wound, creating the perfect environment for infections to fester. The root of the problem would stay intact, and the tree poised to return yet another season with poisoned fruit. And indeed, that solution would sink other players into a black hole that is only rearing its head first in Greece. As it stands, many credible analysts believe France is completely insolvent as well, but cooking books. I wouldn’t be surprised if many more EU member states are in similar situations.

And I would go further to state that, if examining history is a good methodology by which to predict the future, then the inevitable collapse, sure to happen as sun will rise tomorrow and moon will set, is a result of a financial agenda.

One can step back and look at this way: what country in their right mind would promise welfare to retirees at the age of 51?? Only a country influenced by individuals who know that they are setting it up for bankruptcy in the near term. Who owns all of this debt, really? Who creates it? Is it real?

I’d dare invoke the Rothchilds and provide credible sources with facts and supporting evidence to your readers to examine, but I thought I’d let you have a blog post without bringing out the phony ADL brigade of dimwitted Abe Foxman sycophants to stink up the place for once. (here they come, anyway!)

How Can Ten People Paralyze a Country? Ask Greece

This was not a good week to be traveling in beleaguered Greece. I know. I was there.

I’m just back from a whirlwind trip to Greece for an upcoming Nightline story (unrelated to the economic mess.) Well, it would have been a whirlwind trip, but for the excruciating airport delays. As the world knows, Greece is facing economic collapse. They’ve been spending vast sums more than they have. Europe is reluctantly bailing them out, but requiring harsh austerity measures.

Much of my trip was spent in airports. Although air traffic controllers can’t legally strike, they were able to grind air travel to a halt with work stoppages and slowdowns.

An exasperated and exhausted manager at the Athens airport – a sparkling legacy of the 2004 Olympics – explained to me that it was all the work of just ten controllers. Under government austerity measures most civil servants will receive just 60% of their normal salaries.

But the air traffic controllers think they deserve better. So, they’ve paralyzed air travel. In a country that depends massively on tourism it is crippling. The domestic airlines are hemorrhaging money, so are the airports.

What the air traffic controllers are losing amounts to a few thousand dollars a month. What they are doing to the Greek economy is costing millions.

A very weak economy gets worse.

Greece faces scrutiny, Merkel says bailout may change

Tue Sep 27, 2011 11:23pm EDT

* Inspectors to scrutinise strategy for assurances

* Protest momentum gathers, public feels recession misery

* Merkel suggest new bailout deal may be reopened

* Euro zone split over bigger losses for private

(Adds Merkel quotes, FT report, byline)

By Michael Winfrey and Harry Papachristou

ATHENS, Sept 28 (Reuters) – Greece faced a new test in its
attempt to avoid bankruptcy on Wednesday as international
auditors headed for Athens, while Germany suggested a new
bailout may be renegotiated as argument rages over whether
private creditors should take bigger losses.

The “troika” audit team from the European Union, European
Central Bank and IMF is expected to start arriving on Wednesday
and begin talks the day after on the Greek government’s plan to
deepen budget cuts and raise new taxes.

This will allow Athens to meet its commitments under a
second aid programme EU leaders agreed in principle in July that
also touched off a new cycle of strikes and protests.

However, German Chancellor Angela Merkel suggested that
parts of the new 109 billion euro ($148.6 billion) rescue for
the debt-laden country could be reopened, depending on the
outcome of the troika’s audit.

“We have to wait and see what the troika … finds and what
it will tell us (whether) we will have to renegotiate or not,”
she told Greek state television NET, without elaborating.

Germany has repeatedly said negotiations about the details
of the second rescue deal can begin only when the troika says
Greece has qualified to receive a fresh, sixth tranche under the
first bailout agreed back in 2010.

The second bailout aims to ease Greece’s debt burden by
imposing a 21 percent loss on private Greek bondholders.
However, many economists believe that a 50 percent loss is
necessary to make the country’s debt viable.

The Financial Times newspaper reported that a split had
opened in the euro zone over the deal. Quoting senior European
officials, it said as many as seven of its 17 countries argued
that the private bondholders should swallow bigger writedowns.

Hardliners in Germany and the Netherlands were leading the
calls for bigger writedowns but meeting fierce resistance from
France and the ECB, which feared more selling of shares in
European banks with big Greek bond holdings.

Germany’s Bundestag (lower house) will vote on Thursday on
widening the scope of the European Financial Stability Facility
bailout fund, as agreed by the EU leaders on July 21.

Merkel faces a revolt within her conservative camp and may
have to rely on support from the opposition Social Democrats and
Greens to get the measure approved, damaging her authority.


In Greece, taxi drivers, bus and tram operators and tax
collectors prepared to strike for a second day on Wednesday, and
rail and metro workers promised to join them.

Lawmakers opened the way to the troika visit on Tuesday by
passing a property tax bill. That piles the pressure on Greeks
suffering from several waves of belt-tightening and deepens an
economic downturn heading into its fourth year.

Prime Minister George Papandreou’s 154 Socialist deputies
forced the measure through in the 300-seat parliament.

Police dispersed thousands of protesters with tear gas in
Athens’s Syntagma Square, centre of anti-austerity protests that
culminated in bloody clashes with police in June.

“I’ve been trying to find a job for a year now and it’s
impossible,” said Maria Kappa, a graduate of the School of
Philosophy in Athens. “I don’t see the rich people hurt by this
austerity, it’s always the poor who have to pay.”

Inertia in implementing the bailout deal coupled with
European leaders’ inability to erect a wider safety net stoked
fears a Greek default could bring down other euro zone states
such as Italy and Spain and trigger a new global recession.

Angry at the Greek government’s slowness in starting
reforms, the troika quit talks with Athens this month and
threatened to shut off funding unless it mended its ways.

Finance Minister Evangelos Venizelos has since drafted a
plan to catch up on the delays, which have put the government
behind on a goal to cut the budget shortfall to 7.6 percent of
gross domestic product this year.

In the accelerated strategy, the government will cut the
730,000 public workforce by a fifth, reduce the public wage bill
by 20 percent, as well as lower overall pensions by 4 percent in
addition to a 10 percent cut already agreed in previous plans.

It will also now extend the new real estate tax until 2014,
two years longer than originally planned, after the troika
judged Greece’s estimate that it would raise 2 billion euros a
year to be two times too high.

The EU and the IMF say Greece has been focusing too much on
one-off tax measures to plug its budget gap rather than
streamlining the administration and cutting spending.

(Additional writing by David Stamp; Editing by Ramya Venugopal)