Friday, February 12, 2010

More on Greece

According to the New York Times, everything is now just fine and we can go back to trusting the folks in charge.
Europe Commits to Action on Greek Debt Crisis
Published: February 11, 2010
BRUSSELS — European leaders, facing a crucial test for the credibility of their common currency, promised “determined and coordinated action” to safeguard the euro as they sought to persuade jittery bond market investors that Greece would not be allowed to default on its government debt.
Herman Van Rompuy, president of the European Council, also said that the European Union would monitor closely Greece’s pledges to reduce its alarming budget deficit, and would propose measures for Athens drawing on the expertise of the International Monetary Fund. more
The reason Greece is important to the Eurozone if the that there a many other countries with similar problems.  As reported in Spiegel:
An EU Protectorate
How Brussels Is Trying to Prevent a Collapse of the Euro
By Armin Mahler, Christian Reiermann, Wolfgang Reuter and Hans-Jürgen Schlamp
Is Germany to Blame?
The Commission has recommended that Spain, booming until recently, radically restructure its economy. Spain must significantly shrink its bloated construction sector and focus on economic sectors with higher productivity.
France and Italy have been given homework assignments of their own. Both countries are being asked to apply austerity packages and increase labor-market flexibility. France must also get its significant welfare and unemployment expenses under control.
Resentment is growing in the countries most directly affected. But that frustration is not directed, as might be expected, toward the Commission. Instead, it is increasingly surplus countries coming under fire -- with Germany at the forefront. more
Far from announcing the problems in the Eurozone have been solved (like the NYT) Spiegel thinks there are still a BUNCH of problems remaining.
Germany and France Take on the Euro Speculators
By Susanne Amann
EU member states have agreed to come to Greece's aid -- but only if in the case of a complete emergency. First of all the country has to make significant spending cuts. The euro zone states have little choice. Neither Germany nor France can afford to see Athens go bankrupt -- that would end up costing them billions.
Not hurting anyone, not risking anything, yet still coming to a decision -- it was a very European solution that Herman Van Rompuy announced after the special summit of EU leaders on Thursday. The countries belonging to Europe's common currency zone declared their willingness to come to Greece's aid in the case of an emergency, in order to prevent the country from going bankrupt, the European Council President said. But there would not be any financial aid, he stressed, because the Greek government had not asked for it.
That was all the more astounding as there had been wild speculation about what the meeting would produce: direct EU aid, a European bond issue, bilateral loans, help from the International Monetary Fund -- almost every conceivable instrument was brought up as a way to help get the highly indebted country back on its feet. Even an expulsion from the euro zone was discussed. more
And then there are the folks who believe, as I do, that what is being proposed as a solution for the mess in Greece will be an utter disaster--not only just for Greece but as a model "solution" for those other countries (including USA) that have MANY problems similar to hers.
Greece Signs its National Suicide Pact 
Thursday, 02/11/2010 - 12:56 pm 
by Marshall Auerback  
Weighing in on Europe’s new “rescue” package for Greece, Marshall Auerback warns that deficit-bashing is an increasing threat the global economy.
Agreement has been reached in Europe on a “rescue” package for Greece. But it’s no cause for celebration. It’s the kind of “rescue” sensation one experiences after paying out what’s left in one’s wallet when confronted with a robber with a gun. The insanity of self-imposed budgetary constraints will be manifest to all soon enough. Economists and the EU bureaucrats who advocate a slavish adherence to arbitrary compliance numbers fail to comprehend the basis of government spending. In imposing these voluntary financial constraints on government activity, they deny essential government services and the opportunity for full employment to their citizenry.
Score another one, then, for the high priests of fiscal rectitude. Harsh cuts, tax increases — this is by no means a recovery policy. The capital markets have got their pound of flesh. But Greece is no more able to reduce its deficit under these circumstances than it is possible to get blood out of a stone. Politically, it means ceding control of EU macro policy to an external consortium dominated by France and Germany. Greece becomes a colony. more

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