American Banks helped the Greeks swindle the EU

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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 04:19pm

Kane Starkiller wrote:"Slippery" argument is actually you desperately putting words in my mouth. I never went into detail of what the lover knows because it isn't important: the wife cheated that's what matters.
We don't know whether bank knew (article saying so is not evidence accepted in courts last I checked) and even if it did Greece was primary offender.
This is not a court of law. The Spiegel has about the best reputation there is in german news. Finally, unless you have something better to show, there is no argument for the bank not knowing. None whatsoever.
Thanas wrote:Start your own thread, quit derailing mine. Stupid idiot.
My post was relatively small. You latched on to the whole "you claimed the bank is moral" thing and expanded this.
You still derailed the thread, quit shifting blame.
Thanas wrote:And nobody said otherwise, so once more you are attacking imaginary points. And the EU should investigate if they can get Goldman Sachs on the hook for something, merely because they apparently came up with the whole exact details of the scheme.
I wasn't aware that my initial comment was attacking anyone. It was more of a general comment that the Greece is the primary culprit and the primary problem for EU rather than some foreign bank. I don't see how that is completely off topic.[/quote]

So why keep screeching about it for the last posts?
Actually it's yet another "Kane Starkiller obliterates every single Thanas' point until he starts screaming and hurling insults with less and less substance until Kane Starkiller gets bored and leaves leaving Thanas butthurt and itching for a conflict in some future topic" thread.
I think I know where this is going to end up now.
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Re: American Banks helped the Greeks swindle the EU

Post by Serafina » 2010-02-14 04:25pm

Hey, it is absolutely reasonable to assume that a major bank does not know the laws of the tiny EU, even if it directly affects one of their major customers :lol: :roll:
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Re: American Banks helped the Greeks swindle the EU

Post by Stark » 2010-02-14 05:42pm

What's the fallout from this within the EU? Are people just annoyed that the Greeks were in dodgey deals, or has this in some way hurt the other members? If this means Greece doesn't 'really' qualify for membership will they be kicked out? Will they require financial assistance?

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Re: American Banks helped the Greeks swindle the EU

Post by Serafina » 2010-02-14 05:45pm

As far as i can tell, Greece getting kicked out of the EU is pretty unlikely - it would be usefull for no one, and the public is not exactly crieing for blood.
Other sanctions are not unlikely - Germany avoided them only due to being the largest member and paying the most money - Greece is one the receiving end, and cutting those funds can really hurt (ask the farmers).
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Re: American Banks helped the Greeks swindle the EU

Post by Murazor » 2010-02-14 05:57pm

Stark wrote:What's the fallout from this within the EU? Are people just annoyed that the Greeks were in dodgey deals, or has this in some way hurt the other members? If this means Greece doesn't 'really' qualify for membership will they be kicked out? Will they require financial assistance?
Greece is a relatively minor player, but even then a member of the EU in this bad a financial condition hurts everyone in the Union.

However, while Greece would benefit from financial assistance, France and Germany aren't likely to allow major rescue operations because a) they have no faith whatsoever in the Greek political class and b) Greece is just the member of the PIGS (Portugal, Ireland, Greece, Spain) that is in worse condition right now.

Helping Greece would set a precedent that they probably don't want, in case things keep going badly for the rest of us (particularly Spain, since our economy is roughly twice the size of the other three combined). Them getting kicked out of the EU is very unlikely, although severe sanctions are probably in the horizon.

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Re: American Banks helped the Greeks swindle the EU

Post by J » 2010-02-14 07:03pm

Stark wrote:What's the fallout from this within the EU? Are people just annoyed that the Greeks were in dodgey deals, or has this in some way hurt the other members? If this means Greece doesn't 'really' qualify for membership will they be kicked out? Will they require financial assistance?
It's still too early to say as new developments keep popping up every few days. They recently discovered €40 billion of hidden debt and as the investigations continue who knows what else may turn up. Their public unions refuse to follow austerity measures to stop the bleeding and I believe some public servants were even striking for pay raises. Between that, the mess with Goldman-Sachs, their continuing budget deficit & debt problems, they have their hands full.

Then add in the fact that many European banks have all sorts of swap deals, bonds, derivatives packages and all kinds of ties with Greece, if Greece defaults on its debts it has the potential to blow up a lot of banks in the EU, which would then need to be bailed out or shut down by their home countries. Nobody knows the connections & results but there's probably a lot of people working overtime right now to try and figure out the results.

I think a bailout of some sort will happen eventually since they can't risk a collapse and a domino effect, but they'll do it in a "backdoor" way so it doesn't get peoples' attention and hopefully so it won't set a precedent for bailing out future bankrupt EU members. Without a bailout and with the way Greece is running its budget, the country stands a good chance of being eaten alive by various speculators. Investors will refuse to buy Greek bonds which makes it impossible for Greece to finance its debts, so it'll have to drastically cut its budget or go flat broke and suffer a currency failure, which would really, really mess up the country.

There is of course reluctance to do a bailout since at this point no one knows the true finances of Greece, it's entirely possible that they're an endless blackhole like AIG which'll suck in hundreds of billions, nobody knows. Also, that money has to come from somewhere, and that's mainly Germany and France, their citizens won't be too happy with their tax dollars being used to bailout another country (over 2/3 of Germans said NO to bailing out Greece). That money comes out of their economies and does hurt them.

Like I said, it's messy and it'll be a while until we have a clear picture of where things stand and where they're likely headed.
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Re: American Banks helped the Greeks swindle the EU

Post by Patrick Degan » 2010-02-14 09:35pm

Kane Starkiller wrote:All the Goldman Sachs employee must say is that he didn't know. No one said they are nice guys. But being a greedy asshole is one thing, breaking your written agreements is quite another.
"Written agreements" to do something patently illegal carry no validity and does not constitute a defence. Neither does alleged ignorance of the law. You have no argument.
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Re: American Banks helped the Greeks swindle the EU

Post by mr friendly guy » 2010-02-14 09:40pm

Hang on a minute, Kane Starkiller says its ok for Goldman sacks to not be nice people as long as one follows the written agreement (presumably he means the law) yet in a previous thread he tried to justify the US invasion of Iraq on the grounds that Iraq's leaders were not "nice people." The double talk is hilarious.
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Re: American Banks helped the Greeks swindle the EU

Post by K. A. Pital » 2010-02-14 10:49pm

mr friendly guy wrote:Hang on a minute, Kane Starkiller says its ok for Goldman sacks to not be nice people as long as one follows the written agreement (presumably he means the law) yet in a previous thread he tried to justify the US invasion of Iraq on the grounds that Iraq's leaders were not "nice people." The double talk is hilarious.
Kane's logic is that one does not equal the other. For example, Kosovo is rational and justified, whereas all other nationalist separatist movements (say, the Kurds?) are not allowed to make up self-proclaimed nation-states. :lol: And that's not the first time he displays such stellar attitudes.

On the other hand, sometimes he's frustrating. Right after I specifically quoted for him the part where Goldman Sachs did wrong, he ignored it and carried on to describe what has happened as "normal business".
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Re: American Banks helped the Greeks swindle the EU

Post by J » 2010-02-14 11:57pm

Kane Starkiller wrote:
Thanas wrote:Oh please. Are you so thick that you do think purposefully inventing and then selling a method to circumvent the rules is moral and a-ok? If so, I think you need to rethink your definition of morality.
It's no more a-ok than fucking other man's wife. Does that mean the other guy should first demand proof from a woman that she is not married? How would you even legislate this? All the Goldman Sachs employee must say is that he didn't know. No one said they are nice guys.
Are you kidding me? This is not some obscure law buried in the middle of a 40,000 page volume, the EU's debt limit agreements are well publicized laws which are known to all financials conducting business in the continent. It's like walking up to a woman wearing a wedding ring, plying her with drinks and seducing her for a one nighter; if one does so he's a morally reprehensible scumbag and shares in the fault.
But being a greedy asshole is one thing, breaking your written agreements is quite another.
Bzzzt. Wrong. Look up contract law sometime. Contracts to carry out illegal acts or those contrary to public policy can and will be voided and thrown out. The contract between Goldman and Greece while legal in the lawyer sense does however, go against public policy in that it's a tool which was specifically designed to circumvent the government's debt limits, which is a clear violation of its fiduciary obligations and thus of public policy. They're not worth the paper they're written on.
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Re: American Banks helped the Greeks swindle the EU

Post by K. A. Pital » 2010-02-15 12:03am

J wrote:Look up contract law sometime.
Too few people know that contracts made to acrry out illegal acts are not binding on a party in case it knows, or suspects, that the act might be illegal.

Hell, there's a whole subset of common neglience in contract law here in Russia; when a party enters an agreement that raises suspicions as to the legality or the non-breach of other public rules (not necessary laws par se; those can be norms or safety standards), and continues to act despite knowing or having these suspicions, then it shares responsibility for the illegal act.

Various sleazy ways to circumvent government normatives are considered unsound business practices and in certain cases can be judged as fraud even if from a "paper" point of view everything's fine.
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Re: American Banks helped the Greeks swindle the EU

Post by Vympel » 2010-02-15 01:22am

Fucking dodgy Greeks, and I am one.

Seriously, travelling through Greece back in 2005, I had several conversations with my father about how as a whole the country was living above its means, how it couldn't last, how they were overspending and overborrowing, and lo and behold, the chickens have come home to roost.

Its typical that the reaction of many Greeks to the proposed austerity measures is pissing and moaning that they deserve pay rises, usual bullshit about strikes, and whinging that this can somehow be fixed by just focusing on the rich ... somehow - in particular all the usual Greek insano-lefty elements are claiming that the austerity measures don't affect the rich, just the poor, which AFAIK is BS. As an entire society Greece is dysfunctional.

EDIT: in any event, it appears the current government is making a genuine effort to combat Greece's widespread corruption, tax evasion and general being-fucked-ness, so good luck to them.
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Re: American Banks helped the Greeks swindle the EU

Post by The Grim Squeaker » 2010-02-15 01:43am

Vympel wrote: Its typical that the reaction of many Greeks to the proposed austerity measures is pissing and moaning that they deserve pay rises, usual bullshit about strikes, and whinging that this can somehow be fixed by just focusing on the rich ... somehow - in particular all the usual Greek insano-lefty elements are claiming that the austerity measures don't affect the rich, just the poor, which AFAIK is BS. As an entire society Greece is dysfunctional.

EDIT: in any event, it appears the current government is making a genuine effort to combat Greece's widespread corruption, tax evasion and general being-fucked-ness, so good luck to them.
The line I liked best is that "The Greeks are demanding that the Germans pay for their bailout, while the Germans increase their retirement age while the Greeks still lower theirs".
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Re: American Banks helped the Greeks swindle the EU

Post by [R_H] » 2010-02-15 06:53am

J wrote:Their public unions refuse to follow austerity measures to stop the bleeding and I believe some public servants were even striking for pay raises.
There was already a general strike earlier this month, and if I'm not mistaken there's an other one scheduled for later this month. IMO, there are way too many public "servants" in Greece, something like 25% of the population. In 2009 14'000 retired, but 29'000 additional "servants" were hired.
The Grim Squeaker wrote: The line I liked best is that "The Greeks are demanding that the Germans pay for their bailout, while the Germans increase their retirement age while the Greeks still lower theirs".
Their retirement ages are ridiculously low, something like 63 for men and 61 for women.

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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-15 12:07pm

Stas Bush wrote:On the other hand, sometimes he's frustrating. Right after I specifically quoted for him the part where Goldman Sachs did wrong, he ignored it and carried on to describe what has happened as "normal business".
It is his usual modus operandi - because he cannot debate anything, he just stonewalls and continues to restate his original argument as if it makes it any more valid. And then he proclaims victory and weasels out.
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Re: American Banks helped the Greeks swindle the EU

Post by Fingolfin_Noldor » 2010-02-15 12:34pm

Thanas wrote:
Stas Bush wrote:On the other hand, sometimes he's frustrating. Right after I specifically quoted for him the part where Goldman Sachs did wrong, he ignored it and carried on to describe what has happened as "normal business".
It is his usual modus operandi - because he cannot debate anything, he just stonewalls and continues to restate his original argument as if it makes it any more valid. And then he proclaims victory and weasels out.
It won't be the first time he goes around showing his bias for all things American, especially the foreign policy and some.
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Re: American Banks helped the Greeks swindle the EU

Post by D.Turtle » 2010-02-15 12:58pm

And the weird thing is, he isn't even an American.

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Re: American Banks helped the Greeks swindle the EU

Post by Fingolfin_Noldor » 2010-02-15 01:51pm

D.Turtle wrote:And the weird thing is, he isn't even an American.
Probably hero worships the Americans for bombing the Serbs in a highly illegal war. I believe he confessed as much some years ago about that.
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Re: American Banks helped the Greeks swindle the EU

Post by ZSPhobiaSZ » 2010-02-16 05:24pm

This is like in the book about how banks do this to hurt people for money. That should be against the law.

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Re: American Banks helped the Greeks swindle the EU

Post by Xon » 2010-02-16 07:43pm

Technically, it is fraud by the banks and being willful helpers in a criminal act. So it is already against the law. the real trick is actually having enforcement of existing laws.
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Re: American Banks helped the Greeks swindle the EU

Post by J » 2010-02-16 11:11pm

The fun begins.

Telegraph link
Greece loses EU voting power in blow to sovereignty

The European Union has shown its righteous wrath by stripping Greece of its vote at a crucial meeting next month, the worst humiliation ever suffered by an EU member state.

The council of EU finance ministers said Athens must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether. It if fails to do so, the EU will itself impose cuts under the draconian Article 126.9 of the Lisbon Treaty in what would amount to economic suzerainty.

While the symbolic move to suspend Greece of its voting rights at one meeting makes no practical difference, it marks a constitutional watershed and represents a crushing loss of sovereignty.

"We certainly won't let them off the hook," said Austria's finance minister, Josef Proll, echoing views shared by colleagues in Northern Europe. Some German officials have called for Greece to be denied a vote in all EU matter until it emerges from "receivership".

The EU has still refused to reveal details of how it might help Greece raise €30bn (£26bn) from global debt markets by the end of June. Investors are unsure whether this is part of Kabuki play of "constructive ambiguity" to pressure Greece and keep markets guessing, or reflects the deep reluctance by Germany to be drawn deeper in an EU fiscal union. Greek bonds sold off as ten-year yields jumped to 6.42pc, but the euro rallied to $1.3765 against the dollar as broader issues resurfaced in currency markets.

Jean-Claude Juncker, head of the Eurogroup, hinted that ministers have already agreed on a support mechanism, should it be necessary. It will most likely involve by bilateral aid by eurozone states. He said proposals for an IMF bailout - backed by Britain - were "absurd" and would shatter the credibility of monetary union.

Many Germans disagree, including Otmar Issing, once the backbone of the European Central Bank. He said an EU rescue for Greece would be fatal, arguing that unflinching rigour is the only way to hold monetary union together without political union.

Tuesday's EU verdict amounted to a thumbs down on Greece's earlier austerity efforts, viewed as too reliant on one-off measures and too light on spending cuts. Greece must reduce its deficit from 12.7pc of GDP to 3pc in three years. Greek customs officials expressed their anger by kicking off a three-day strike, the first of many stoppages set to culminate in a general strike next week.

However, premier George Papandreou has won support from key political parties and a majority of the people. Greece may yet surprise critics by mustering its Spartan Spirit.
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Re: American Banks helped the Greeks swindle the EU

Post by K. A. Pital » 2010-02-16 11:26pm

PASOK will have to see if it can come through this. It's especially damaging to a socialist party that just recently won over the previous right-wing government, when it is being forced to install "austerity measures" and has no choice.
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Re: American Banks helped the Greeks swindle the EU

Post by J » 2010-02-17 02:39pm

And the Germans say "forget about it" with regards to a bailout.

Guardian link
Angela Merkel dashes Greek hopes of rescue bidGerman chancellor refuses to rescue Greece's ailing economy amid Berlin's domestic austerity
Ian Traynor guardian.co.uk, Thursday 11 February 2010 20.39 GMT

Angela Merkel, the German chancellor, mounted stiff resistance tonight to any swift bailout of Greece, as a rift opened up between European capitals over how best to tackle the risks posed to the euro.

Despite a show of Franco-German unity on the crisis and the first statement from EU leaders pledging to safeguard the currency's stability, hopes on the markets of a German-led rescue plan to shore up Greece's critical public finances were dashed by Merkel, who repeatedly emphasised that Athens would need to put its own house in order and brushed aside all questions of financial support.

"Germany is stepping totally on the brakes on financial assistance," said a senior EU diplomat. "On legal grounds, on constitutional grounds and on principle." Another senior diplomat said of the Germans: "They're not waving their chequebooks."

An EU summit of 27 government chiefs in Brussels was the first opportunity to tackle the Greek crisis and also send a strong message to the financial markets, which have been betting against the euro for the last week.

Following talks between the Greek prime minister, George Papandreou, Merkel, President Nicolas Sarkozy of France, and Jose Manuel Barroso and Herman Van Rompuy, the European commission and European council presidents, the leaders issued a statement aimed at restoring calm and voicing political support for Papandreou's programme of swingeing budget cuts and structural reforms.

The statement said the 16 EU countries who use the single currency, including Greece, "will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole." That was seen as a strong political signal to speculators that the big euro economies such as Germany and France would act persuasively to restore confidence in the currency.

But there were no promises of funds for Greece and the statement emphasised that "the Greek government has not requested any financial support".

The European currency and the eurozone's stock markets gave a lukewarm reception to the outcome of the summit. The euro lost 1% against the dollar to $1.360, while the Dow Jones Stoxx 50 Index lost 0.7%. The major French, German, Spanish and Italian indexes fell by between 0.5% and 1.6%.

"This is little more than a sticking plaster at this stage," said Neil Williams, fixed income chief economist at Hermes Asset Management. "What is needed is a credible programme to help all the dominoes, not just one, and this takes time."

Merkel and Sarkozy held a joint press conference after the summit to demonstrate Franco-German unity, but that masked fundamental differences over how to proceed.

"France and Germany cannot agree on anything," said a Brussels official. "They are not always on the same page."

Berlin and Paris have been at odds for the last week through several rounds of negotiations, with the French, backed by the Spanish, seeking a solution through lending to Greece. But Germany and the European Central Bank (ECB) took a hard line, arguing that the bigger risk to the euro's stability came from bailing out a profligate member state which has notched up a budget deficit of almost 13% and a national debt of nearly €300bn.

The split meant 16 finance ministers could not agree a common position before the summit. "Germany cannot justify its taxpayers having to finance the lovely lives of the Greeks," said a senior diplomat.

Rather than bailing out Athens, Berlin is insisting on rigorous policing of the Greek austerity programme by a triple force from the commission, the ECB and the International Monetary Fund, an exercise never attempted in the eurozone.

"We recognise our responsibility for the stability of the eurozone," said ­Merkel. "Greece is not demanding any money from us."

The three will judge, initially in March, whether the Greek programme is being implemented "credibly, realistically and effectively", German officials said.

Merkel said this was the best way to assuage the markets. The parallel is with Ireland which has responded to a similar public finance crisis with savage spending cuts, public sector wage and pension cuts and restored market confidence.

Merkel's tough stance reflects her awareness that voters could react angrily to having to contribute to a bailout at a time of tough budget discipline at home.

Berlin also argues it has scant scope for manoeuvre legally as the German constitutional court would be likely to rule, under the terms of the Maastricht Treaty setting up the single currency, that Germany cannot come to the bilateral aid of a single currency country in trouble.

The European strategy that emerged tonight was one of wait, see and hope. The Greek government does not need to raise any money until the end of March at the earliest.

Jean-Claude Trichet, president of the ECB, complained that the Papandreou medicine was not strong enough, and he was supported by Berlin in demanding tougher action by the Greek government.

Papandreou has pledged to slash the ballooning budget deficit by 4% this year alone. Merkel made clear that this would be taken as the measure of success and that the commission, central bank and IMF experts would need to hold the Greek prime minister to that pledge.

Meetings of eurozone and EU finance ministers next Monday and Tuesday are to deal with the details of the European strategy, but these are more likely to focus on how to police the Greek austerity package than on bailout plans.
And her coalition partners are on the same page

Bloomberg link
Merkel’s CSU Ally Says ‘Not a Single Euro’ for Greece (Update1) Share Business
By Rainer Buergin

Feb. 17 (Bloomberg) -- Germany must resist supporting Greece with taxpayers’ money because granting aid would invite other indebted euro-region countries to emulate Greece, said the leader of Chancellor Angela Merkel’s Bavarian allies.

“We are the stable currency party,” Horst Seehofer, who heads the Christian Social Union, one of three parties in Merkel’s coalition, told a rally in the southern city of Passau today. “That’s why we’re helping Greece politically; but not a single euro must go there.”

Seehofer, who is also the prime minister of Bavaria, said Greece’s financial woes risk damaging “the stability of the European currency.” The euro traded at $1.3645 as of 5:09 p.m. in Berlin, down from $1.3770 after climbing to $1.3788, the highest since Feb. 11.

European finance ministers meeting in Brussels Feb. 15-16 turned up the pressure on Greece to rein in its deficit and refused to specify potential aid measures, as the Greek government said it was ahead of schedule on its budget targets.

Greek government bonds rose today, as the extra yield demanded to hold Greek 10-year debt instead of German equivalents declined for the first time in four days.

‘Consciously Flawed’

Merkel faces opposition to any move to provide aid for Greece from her Free Democratic Party junior coalition partner as well as from Seehofer’s CSU. Carl-Ludwig Thiele, the FDP’s financial-policy spokesman in parliament, said Feb. 11 that Germans “can’t be expected to pay for the consciously flawed fiscal and budgetary polices of other euro-zone countries.”

Germans won’t rise up in protest if their government helps Greece cover its deficit, Manfred Guellner, head of the Berlin- based Forsa polling company, said in a phone interview yesterday. Threats by her coalition partners to block aid to Greece are “posturing” and “not credible.”

Greece’s troubles are “making people aware of the danger of big deficits,” and that may help Merkel swing the economic- policy debate in Germany away from Free Democratic calls for more tax cuts toward budget consolidation, Guellner said. Merkel can use Greece as “a case in point.”

Merkel is scheduled to deliver a policy speech to party members in northern Germany near her electoral district at about 6 p.m. today.

Greece needs to sell 53 billion euros ($72.6 billion) of debt this year, the equivalent of about 20 percent of its GDP, and faces bond redemptions of about 8 billion euros on both April 20 and May 19. Officials in Athens have committed to reduce the budget gap from 12.7 percent of gross domestic product in 2009 to 8.7 percent by the end of this year.

‘Considering Support’

Officials in Germany are “considering support” for Greece that would come “under strict conditions and if the Greek government undertakes far-reaching state reforms,” Michael Meister, financial-affairs spokesman for Merkel’s Christian Democratic Union, said Feb. 9.

Finance Minister Wolfgang Schaeuble told lawmakers the next day that options for helping Greece extend beyond loan guarantees, according to a lawmaker who attended the briefing in Berlin and spoke on the condition of anonymity because the briefing was private. Schaeuble told reporters he had “no intention to participate in speculation.”

Spanish Finance Minister Elena Salgado, whose country holds the rotating European Union presidency, told reporters in Brussels yesterday that, if necessary, “Greece will receive whatever aid it needs from the members of the European Union.”

A team of officials from the EU and the European Central Bank will travel to Athens in coming days to “verify the implementation” of budget cuts, Monetary Affairs Commissioner Olli Rehn said.
This is going to be messy.
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[R_H]
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Re: American Banks helped the Greeks swindle the EU

Post by [R_H] » 2010-02-17 03:03pm

I saw this interesting OpEd

The Making of a Euromess (NYTimes)
Lately, financial news has been dominated by reports from Greece and other nations on the European periphery. And rightly so.

But I’ve been troubled by reporting that focuses almost exclusively on European debts and deficits, conveying the impression that it’s all about government profligacy — and feeding into the narrative of our own deficit hawks, who want to slash spending even in the face of mass unemployment, and hold Greece up as an object lesson of what will happen if we don’t.

For the truth is that lack of fiscal discipline isn’t the whole, or even the main, source of Europe’s troubles — not even in Greece, whose government was indeed irresponsible (and hid its irresponsibility with creative accounting).

No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.

Consider the case of Spain, which on the eve of the crisis appeared to be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in 2007, compared with 66 percent in Germany. It was running budget surpluses. And it had exemplary bank regulation.

But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular.

The result was rapid growth combined with significant inflation: between 2000 and 2008, the prices of goods and services produced in Spain rose by 35 percent, compared with a rise of only 10 percent in Germany. Thanks to rising costs, Spanish exports became increasingly uncompetitive, but job growth stayed strong thanks to the housing boom.

Then the bubble burst. Spanish unemployment soared, and the budget went into deep deficit. But the flood of red ink — which was caused partly by the way the slump depressed revenues and partly by emergency spending to limit the slump’s human costs — was a result, not a cause, of Spain’s problems.

And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation.

Now, if Spain were an American state rather than a European country, things wouldn’t be so bad. For one thing, costs and prices wouldn’t have gotten so far out of line: Florida, which among other things was freely able to attract workers from other states and keep labor costs down, never experienced anything like Spain’s relative inflation. For another, Spain would be receiving a lot of automatic support in the crisis: Florida’s housing boom has gone bust, but Washington keeps sending the Social Security and Medicare checks.

But Spain isn’t an American state, and as a result it’s in deep trouble. Greece, of course, is in even deeper trouble, because the Greeks, unlike the Spaniards, actually were fiscally irresponsible. Greece, however, has a small economy, whose troubles matter mainly because they’re spilling over to much bigger economies, like Spain’s. So the inflexibility of the euro, not deficit spending, lies at the heart of the crisis.

None of this should come as a big surprise. Long before the euro came into being, economists warned that Europe wasn’t ready for a single currency. But these warnings were ignored, and the crisis came.

Now what? A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As Berkeley’s Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger “the mother of all financial crises.” So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.

But that’s not going to happen anytime soon. What we’ll probably see over the next few years is a painful process of muddling through: bailouts accompanied by demands for savage austerity, all against a background of very high unemployment, perpetuated by the grinding deflation I already mentioned.

It’s an ugly picture. But it’s important to understand the nature of Europe’s fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready.
An interesting fact and somewhat related to the subject at hand, Zapatero's disapproval rating is in the high 60s, the oppostion leader's is in the low 70s.

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Re: American Banks helped the Greeks swindle the EU

Post by KrauserKrauser » 2010-02-17 03:08pm

Now, who is willing to bet that everyone of these countries that are pointing the finger and yelling at Greece have made similar shady deals that simply haven't been exposed?

While the Greek government may be fucked up on multiple levels to allow this to happen, the rest of the EU governments aren't exactly beacons of propriety and uncorruptability.
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