Global News Journal

from MacroScope:

Greek debt – remember the goats

Greece's creditors have essentially let it off the hook by overwhelmingly agreeing to take a 74 percent loss.  So what better time to  remember  one of the first times Athens got in trouble with paying its debts.

In 490 BC, the bucolic plains before the town of Marathon were the site of a bloodbath. Invading Persians  lost a key battle against Greeks, who were led by the great Athenian warrior Kallimachos, aka Callimachus.

The trouble is, Kallimachos shares some of the difficulty with numbers that  modern Greek leaders appear to have.  Before launching himself upon the  Persians,  he  pledged to sacrifice a young goat to the Gods for every enemy that was killed.

His troops slaughtered some 6,400 invaders. Unfortunately the Athenians didn't have that many young goats. So they had to spread the repayment and legend has it that it took them a century to honour the pledge.

Apparently, Zeus and the other Gods had not heard of the Institute of International Finance and were unwilling to take a 74 percent cut in goats.

from Jeremy Gaunt:

Greeks on the street

Greeks smashing windows and setting fire to shops and banks in a fury of opposition to yet more austerity is gripping.  But it is hardly unique. A few years ago there were similar scenes for weeks after police shot a 15-year old schoolboy.  And back when I lived there, U.S. President Bill Clinton was treated to a similar welcome -- mainly because of his military assault on Serbia (a fellow Christian Orthodox nation) during the Kosovo conflict.

There are doubtless degrees. The latest level of destruction was the worst since widespread riots in 2008 -- and austerity being imposed on Greeks is very painful. But it is worth noting that there are two underlying elements than make such uprisings more common in Greece than elsewhere.

The first is a division in Greek society that goes back to at least the end of the second world war. The civil war that followed the end of the German occupation was brutal and split the country between those wanting western free market democracy and those favouring Soviet-style communism. This carried though into the 1967-74 junta.

The second element is the role of outsiders on Greek history. The Civil War brought in western intervention and the junta got U.S. support -- to the deep-seated bitterness of those on the other side. Going back further -- and Greeks have long historic memories -- there are Persians, crusaders, Nazi Germans and the particularly hated Ottomans trying to make Greeks be something other than Greek. Here is a feature on it.

Add to that mix the Washington-based International Monetary Fund, the Frankfurt-based European Central Bank, the Brussels-based European Commission, derisive artilces in British and German tabloids and a drumbeat of tough talk from Berlin.

This is what happens when Greeks get their backs up about foreigners telling them what to do.

Europe can’t put out the blaze

If the world thought that Europe’s finance ministers were running in to put out the blaze spreading through Athens and Rome this week, it might come as a surprise to learn they still don’t agree on the size of the fire or how to deal with it.

Any training course will tell you that if a small fire isn’t tackled quickly, it could make things a lot worse. The Greek crisis is like a small electrical fire that has grown into a dangerous inferno now threatening to gut Italy.

But ministers meeting in Brussels have clearly not been on any fire extinguisher training courses lately — they don’t know their water from their foam and their dry powder. In fact, they appear to be pouring oil on the fire.

Belgium’s Finance Minister Didier Reynders says it is best to try to smother the blaze with a small cloth soaked in a chemical called a financial transaction tax, while Sweden’s Anders Borg and Austria’s Maria Fekter say they can’t spare any of their CO2 extinguishers.

“Italy can achieve a lot from its own doing,” Fekter told reporters who were watching the fire grow closer. Borg, Fekter and others are sure the Italians in the burning building down the street will be able to sort things out themselves.

Spain’s Elena Salgado is meanwhile clearly upset that the smoke from that fire is billowing into her garden, but France’s Francois Baroin says there was no need to reach for a fire hose: “Tout va bien” (Everything’s going well), he said, wiping his brow from the heat. A combustible mix of hot air and faulty wiring seem to be one assessment of the causes of the euro zone flames, which no one is really willing to consider. But as the sound of emergency sirens grows louder, it may be time to remove the safety pin from the extinguisher marked “European Central Bank” — it may be the only way to remove all the oxygen feeding the fire.

from Jeremy Gaunt:

Democracy and Chaos are both Greek

It seems as if almost everyone was surprised by Prime Minister George Papandreou's decision to hold a referendum on the euro zone's bailout package for his country. At the very least, it can probably be said that he is weary of being hammered from all sides --  his own party, the opposition, the people on the street, Germany, the tabloid press, you name it.

A lot will obviously depend on what question is asked. Do you want an end to austerity, would get a clear yes vote. Do you want to leave the euro zone -- perhaps not.

Financial markets, however, do not initially appear content to wait.  Talk of an end-of-year rally is off the table (at least for now).  It's not exactly χάος (chaos) out there, but Papandreou's  experiment  in δημοκρατία (democracy) has sent the whole euro zone project into a new, risky phase.

It was a typo, but RBS's take on the Greek referendum this morning will have had some resonance:

"We view this as a major negative for Greece and the rest of the momentary union".

Half time at the euro zone cup final

Covering a summit of European leaders is a bit like covering a soccer match with no ticket for the stadium and no live TV broadcast to watch. The only way you have an idea of the scoreline is from the groans and cheers from inside the ground.

With EU leaders meeting on Brussels on Sunday and again on Wednesday to try to resolve the region’s debt crisis, the emergency back-to-back summits look like a game of two halves.

A European Commission spokeswoman said as much on Monday, trying to explain why there had been no major announcements so far on solving the debt crisis: leaders had gone in for half time.

So who is playing whom? “Euro zone versus financial markets” would seem to fit the bill, although mostly it feels it is France against Germany, with European Council President Herman Van Rompuy the referee, and French President Nicolas Sarkozy getting caught out by Germany’s off-side trap every time.

Even from outside the stadium, you can hear the adulation from the Finnish and Dutch fans when they see coach Angela Merkel on the touchline, although some Greeks are angry she won’t pay for more first aid for their injured players.

The euro team has become infamous for own goals of late and the pressure is on to avoid regulation.

So at the second half on Wednesday, the euro squad will come back out onto the field to an impatient crowd and needing to win 3-0 to be certain of victory.

Waiting for Europe’s “appropriate response”

Will the euro zone finally act decisively?

Investors are hoping for something big from European leaders at the EU summit on Oct. 23 and of the Group of 20 on Nov. 3. But they also know the 17 nations of the euro have a habit of offering delayed, half-hearted rescues that have cost them credibility.

So there’s been a lot of “urging” and “warning” in Brussels lately — politicians and central bankers have all been demanding Europe act as international alarm grows that its sovereign debt problems may drag the world into recession. “Further delays are only aggravating the situation,” said European Central Bank President Jean-Claude Trichet on Tuesday in his last appearance at the European Parliament, before he hands over the post to Mario Draghi on Nov. 1.

A day earlier, Germany’s Deputy Finance Minister, Joerg Asmussen, at the parliament to promote his candidacy to join the ECB‘s board, made his call, saying “cooperation has to be increased,” across the euro members, divided as to who should pay to rescue the heavily indebted nations of southern Europe. “I want to see a solution for debt sustainability for Greece,” Asmussen said. So do so many others, especially Greek Prime Minister George Papandreou, who in Brussels on Thursday said it was a “crucial element to make the necessary decisions concerning Greece.”

The European Roundtable of Industrialists, a business lobby of multinationals ranging from French car maker Renault to Spain’s Telefonica, has also come through Brussels to make its point. The group’s head, Leif Johansson, who is also chairman of Swedish phone maker Ericsson, warned that if European leaders fail to act, businesses could see a repeat of the liquidity freeze that followed the collapse of U.S. investment bank Lehman Brothers.

“The worst element of the 2008/2009 crisis was when liquidity froze,” he said. “The worst scenario we have right now is that that could happen again … and there is a real downside risk.” 

The Oct. 23 summit is being billed as a make-or-break event where Germany and France, the main powers in the euro zone, must come up with the solutions investors want. A meeting last Sunday between German Chancellor Angela Merkel and French President Nicholas Sarkozy, and their promise of a comprehensive strategy, suggests there will be a serious attempt to put forward a framework to try to resolve the crisis.

Macedonia and Greece could look to EU for help

“What’s in a name?” asked love-struck Juliet by way of justifying her love for Romeo, whose Montague family was so loathed by the Capulets.

For Macedonia, rather a lot.

The name has been fought over by Greece and “The Former Yugoslav Republic of Macedonia” for nearly two decades. Now European Union diplomats are telling them to ask for mediation help from the bloc. It may be the only chance, they say, for the two countries to solve a dispute that is preventing Macedonia from joining NATO and starting accession negotiations with the EU.

After a decade of talks facilitated by the United Nations to try to get the two to agree a new name for the former Yugoslav state, there is little sign of progress. EU diplomats argue that closer involvement in the talks by, say, the EU’s executive Commission or representatives of its new diplomatic service, might help the two come to an agreement.

The lack of progress frustrates some officials in Brussels, who say it sends the wrong signal to the rest of the EU-bound Balkans. It tells them that bilateral disputes can effectively block the Commission as it steers the bloc’s enlargement policy. Having officials from Brussels directly involved in talks would make it easier to use EU policies as ‘carrot and stick’ to coax the two capitals towards agreement, they say. “The EU is the missing link,” one EU official said recently.

At the core of the dispute is the insistence by Athens that Skopje has usurped a name that implies a claim on Greece’s own region of Macedonia. A U.N.-brokered deal in 1995 allowed the newly independent Balkan state to join the United Nations under the temporary designation “The Former Yugoslav Republic of Macedonia”. A fair amount of diplomatic creativity followed. Its envoys have sat at U.N. meetings between representatives of Thailand and Togo — the country name being considered to start with “The”. A handful of proposals for a new name have been circulated, mostly tacking on a descriptive word such as ‘Upper’ or ‘Northern’ to the name Macedonia. Other suggestions included Democratic Republic of Macedonia, Constitutional Republic of Macedonia, Independent Republic of Macedonia and Republic of New Macedonia.

But the two capitals have dug in their heels, even though both say publicly they want a solution. The latest round of talks between Macedonian and Greek leaders, who met in Brussels in October, produced no result so far.

Whatever happened to Europe’s debt crisis?

If people stop commenting on the financial crisis, does it still exist?

A month ago, Europe was in the throes of fretting about Greece’s debt problems and whether they were going to spill over to Portugal and Spain, bringing down the euro and a decade of monetary union with it. At the same time there was intense anxiety about impending results from stress tests on nearly 100 European banks.

Every day — and sometimes several times a day – European Union officials, ministers, leaders or central bank governors would say something about the crisis, providing more fodder for frazzled financial markets to make another round of cliff-hanging calls over whether things were getting better or worse.

The market gyrations would prompt more questioning of officials, adding more verbal fuel to the fire, keeping the merry-go-round twirling.

Of course, decisions were also being taken that helped calm fevered brows — Greece took steps to cut government spending, the stress test results largely proved reassuring, and Portugal and Spain financed their debts through the markets without too much disruption.

But mostly, officials just stopped commenting on the crisis. Why? In large part because European went on holiday.

The European Union effectively shuts down in August — the Commission holds no briefings, the European Parliament is in recess and there are no leaders’ summits. This year most headed for the beaches in the last week of July.

EU squabbles feed market frenzy

  The European Union can rarely have been more in need of a show of unity than now, as it tries to convince financial markets it can handle the euro zone’s debt crisis.

    Hardly a day goes by without a European leader underlining the need to act together, but hardly a day passes without signs of differences among them that undermine the impression of unity.

    This week is no exception. European Commission President Jose Manuel Barroso said in a speech in Brussels on Tuesday: “We can turn today’s challenges into opportunities only if we stand together, give a collective response.”

    But comments he made in an interview published hours earlier showed the EU’s leaders are anything but united in their vision of how to tackle the crisis.

    In the interview with Frankfurter Allgemeine Zeitung, Barroso dismissed as “naive” Germany’s call for the EU treaty to be modified to prevent a repeat of Greece’s debt crisis — and Germany hit back quickly.

    Economy Minister Rainer Bruederle said he was surprised at the remarks and went on to criticise a joint euro bond proposed by European Union President Herman Van Rompuy, saying it would create the wrong incentives and reward member states that do not pursue sensible budget policies.

    “What we need are clear signals for solid state finances in order to secure trust in the euro over the long term, and to prevent future crises,” Bruederle said.

from MacroScope:

Deficit-obsessed Czechs grapple ahead of vote

If one were to believe the noise coming from right-of-centre politicians in Prague, the Czechs are on the brink of a Greece-style budget meltdown, and victory by the leftist Social Democrats in a May 28-29 election would plunge them into economic collapse.

An ad in newspapers this week from the right-wing Civic Democrats (ODS) showed masked Greek rioters in front of a burning barricade. “Socialists in Greece – the same as in the Czech Republic”, the headline read. Alongside, a picture of Jiri Paroubek, leader of the Social Democrats (CSSD) bore the caption “CSSD = State Bankruptcy”.

The ad angered the Greek embassy, which summoned ODS’s campaign manager to complain. It also puzzled many analysts as to why a country with relatively sound economic fundamentals could be worried about national bankruptcy in the short term.

The Czechs run in the middle of the pack in terms of European Union budget deficits, and they have one of the bloc’s smallest debt piles overall – only 35.4 percent of gross domestic product, compared with an EU average of 73.6 percent.

On the other hand, they suffer acutely from a fiscal risk common to many EU states. The ageing Czech population is for the first time threatening the country’s unreformed pension and healthcare systems with billion euro deficits each year – a trend that economists say will only worsen unless policymakers reform the systems now.

So, while fellow EU newcomer states like Romania and Hungary are aiming for higher-than-previously estimated budget deficits. The fear of the impending demographic crisis in the Czech Republic has prompted the caretaker government, to propose more spending cuts to make sure the country does not exceed its planned budget deficit of 5.3 percent of GDP this year.

"Otherwise we will really make ourselves huge problems. I am not fearmongering here, that is reality," Prime Minister Jan Fischer told Reuters in an interview in April.