Thursday, June 16, 2011

New aid package for Greece? Will a facing of reality be included?

With the third nationwide general strike this year, the Greek people are putting up some real resistance against the ruinous austerity measures demanded by the EU and the IMF and foolishly being implemented by the Greek social democratic party. The Socialist Party leadership of the government is continuing, but Prime Minister George Papandreou is reconstituting his government: George Gilson, Reshuffle replaces unity government Athens News 06/16/2011. Papandreou has called for a vote of confidence in Parliament.

Maria Petrakis and Natalie Weeks report for Papandreou Calls Confidence Vote in Bid to Hang On, Pass Cuts Bloomberg Business Week (06/16/2011):

The political turmoil came as European Union talks on forging a new bailout to prevent the first euro-area default stalled. The impasse over the aid formula and speculation that a government shakeup would disrupt passage of budget cuts and asset sales sent Greek bonds and the euro plunging yesterday.

"If the no confidence motion fails, the market reaction is just the beginning," Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London, wrote in a note. "Then Armageddon scenarios come into play, which include default and potentially the whole contagion scenario plays out."
Bankers can start dispensing the purple prose when they fret that lenders might finally have to take their inevitable losses.

Or things like this can also get bankers' imaginations flying:

Papandreou’s options are narrowing after attempts to gain opposition support for the austerity plan failed, party allies turned against him and public anger grew. The premier needs to clinch a vote on a 78 billion-euro five-year package of budget cuts and state-asset sales by the end of the month to ensure the country gets a new aid package needed to prevent a default. ...

More than 20,000 people rallied yesterday in Athens against wage reductions and tax increases as lawmakers debated the budget cuts and asset sales that are conditions of the new aid. Ports, banks, hospitals and state-run companies were paralyzed by strikes, while a Papandreou ally said he won't support the austerity measures and another bolted his Socialist Party. Papandreou held a six-seat edge in the 300-member legislature before the defections.

The Irish government, meanwhile, is proposing to let investors take some losses on bonds of two large banks bailed out by the government: See
Noonan will impose big losses on bondholders if ECB agrees Lara Marlowe, et al,Irish Times 16.06.2011.

These following three stories are from last week. But they have news about the current state of the EU's issues with Greece - and vice versa. George Georgiopoulos, Greece to tackle austerity plan to win new bailout Reuters 06/05/2011

Greek Prime Minister George Papandreou starts a campaign on Monday to secure a new international bailout by imposing years of austerity on a nation already seething over corruption and economic mismanagement.

Unease is growing within Papandreou's ranks about the consequences of waves of budget cuts demanded under successive deals with the European Union and IMF -- and this could turn into alarm after at least 80,000 Greeks crammed a central Athens square to vent their anger over the nation's dire state.

As the government struggles to prevent Greece from defaulting on its debt, the Socialist cabinet will discuss informally on Monday the medium-term economic plan which will impose 6.4 billion euros ($9.37 billion) of extra austerity this year alone.
The new aid package is expected to run over 100 billion euros, $130 billion USD or so, as of this article: Teure Stütze:Neue Griechenland-Hilfe kostet über hundert Milliarden EuroDer Spiegel Online 04.06.2011. I've seen estimates this week ranging from 90B to 100B euros. It's a moving target because of ongoing negotiations.

The austerity measures have been provoking very justified resistance from the public: Marching to a new beat Athens News editorial 06/05/2011.

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