The effort by eurozone countries and the IMF to reassure markets for government debt by loaning money to Greece "has failed," the Financial Times of London said Thursday. -- Officials think the European financial system may have liquidity problems as investors flee risk. -- "European banks are not starting with huge buffers of capital, nor strong balance sheets that can withstand a closure in funding markets. Worse, government budgets are no longer able easily to fund a new round of bank bail-outs." -- Stock market fluctuations were "wild" on Thursday, the Financial Times said in another article, citing "U.S. stock prices losing almost 9 per cent, before reclaiming most of their losses by day’s end." -- One analysis called the developments "really shocking." -- Columnist Martin Wolf confessed to "huge doubts" about the prospects for success in the rescue of Greece. -- Wolf does not believe the effort to avoid debt restructuring (that is, delaying payment on loans, anathema to investors) is likely to succeed. -- From a broader perspective, "The crises now unfolding confirm the wisdom of those who saw the euro as a highly risky venture. . . . The fear that yoking together such diverse countries would increase tension, rather than reduce it, also appears vindicated: look at the surge of anti-European sentiment inside Germany. . . . The attempted rescue of Greece is just the beginning of the story." -- WSWS said the solution imposed by the IMF and European government amounts to an "attack on the working class." -- "As massive sovereign debt threatens to spark another financial crisis, the class lines are being more clearly drawn," said Stefan Steinberg, who raised the possibility that police provocateurs were involved in violence Wednesday that turned lethal....
GLOOM OVER EUROPE AS CRISIS SHADOW INTENSIFIES
By Chris Giles and Brooke Masters (London), Scheherazade Daneschkhu (Paris), Victor Mallet (Madrid), and James Wilson (Frankfurt)
Financial Times (London)
May 6, 2010
Amid the many imponderables over the eurozone and International Monetary Fund support package for Greece, one certainty is that the loans have not had their desired effect. The result is that a shadow once again hangs over European banks.
The purpose of the 110bn-euro ($140bn) emergency loan package to Greece was to buy the country time to sort out its budgetary crisis and reassure sovereign debt markets that the country was not about to default. This has failed.
Since the package was announced on Sunday, the yield on Greek three-year bonds has risen from 11 per cent to 17 per cent. More troubling, sovereign yields have also gone up in other peripheral eurozone countries as investors have fled from risk. Spanish and Portuguese three-year bond yields have both risen by more than a percentage point over the week.
MARKETS HIT AMID EUROPEAN DEBT FEARS
By Michael Mackenzie (New York), Tony Barber (Brussels), and Tom Braithwaite (Washington)
Financial Times (London)
May 6, 2010
Financial markets weighed down by fears about the European debt crisis fluctuated in wild trading on Thursday, with U.S. stock prices losing almost 9 per cent, before reclaiming most of their losses by day’s end.
The speed of the descent in stock prices and other markets fuelled suspicion that a computer trading program error had occurred as traders wrestled with the anxiety that Greece could become the first eurozone country to default on its debt.
A BAIL-OUT FOR GREECE IS JUST THE BEGINNING
By Martin Wolf
Financial Times (London)
May 4, 2010
Desperate times; desperate measures. After months of costly delay, the eurozone has come up with an enormous package of support for Greece. By bringing in the International Monetary Fund, at Germany’s behest, it has obtained some additional resources and a better program. But is it going to work? Alas, I have huge doubts.
So what is the program? In outline, it is a package of 110bn euros ($143bn) (equivalent to slightly more than a third of Greece’s outstanding debt), 30bn euros of which will come from the IMF (far more than normally permitted) and the rest from the eurozone. This would be enough to take Greece out of the market, if necessary, for more than two years. In return, Greece has promised a fiscal consolidation of 11 per cent of gross domestic product over three years, on top of the measures taken earlier, with the aim of reaching a 3 per cent deficit by 2014, down from 13.6 per cent in 2009. Government spending measures are to yield savings of 5¼ per cent of GDP over three years: pensions and wages will be reduced, and then frozen for three years, with payment of seasonal bonuses abolished. Tax measures are to yield 4 per cent of GDP. Even so, public debt is forecast to peak at 150 per cent of GDP.
GREEK WORKERS STRIKE AGAINST AUSTERITY MEASURES
By Stefan Steinberg
May 6, 2010
As many as three million workers took part in a general strike in Greece on Wednesday in opposition to the latest round of austerity measures announced last Sunday by the Greek government. Over 100,000 gathered in demonstrations in Athens, the Greek capital.
Many services and businesses were shut down for the day, including airports, ports, schools, government agencies, and tourist sites. Journalists and most hospital workers also participated in the strike, which was organized by the private sector General Confederation of Greek Workers (GSEE) and the public sector Civil Servants’ Confederation (ADEDY).
The mass demonstrations, which some described as the biggest mobilization in the country in the past twenty years, were met by a heavy police presence that took on a provocative character. Greek Prime Minister George Papandreou seized on the death of three workers in the firebombing of a bank to blackguard all opposition and push the austerity measures.
The Greek Parliament is due to vote on the austerity measures on Thursday. The proposals, which were agreed to by Papandreou’s PASOK government, are part of an agreement including 110bn euros in loans from European governments and the International Monetary Fund. They include massive cuts in salaries and bonuses for public sector workers, the easing of restrictions on mass firings of private sector workers, the privatization of government services, and a sharp increase in regressive taxes that target the working class.
The vast majority of those taking part in the demonstrations were ordinary workers. The strikes reflect growing mass opposition to the attack on the working class -- not only in Greece, but throughout Europe and internationally. As massive sovereign debt threatens to spark another financial crisis, the class lines are being more clearly drawn.
The overwhelming concern among international financial institutions and European governments, backed by the mass media, is that opposition will hinder attempts to make the working class pay for budget deficits brought on by the economic crisis and the bailout of the banks.
Clashes took place at the parliament building in Athens, as some protesters attempted to break through a cordon of police, chanting “thieves, thieves.” In a number of other confrontations, demonstrators threw rocks and petrol bombs at police, who responded with pepper spray, tear gas, and stun grenades.
Unidentified individuals set fire to the Marfin Bank in Athens, killing three bank workers. Papandreou immediately seized on the reactionary incident by attempting to delegitimize opposition and generate momentum for the austerity measures.
“We were all deeply shocked by the unjust deaths of these three workers who became victims today of a murderous act,” said Papandreou. Seeking to create an amalgam between the firebombing and the protests, he added, “This is where uncontrolled violence and political irresponsibility lead us.”
Papandreou insisted that the cuts would go on. The crippling attacks on worker wages and benefits, he declared, were intended to “save jobs, protect families, households, and workers.” Finance Minister George Papaconstantinou added, “We will not take a single step backwards.”
As often with violent incidents such as the firebombing of the bank, the identity of those responsible remains unclear. Police spoke of masked perpetrators and anarchists. It is also quite possible that police provocateurs were involved, a regular occurrence in Greek politics. Less than two years ago, Greek television showed footage of police talking amiably to “anarchists” who were involved in breaking into and burning down shops and banks during the youth rebellions in late 2008.
The Papandreou government is counting on the trade unions to demobilize opposition and prevent it from finding an independent political expression. The trade unions support the austerity measures, with Spyros Papaspyros, head of ADEDY, telling the *Financial Times* on the eve of the strike that the unions would not do anything that would endanger the country’s debt repayment. According to the *Times*, “Mr. Papaspyros said the unions would do their best to press their demands for a fairer distribution of the costs of the austerity measures but had no intention of helping speculators who bet against a Greek default.”
The strikes and protest in Greece came as European leaders were seeking to secure parliamentary approval for the EU-IMF bailout package. In Germany, Chancellor Angela Merkel urged parliament to quickly pass the country’s share of the bailout -- 22 billion euros over three years. Merkel told deputies, “Nothing less than the future of Europe, and with that the future of Germany in Europe, is at stake . . . We are at a fork in the road."
In an indication of the hurdles confronting the implementation of the EU-IMF bail out package, the right-wing Slovakian government announced it would not agree to the deal until the Greek government agreed to undertake additional austerity measures. Another Eurozone member, Slovenia, announced that it was planning to take out an international loan in order to pay its share of the E.U. bailout package.
Greek and international finance markets reacted negatively to the latest developments in Greece. Greek stocks dropped four percent in trading on Wednesday while the interest charged on Greek 10-year bonds soared to over 10 percent. All of the main European stock exchanges ended down on the day, and the euro fell below $1.29 for the first time in over a year.
Greece is seen as a test case for measures that are planned throughout Europe. One New York-based financial analyst told the BBC that the reaction of the U.S. financial markets “is that [Greek] people will simply refuse to accept the austerity plan. If the Greeks are this upset, then maybe we need to worry about the Portuguese and Spanish and Italians being upset with the cuts they’re going to have to make.”
In preparation for a more direct assault on the working class in Portugal -- which has already implemented major austerity measures -- credit rating agency Moody’s threatened on Wednesday to downgrade the country’s debt.