Papandreou Sends European Markets Into Chaotic Condition
Prime Minister Of Greece To Put Bailout To A Vote Which No One Believes Has Any Chance Of Passage
Note: This blog does not give financial advice. Please consult your
bank or other professional financial advisors for such advice.
A short while ago, with the grudging approval of a very angry Germany, the ESFS
Financial Stability Facility) approved a bailout loan for Greece. This
has nothing to do with any warm, fuzzy concern for the Greeks (to the
contrary, the Germans loathe them to the point of stereotyping them with
the same ugliness the Third Reich reserved for the Jews).
real reason is because European banks (mainly those in France and
Austria) have become ensnared like Laocoön in the tentacles of Greek
debt by virtue of having bought up billions of that bankrupt country's
Greece doesn't accept the loan from the ESFS, it will not be able to
pay the interest owed on those bonds held by European banks. And if
those interest payments stop, the banks will collapse themselves,
triggering a worldwide financial panic that would eclipse the 1929 stock
market crash in our country which ushered in the Great Depression.
you understand that, you realize that the ESFS isn't bailing out Greece
but themselves. Ergo, Greece must accept that loan.
There's one problem, however - the terms of the loan are brutal.
with the huge raises in taxes, the terms attack the single greatest
cause of Greece's economic nightmare - its massive patronage system.
More than half of all workers in Greece are nothing of the sort;
instead, they're family members, friends (and a lot of mistresses) of
powerful government officials and political bosses who've been handed a
'job' which requires absolutely no work save for the tiresome trek to
the bank every month to deposit a lavish paycheck.
'job' corruption is endemic - and my wretched Greek friend, Marina, who
lives and works in Athens is witness to its unfairness first hand. She
is a hardworking and brilliant. Because she has never married, because her parents were never
members of the government (and because she flatly refuses to be one of
the dean's mistresses), she has no husband, family or lover to pull
strings in order to get her one of those fat paychecks. Instead, she
has to pull in excruciatingly long hours, write extensive papers and
travel abroad to Europe and England to give lectures in a desperate
attempt to get tenure. Alas, she still hasn't gotten it, despite her
outstanding credentials. To rub salt in the wound, every day she
arrives to work in her department, she's forced to walk past row upon
row of empty offices on her way to her cramped room at the far end. The
reason those offices are empty is because their occupants don't need to
show up for work; since they're all wives, daughters (and buxom
mistresses) of government officials, these 'workers' can (and do) spend
the entire day shopping and doing their nails. And they're paid at
least twice as much! Yes, that's how bad it is.
now that is going to come to an end. The terms of the bailout loan
from the ESFS stipulate that those phony workers will be slashed by 90%.
(This will be accomplished by having only one in 10 'retiring' civil
servants replaced.) And it doesn't stop there.
retirement age will go from 61 to 65, full pensions will not be given
unless someone has worked 40 years, public sector workers will lose 20%
of their salary, state workers will lose 30% and 30,000 civil servants
would be suspended on partial pay. All of this is in addition to huge
hikes in property, VAT and incomes taxes; not to mention a 33% jump in
taxes on fuel, cigarettes and alcohol.
So now you understand why all of those petrol bombs have been tossed in Athens over the last month.
the ESFS was confident that the Greek government would accept it.
After all, the country was bankrupt, it had no choice. Indeed, the
ESFS was so certain of that acceptance that they concentrated all of
their energy in hashing out how big the bailout would be. What NONE of
them expected was what the Greek Prime Minister George Papandreou just
did this morning. He announced that he would put the terms of the
bailout loan to a vote by the Greek people themselves.
short, Papandreou has just flicked his Bic and lit the fuse to a
ticking time bomb. Expecting the Greeks to approve the cutting off of
their spoils is like expecting a Chicago welfare mother to refuse her
monthly paycheck. And ten seconds after the Greeks vote "No" (which
they will - riots and petrol bombs don't mean a 'yes'), their Greek
bonds become worthless. And since the French and Austrian banks hold a
disproportionate amount of those bonds, they'll have to default also or
at least go into receivership. This will then trigger their
government's takeover of those banks, which will plunge that
government's credit rating into the toilet - which will trigger a drop
of their government's bonds which will cause other banks in other
countries holding those bonds to collapse themselves, forcing their
respective governments to....well, you get the ugly picture. And all of
this couldn't happen at a worse time.
is the lowest member of a group of five debt-ridden European nations -
Portugal, Ireland, Italy, Greece and Spain (which, for obvious reasons,
have been nicknamed the PIIGS) who are all drowning in a sea of red ink.
And the moment Greece sinks, the undertow will suck in the remaining
four. And just when you think it couldn't get worse - it has.
everyone's shock, Belgium just oinked its way into the sty. As of last
month, it is technically in Chapter 11 bankruptcy due to the collapse
of its state run bank, Nexia (which is that nation's version of our
Federal Reserve). Yes, it's bad.
I wish I could end this missive with words of hope but, frankly, my dears, I can't see any.
the beginning, the only chance of the Euro's survival was if all of the
nations held together. But if just one broke ranks, all of them would
collapse. And today, that is just what Greece has done.
do not wish to sound like Chicken Little - but honestly and truly, as I
see it, the financial sky is beginning to fall in Europe.
For more on this very serious financial topic we invite you to read this report from The Daily Mail.