Will Greeks Defy Rape and Pillage By Barbarians Bankers? An E-Mail from Athensby Yves Smith
http://www.nakedcapitalism.com/2011/05/will-greeks-defy-rape-and-pillage-by-barbarians-bankers-an-e-mail-from-athens.htmlWow, this is what debt slavery looks like on a national level.
The Financial Times reports that a new austerity package is about to be foisted on Greece. It amounts to asset stripping and a serious curtailment of national sovereignity:
European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens….pressure is building to have a deal done within three weeks because of an IMF threat to withhold its portion of June’s €12bn bail-out payment unless Athens can show it can meet all its financing requirements for the next 12 months.
Officials think Greece will be unable to return to the financial markets to raise money on its own in March – as originally planned in the current €110bn package – meaning that the IMF is now forbidden from distributing any additional cash. Without the IMF funds, eurozone governments would either be forced to fill the gap or Athens could default.
To bring the IMF back in, the new deal must be reached by a scheduled meeting of EU finance ministers on June 20.
Even if they get their way, the rescue package is certain to fail to forestall an eventual default or restructuring because none of these rescues is a rescue. When the banks got in financial trouble, they got to borrow at discount rates. If Greece were to borrow from the ECB, say at 2% over the EBC’s policy rate, instead of the punitive rates on offer, it would look a hell of a lot more viable near term. I’m not saying that this is the best or only remedy, but the ECB is also blocking a restructuring, specifically, anything that would be deemed to be a credit event. Clearly the concern is not Greek CDS; John Dizard has pointed otu that the level of Greek CDS is miniscule, less than 2% of the outstanding debt, so what happens to the CDS writers is simply noise compared to what happens to the bonds themselves. The concern seems to be setting a precedent, that the ECB seems desperate to maintain the fiction that no eurozone sovereign will default or restructure (and these are hardly the only options; a voluntary restructuring would get the job done).
Another reason this rescue is not a rescue is that one of its major elements, that of stripping Greece of assets, is unlikely to raise the €50 billion expected. The demands here are astonishing. Greek premier George Papandreou agreed to only €5 billion of asset sales a year ago; the best state owned assets are expected to fetch at best €15 billion. Trust me, if that’s all you can get from the best properties, anything else that can be cobbled together is likely to be worth at most half that in toto. So it’s not hard to foresee that the receipts from the infrastructure sales are likely to fall short by about half.
http://www.nakedcapitalism.com/2011/05/will-greeks-defy-rape-and-pillage-by-barbarians-bankers-an-e-mail-from-athens.html">more...
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