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21 Jun 2011

What's A Greek Earn?

Athens: Not Happy
So for the second time the state of Greece is in a state and requires a sub until some mythical payday somewhere in the far-flung future.  Not far behind in the queue for more dosh are the other countries that have already had a fiver slipped their way .


So what is going on? 

Well  to me a mere lay-person it seems that the €uro zone of the EU has painted itself into a corner and - being run by professional politicians -  they are not going to admit defeat and do a U turn (although the tories could probably teach them how). From how I look at it this is a problem that cannot be solved by more loans.   To be brutally frank,  the Greeks need to be forced to default whether they want to or not and not only that but also excluded from the €uro and also expelled from the EU and as quickly as possible.  This serves two purposes - it gets rid of the €uro zone's weakest link and allows Greece to reinstate it's own currency and sort itself out. 


The proposed austerity package is utterly pointless and will achieve absolutely nothing (except make the banks richer).  Everybody seems to know it and the markets rose today not on a belief that a second bail-out will work but because they are actually gambling that it won't and are now even more convinced it won't and as a result feeling more confident.


The problem the ECB/EU has got is that it is caught in the headlights like a rabbit and cannot see beyond keeping Greece in the EU.  I think all they can see are two solutions - Plan A and Plan B.


Plan A is I think,  that Greece must be kept in both the EU and the €uro no matter what the cost.  That the risk of allowing it to fail and the contagion that will cause will bring the whole EU down and probably start a second- even bigger - global credit crunch. That the consequences of a Greek failure whilst within the EU would be devastating not just to the €uro,  not even to just the EU but to all of Europe.  That the contagion unleashed by default would spread like wild fire and very very quickly - in a matter of days.  So they are throwing all the can at it to stop it. Why should the UK care? Well people claim that the UK's exposure is 'only' about €12Bn but Lord Myners , on Channel 4 News tonight stated The City's exposure to Greece is much greater than is even realised by the baying mob of anti-euro fanatics, because of insurance derivatives. If the euro dam breaks the City will be washed away in the flood of insurance claims along with the UK banking system. If the Greek parliament does not pass the legislation required to obtain EU/IMF funds tonight the City stands in mortal danger.  So no matter what the cost,  Greece must be propped up.  The EU line is drawn at Athens - not one step back. No retreat, no surrender.


Plan B is what they see as the only alternative - the immediate expulsion of Greece from both the €uro and the EU and if that happens it will possibly then entail the exclusion of Portugal, then Ireland, then Spain, then Italy.  Possibly even Belgium and Holland - the breaking up of the EU.  Unacceptable to the EU elite.


So from their perspective they are trapped - no matter what they have got to stop this at Greece and keep Greece on the inside (Plan A).  To opt for Plan B would be to admit defeat and be a totally and utterly humiliating climbdown by the political and financial elite of Europe.  Political and financial elite eat humble pie?  Not on the menu.


But Plan A isn't going to work either.  Look  for example at this mad scheme to sell-off Greece's assets.  They aren't worth anything - not a €uro, not even a drachma.   Nearly all of them are crippled with huge debts, massive over-staffing, decaying and outdated infrastructure.

As an example,  take Greece's railways.  Total income approx €100M.  Wage bill alone just over €400M.   So a private investor will have to cut wages by more than 75% before they can even afford to buy the  guard a flag, a whistle and a hat.  Their airports are in much the same state as is their arms industry, their power generation and their water.   Nobody is going to buy their assets until after the country has gone bust.  


Who Get's A Spanking?


And once Greece goes under - which I now believe it will, (even the UK treasury is planning for it)  then it becomes only a matter of time before others follow them.   Take Ireland  for example.  A default is a mathematical certainty. Their Banks owe €260Bn  -  taxpayer -funded Govt loans €32Bn,  the Irish Central Bank €52Bn, NAMA toxic loans €37Bn, ECB is owed €129Bn, and they owe us £10Bn.   Their tax-payer base - including people working part-time at near minimum wage, is only 1.8M people.  Get a calculator and work it out - it is physically impossible for so few people to pay off so much money unless they ramp up company tax significantly AND have an economic boom to surpass the last one AND it isn't based on debt and even then it's doubtful.   If they don't increase tax revenue by a huge amount we'll never get the money back.  It's as simple as that.The ECB knows this which is why it is insistent they increase company tax as a precursor to any more money or better terms.  

And there are other countries in just as bad a state.

Anyway,  that's how it appears to me. I find the amount of money being thrown at these countries staggering.  Where's it all going?  Straight into the bank's back pockets is where.  These countries are just being used as funnels - brown envelopes if you will.  This is how they have bailed the banks out - by allowing them to sell their bad debts to us,  charge as a fee for doing it and then add interest. And when these smaller countries go under,  the banks will just heap it all and more onto the next ones up the food chain and sooner or later it will be our turn until eventually the banks don't owe anyone anything and we are in debt to them for generations and paying for the privilage in compound interest.

Anyway,  that's how it looks to me.



7 comments:

Anonymous said...

"They way the French and German banks do not want the story told is that they, the banks, made private debt deals with Greek developers, Greek cities and municipalities, Greek Banks and the Greek state - PRIVATE deals - lent money, bought bonds - because being risky they offered a 'good return' and then got burned when Greece could not pay. Then, instead of taking the losses just as in the good times they happily took the profits, they cried, 'the sky will fall', and insisted that someone make sure all their bad private debts were settled in full buy someone, anyone they didn't care who. Bad French and German bank loans are being paid off by Greek tax payers, destroying Greek civil society, whether they were ever involved with the loans or not. "

From a much more detailed post, not by me, at
http://golemxiv-credo.blogspot.com/2011/06/greece-its-all-about-bailing-out-french.html

The Red Flag said...

And before the French and Germans lent them a penny, Goldman-Sachs audited Greece and certified it fit to join the €uro

kp said...

Twits ... the biggest loser will be the UK.

Direct bank losses are easily calculable and. although it looks bad for German & French banks, their losses are appropriately insured.

And guess which country holds almost all the insurance risk ... the UK.

stuart said...

http://www.huffingtonpost.com/2010/06/03/greek-financial-crisis-olympics_n_598829.html

"The 2004 Athens Olympics cost nearly $11 billion by current exchange rates, double the initial budget. And that figure that does not include major infrastructure projects rushed to completion at inflated costs. In the months before the games, construction crews worked around the clock, using floodlights to keep the work going at night.

In addition, the tab for security alone was more than $1.2 billion.

Six years later, more than half of Athens' Olympic sites are barely used or empty. The long list of mothballed facilities includes a baseball diamond, a massive man-made canoe and kayak course, and arenas built for unglamorous sports such as table tennis, field hockey and judo..."

A sign of things to come?

Prometheuswrites said...

Banks; Oceans; Nuclear Power Stations; Capitalism and The Western Imperialist Adventure:

http://www.youtube.com/watch?v=plRgOw5uxLo&feature=related

The Doors: When The Music's Over

PS. Re: "The cupboard is bare":- the cash is in the off-shore tax-havens. (Check out earlier GolumXIV and Automatic Earth blogs for details)

Robert said...

It's not just the Greeks though is it, if the Greeks go it could be like a long line of domino's just toppling.

To many countries have been living a lie for so long.

I was at a meeting a few years ago in which Plaid discussed Independence they stated we could be another Ireland another Greece another yes another country who expected billions from the EU for nothing.

The EU might have just grown up but some how I doubt it.

The Red Flag said...

Cheers Prom. If any reader is interested, I have a direct link to GolemXIV's blog in my sidebar.

He writes fascinating stuff.