In Greece, austerity kindles deep discontent, breakdown in rule of law

[Zanza]

The Balkans Are Not Worth The Bones Of A Single Pomeranian Grenadier.

Why would the Poles get involved anyway?

[Martinus]

The Balkans Are Not Worth The Bones Of A Single Pomeranian Grenadier.

Why would the Poles get involved anyway?

Dunno. Ask Angela Merkel why she asked our government to chip in for the Greece aid.

[The Brain]

I worked with a Japanese guy a few years. He confirmed that Swedes work a LOT less than Japanese but a LOT more efficiently.

[Zanza]

Dunno. Ask Angela Merkel why she asked our government to chip in for the Greece aid.

European solidarity. :p If the Polish EU presidency wants to secure more funds for the structural cohesion funds, they should show support in the Euro crisis.

[MadImmortalMan]

Call it a sovereign debt crisis if you wish, but it still remains a banking crisis at it's heart.

Not anymore. They've been bailed. Now it's a sovereign debt crisis. If it blows up, it will become a banking crisis again too.

[alfred russel]

iirc the US national debt is approaching 70% after the bailouts (most of which will be repaid at a profit iirc). Greece is performing at nearly an order of magnitude worse without fighting two wars.

It's actually 98.6% gross public debt by now.

If you only consider net public debt, Greece has a much lower percentage too as a lot of their debt is held by institutions like the ECB, EFSM or EFSF. Arguably the IMF or Greek Public Pension Fund loans would also not qualify for net public debt. By that measure, Greek debt is constantly decreasing as more and more is bought by EU institutions. 

I think Viking's figure is the more relevant one. The difference primarily is due to intergovernmental accounting and is owed by the federal government to itself.

Basically social security taxes are designated for social security payments, and the taxes have exceeded payments frequently. That payroll tax money is used for general purposes, with an IOU from the general fund of the government to the social security fund of the government for the amount. But the government can avoid the transfer by just changing the laws regarding social security.

[Admiral Yi]

But the government can avoid the transfer by just changing the laws regarding social security.

Which, as we know from a different thread, the Republicans can do with a snap of their fingers.

[Razgovory]

Dunno. Ask Angela Merkel why she asked our government to chip in for the Greece aid.

Probably wants someone to deliver the money more on the Greek's "level".

[jimmy olsen]

Doesn't look good.

http://www.msnbc.msn.com/id/43633233/ns/business-us_business/

Greece risks being judged in default on its debt obligations if banks are forced to bear part of the pain, Standard & Poor's said Monday, suggesting that current proposals for rescuing the euro zone's weakest member may have to be reconsidered.

In particular, a plan proposed by the French government and banks "could require private sector debt restructuring in a form that we would view as an effective default," S.&P. said in a statement.

The effects of a Greek default would be felt around the world. The country's debt of €330 billion might not be large enough in itself to set off a renewed financial crisis, but once the precedent of a euro-zone default had been set, investors would likely abandon the debts of other struggling members, including Portugal and Spain.

More worryingly, Western banks, including the giants of Wall Street, have built a tower of credit default swaps — essentially insurance — on the debts of those countries, and the cost of paying up in a default would be huge. While the French and German banks have the biggest direct exposure to Greek's debt, it is American banks and insurance companies that would have the largest obligations to cover payments to those holding the swaps.

A finding by the credit ratings agencies of default would also require the E.C.B. to impose discounts, known as haircuts, on the Greek debt it has accepted as collateral. That would inflict more financial pain on banks holding that debt.

Euro-zone finance ministers agreed over the weekend to provide Athens with financing of €8.7 billion, or $12.6 billion, from the €110 billion bailout agreed to last year, to help the Greek government function through the summer. The new aid eliminates the prospect of a near-term default.

But the finance ministers put off the question of how to provide a second bailout, reportedly valued at up to €90 billion, to keep the country operating through 2014, when it is hoped that Greece will be able to return to the credit markets.
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The thorny issue of how to share the pain with the private sector suggests that discussion of the second bailout could continue for months.

Nicolas Sarkozy, the French president, announced June 27 that French banks had agreed to a plan under which the banks would reinvest most of the proceeds of their holdings of Greek debt maturing between now and 2014 back into new long-term Greek securities.

"If it wasn't voluntary," Mr. Sarkozy said at the time, "it would be viewed as a default, with a huge risk of an amplification of the crisis."

Germany's biggest banks have also agreed to roll over some of their Greek debt holdings.

But Standard & Poor's said Monday that it "views certain types of debt exchanges and similar restructurings as equivalent to a payment default": when a transaction is seen as "distressed rather than purely opportunistic" and when it results "in investors receiving less value than the promise of the original securities."

Both conditions would appear to be met by the French proposal, it said.

S.&P. has already cut Greece's long-term rating to CCC, deep in junk territory.

European officials are anxious to avoid setting off a default, Gilles Moëc, an economist at Deutsche Bank in London, said, because that could lead to a crisis in relations with the European Central Bank.

The E.C.B., which itself holds billions of euros worth of Greek debt, has said it could only accept the participation of bondholders in any restructuring if it were "entirely voluntary."

The central bank — which has been helping Greece by buying its debt on the secondary market — "doesn't want to jeopardize publicly its balance sheet anymore," Mr. Moëc said. "It's one thing to say they'll accept Greek government bonds, it's another thing to have something on their balance sheet that has ceased to pay, which is the definition of default."

"It doesn't mean the Greek securities are not going to be paid," he said, adding: "The E.C.B. would be able to accept them if the final structure was relatively healthy. One thing the E.C.B. doesn't want is any infringement of its right to decide on the collateral that it accepts."

This article, "S.&P. Warns Bank Plan Would Cause Greek Default," originally appeared in The New York Times.

[Crazy_Ivan80]

those banks knew the risks.
And risk means, afaik, that sometimes you don't get your money back.

[grumbler]

those banks knew the risks.
And risk means, afaik, that sometimes you don't get your money back.

Yes.  This is known as a default.  It ruins the credit of the creditor, but the creditor doesn't pay back all of the loan.  The Greek government knew the risks of borrowing, and risk means, afaik, that sometimes people learn not to trust you, so you don't get to borrow money any more.

[Martinus]

those banks knew the risks.
And risk means, afaik, that sometimes you don't get your money back.

Yes.  This is known as a default.  It ruins the credit of the creditor, but the creditor doesn't pay back all of the loan.  The Greek government knew the risks of borrowing, and risk means, afaik, that sometimes people learn not to trust you, so you don't get to borrow money any more.

Yeah. I think many people do not realize to what extent modern governments are financed by debt. The problem for a country like Greece, if it defaults, is not just that it will tell its creditors to go to hell - but that suddenly it will find itself in a huge cashflow problem.

[Neil]

Not just governments.  Corporations do the same thing, except they usually have the assets to cover their liabilities.

[grumbler]

Not just governments.  Corporations do the same thing, except they usually have the assets to cover their liabilities.

Yeah, but the banks have access to those assets in the case of a default.  Sovereign debt is different.

[Razgovory]

Not just governments.  Corporations do the same thing, except they usually have the assets to cover their liabilities.

Yeah, but the banks have access to those assets in the case of a default.  Sovereign debt is different.

Governments could offer their citizens as collateral.