Greeks take to the streets; Striking workers shut down the country

Greek Strikes Defy Papandreou’s Bid to Stop Crisis (Update2)
By Natalie Weeks and Maria Petrakis


Feb. 10 (Bloomberg) -- Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets today as striking labor unions shut down schools, hospitals and flights.

Air-traffic controllers and civil-aviation workers are effectively closing down Greek airspace as part of the 24-hour work stoppage by ADEDY, the umbrella group representing about 600,000 civil servants. Some 483 international and domestic flights have been cancelled, a spokeswoman for Athens International Airport, Greece’s biggest, said by telephone.

Protests against Papandreou’s plans to freeze wages and reduce benefits come after European Union leaders, set to meet at a summit in Brussels tomorrow, signaled they may aid the country if progress in cutting the deficit is made. Bonds have slumped in Greece and in the euro area’s southern edge as investors examine budget shortfalls across the 16-nation bloc.

“The concern is whether the strike will be a one-off or the first of a long series of street demonstrations involving other parts of the economy,” said Giada Giani, an economist at Citigroup Global Markets in London. “We need to see a prolonged period of strikes before we know whether the government’s willingness will be affected.” .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aWDNXy4.w4DQ&pos=9

...and it was something to behold - center city actually shook.

k&r

The Greek government is about to be insolvent because lenders don't want to roll over their debt without spending cuts, and the populace doesn't want spending cuts.

If the EU lets them go down they risk hurting the overall EU economy because it will create more risk in their member nations and increase lending costs. However, Spain, Portugal, Ireland, and Italy are going to want their bailout too.

In the past the solution was always for the nation to inflate it's currency since Greece has no control over the central bank that option is not viable, unless the EU intends to inflate the Euro for the entire Euro-zone and just bail everyone out.

Once you bailout one, you bail them all out.

"Tuesday, February 9, 2010
Goldman Helped Greece Disguise Deficit

Readers may know that one point of contention in the worries about Greece’s deficits is that it had hidden the fact that it violated Maastricht rule that fine eurozone countries whose fiscal deficits exceed 3% of GDP.

How was this subterfuge achieved? While the Greek government engaged in some bogus accounting on its own, it also got some help from Goldman. Der Spiegel explains how:

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country’s already bloated deficit.

Greeks aren’t very welcome in the Rue Alphones Weicker in Luxembourg. It’s home to Eurostat, the European Union’s statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data “cannot be confirmed” or has been requested but “not received.”

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn’t exceed 60 percent.
The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. “Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

snip

http://www.nakedcapitalism.com/2010/02/goldman-helped-greece-disguise-deficit.html

Too late for the U.S.

;(