Markets Brace as the Crisis in Europe Flares Up Again Fears about Europes deteriorating finances intensified on Sunday as new doubts about the health of French banks, as well as Germanys willingness to help Greece avert default, left investors bracing for another global stock market downturn this week. In Greece, the epicenter of the Continents financial disarray, government officials announced new austerity measures on Sunday, even as the countrys finance minister, Evangelos Venizelos, warned that the Greek economy was expected to shrink much more sharply this year than previously anticipated. In a revision, a contraction of 5.3 percent in 2011 was predicted, rather than the 3.8 percent forecast in May. Slower growth could make it harder for Greece to pay its debts, even as it tries to reduce them by cutting government spending and raising taxes. While the Greek drama has been running for more than a year, only recently has it threatened French and German banks, unnerving investors around the world and sending stocks tumbling in Europe and the United States. More than anything else, political and business leaders want to avoid the phenomenon of contagion, in which fears in one country spread to others, causing severe stress throughout the financial system, as happened in the fall of 2008. To be sure, Europe could still draw away from the precipice. That is especially true if policy makers come up with a plan to keep Greece afloat while also preventing anxiety from infecting other countries like Spain and Italy, whose huge debts and weak economies have fed worries that their borrowing has become unsustainable. On Sunday, French government officials braced for possible ratings downgrades by Moodys Investors Service of Frances three largest banks, BNP Paribas, Société Générale and Crédit Agricole, whose shares were among the biggest losers last week. The biggest banks in Europe, especially in France, hold billions of euros worth of Greek bonds, and investors fear even a partial default by Greece would sharply diminish the value of those assets, eroding already weak capital positions. American financial institutions, typically heavy lenders to their French counterparts, have begun to pull back on these loans, but United States banks exposure to France remains substantial. Still, if the French banks are indeed downgraded, it would underscore how European officials have been unable to contain the effect of the financial crisis in Greece, despite two bailout packages totaling more than 200 billion euros ($272 billion). Frustration elsewhere in Europe has been mounting over whether Greece is sticking with the austerity goals it agreed to follow in order to qualify for the aid, and German voters in particular are wary of more handouts. Despite repeated pledges by Chancellor Angela Merkel to keep Europe together, the cacophony of dissent within Germany has been rising. That is creating fresh doubt justified or not about the nations commitment to the euro. The German electorate is not in the mind-set to undertake actions it sees as subsidizing less worthy nations, said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y. As a result, the government is moving in a very isolationist way to try to establish a fortress Germany thats economically secure despite the risks in its European Union partners. On Friday, a stalwart German member of the European Central Bank, Jürgen Stark, abruptly resigned news that would have barely merited more than a few lines in the financial pages just a few years ago. Today, it is considered a sign of frustration within Germany about the extraordinary measures being pursued to maintain stability in the euro zone, adding to the volatility in global financial markets. Mr. Starks departure could be seen by financial markets as another indication of growing disenchantment in Germany towards the euro, Julian Callow, chief European economist at Barclays, wrote in a note to clients. Last week, Mrs. Merkels finance minister, Wolfgang Schäuble, warned that Greeces European Union partners would withhold new financial aid that is needed to help Athens pay its bills through Christmas unless the Greek government fulfilled the conditions of its first bailout. All this has generated severe discomfort in Washington, which has watched the fallout from the European debt crisis with growing alarm. Treasury Secretary Timothy F. Geithner has been in regular contact with his European counterparts, repeatedly advising them to speak with a single voice to help reduce confusion in financial markets. After a series of discussions on Friday at a meeting of the Group of 8 finance ministers in Marseille, he declared that European officials fully understand the gravity of the situation there. Athens is expecting to receive the next allotment of 8 billion euros of aid from the 110 billion euro rescue package that Greece was awarded last year. That aid is to be supplemented by a second bailout of 109 billion euros that European leaders agreed to in July. But the second package is threatened by demands from a handful of euro zone countries, including Finland and the Netherlands, that Greece provide collateral to secure further loans. Mr. Venizelos said the government would do everything needed to close the budget shortfall. If we can prove wrong those who are betting on Greece to fail, we will see the crisis recede, he said. Among the measures Mr. Venizelos announced on Sunday was a temporary property tax, ranging from 50 cents to 10 euros a square meter, depending on the value of the property, which would be collected for two years. The levy will be added to electricity bills to thwart tax evasion. Mr. Venizelos also warned that the government would make further cuts to public spending. In a largely symbolic move, the government said it would withhold a months pay from all elected officials. This is a battle for the countrys survival, Prime Minister George A. Papandreou told a news conference in the northern port city of Salonika on Sunday. These measures are the supplies we need to fight. http://www.nytimes.com/2011/09/12/b...s-uncertainty.html?_r=2&partner=MYWAY&ei=5065 I don't see the EU surviving this, if Greece continues to lurch towards default. Why should Germany and France destroy themselves to say a socialist ponzi scheme gone wrong in Greece? Wouldn't it be ironic, if a socialist European nation's debt pulled the world into a depression? Talk about the ultimate "told you so"! _
actually greece is just the tip of the iceberg. ireland and portugal are also on the brink of the default. ECB has enough financial resources (since they have small economies) to save them but what happens if Italy and Spain are the next one? ECB is currently buying btp and bonos (italian and spanish public debt titles) still the 10years btp yeld is 5,5% today. If that yeld raises 7% italy can not honours its debt. and Italy has a debt of 1900billion euros. It would be the biggest state default ever seen. and if that happens also all the other western european states will probably default. Even germany (whose debt has aaa rating) will experience big problems. Consider that germany public debt is actually 80% of its GDP. But if we add to that the debt of KfW (which emits bonds guaranteed by the german state but whose debt is not included in public debt just for a financial trick) the geman public debt raises at 100% of its GDP. It would be like a dominoes game.
That is the wet dream of every Anglo-Saxon Financial Imperialist -- the Age of the Dollar & The Pound, the Age of New York and London as the reference point for financial centres -- is coming to an end. I understand that is hard to swallow, but swallow y'all will. That, of course, is utterly clueless -- as usual. What you call "socialist European nation's debt" -- for the thousand time -- are actually lower than "non-socialist America's debt". So what gives?
Why the defensive comments about the USA in every thread on the EU's financial woes? Do you have an inferiority complex? _
well, the welfare state actually is just a piece of the equation. for example in italy there are subsides to people who loose their jobs. but those subsides are payed not by the state but by the workers themselves(a certain percentage of their wages are taken not by the state but by social security for this purpose). so for example cutting those subsides will not improve public finances. Improving laws against corruption (italy looses 60 billion euros every year for corruption according to its central banks) and against tax evasion (120 billion every year) could work but it costs time (and the bond markets need money now, not in the future) and italian politicians are not willing to do so because they are the recipients of corruption. I also know that in greece tax evasion and corruption are really widespread and that' s one the major causes of greece debt.
Does Belgium even have a government yet? LOL. Even with the massive taxation they bludgeon their citizens with, they fail.
We have more than enough governments that keep Belgium running, e.g. -- hold on to the branches of the trees -- the Government Of Wallonia (= the Government Of the Walloon Region), the Government Of The Francophones, the Government Of the Brussels-Capital Region, the Flemish Government (= Government Of The Dutchspeakers + Goverment of The Flemish Region), the Government Of The Germanspeakers, etc. Then we also have certain matters dealt with on the Provincial level (e.g. Province of Antwerp, Province of East-Flanders, Province of Hainaut, etc.) or on the communal level (e.g. City Of Brussels, City of Antwerp, etc.). Not having a federal government really isn't that much of disaster. Also,... Not looking bright nowadays because, once again, the talks are being torpedoed by the Radial Francophones on the issue of Brussel-Halle-Vilvoorde (also known as "BHV"). The political party is blocking everything -- they have 1 (!) seat in The Chamber.
Well, in all honesty, I sometimes wonder about this too -- me having an inferiority complex as a European. And, I guess I do. Anyhow, I just think it's important to see things in context. Some among us here are making threads about the debt woes of some little European country on a daily basis; whilst the financial problems of their own country is of a far bigger proportion and far more serious than little Greece's are. No surprise, because it fits remakably well in the utter and total smokescreen that the Anglo-Saxon press has layed to cover-up the state of their own country finances.
Socialist? With no inheritance or capital gains tax? 2-12-2008 The government of Greece has taken a very bold step forward by abolishing (in effect) the tax which the vast majority of heirs have to pay in order to obtain ownership over the assets of a deceased person. http://www.helleniccomserve.com/greeceabolishesinheritancetax.html June 2005 Greece, capital gains derived from certain transactions are subject to tax as income for corporations. Under the new tax laws, dividend tax has been abolished. http://fidelityco.net/pdf/Taxation in Greece - June 2005.pdf 11-1-2003 The Greek government announced plans to cut the corporate tax rate from 35 to 25 percent for investments over 30 million http://business.highbeam.com/137663...9/greece-woos-large-foreign-investors-tax-cut 2002 In 2002 the Greek government abolished its high tax on intra-family transfers of businesses. http://www.kauffman.org/uploadedFil...mergingScholars/KDFP/tsoutsoura-margarita.pdf October 2001 The 2002 Budget that was presented to Parliament on November 22nd was revised compared with initial expectations, due to the worse-than-expected international environment and the introduction of new tax cuts http://fidelityco.net/pdf/Taxation in Greece - June 2005.pdf 11-16-2001 The tax measures include: raising a tax free income for all taxpayers by 20 percent, reducing a tax rate on corporate profits from 35 to 32.5 percent for companies that create new jobs (with the option of extending the measure if it proved efficient), and abolishing a stamp duty payment to all transaction except house rents and contracts (both cases will be reviewed in 2003). http://www.greekembassy.org/Embassy/Content/en/Article.aspx?office=8&folder=325&article=8800 12-5-2000 Greece's National Economy and Finance Minister Yiannos Papantoniou on Monday announced a cut in securities' transaction tax from 0.6 percent to 0.3 percent, a moved aimed to boost liquidity in the Athens Stock Exchange. http://www.greekembassy.org/embassy/content/en/Article.aspx?office=2&folder=291&article=4960 Looks to me like Greece followed the same basic conservative model the US did, cutting taxes to spur growth but ending up instead with a (*)(*)(*)(*)ty economy and a huge deficit. http://www.tradingeconomics.com/greece/government-budget
Italy sold 6.485 billion euros ($8.846 billion) of BTP government bonds, including 3.865 billion euros for a new five-year bond on which it paid a 5.60 percent yield, the highest on a five-year bond since the euro's introduction. The amount sold in the auction compared to a 5 billion to 7 billion euros target range for the four auctions, including a 3 billion to 4 billion euros target range for the five-year bond. The bid to cover ratio on the five-year bond fell to 1.279, well below the 1.93 in the previous auction of five-year paper. Hopes that China might step in to buy Italian bonds, after an Italian request and recent talks, failed to provide much support for the auctions. The European Central Bank has also been supporting Italian bonds by market purchases as the Italian government strives to approve austerity measures. http://www.cnbc.com/id/44498302 it' s a very dangerous situation. in these days the italian government is approving cuts to the expenses and is raising taxes for 54 billion euros but with these yelds it' s still not enough. Moreover with these new taxes the gdp growth will shrink and so the public debt/gdp ratio will grow.
Italy's sovereign debt rating cut by S&P on growth fear S&P cut its rating by one level to A from A+, adding that the outlook for the country was "negative". It cited fears over Italy's ability to cut state spending and bring its finances in order, particularly given the country's growth prospects. Italy said the move had been influenced by "political considerations". A government statement said the downgrade had also been dictated more by stories in the media than by economic reality. http://www.bbc.co.uk/news/business-14981718 with these kind of statements and with a government like this things are going worse day by day. Stock exchanges have probably yet discounted this downgrade since it was predictable but the bond market is not as fast as the stock market. I think the btp yelds will raise if berlusconi will not fired.
Or, as the Italian PM put it: "The government has always won the confidence of parliament, thereby demonstrating the solidity of its majority. Standard and Poor's evaluation appears to be dictated more by background articles in the newspapers than the reality of things and seems to be invalidated by political considerations." http://www.guardian.co.uk/business/blog/2011/sep/20/eu-debt-crisis-italy-downgrade I have no words, it' s really unbelievable
