Posts Tagged: austerity

Greece’s riot dog Loukanikos dies

10 October 2014 - 6:35 am

Greek media report that Loukanikos (Greek for sausage) passed away peacefully, having retired from protests in 2012.

Loukanikos began hitting the headlines in 2010, when the stray hound began appearing in the front line of anti-austerity protests.

Athens journalist Damian Mac Con Uladh reports that Loukanikos suffered from his years on the front line.

According to Avgi journalist Petros Katsakos, the dog’s health was adversely affected by tear gas and from being kicked from police, forcing him to “retire” from active protest about two years ago.

“He was on the couch sleeping, when suddenly his heart stopped beating,” Loukanikos’ carer told Avgi.

At the height of his fame, Loukanikos even feature in Time Magazine’s review of 2011 (full details).

Loukanikos ‘retired’ in autumn 2012, around the time that the eurozone crisis was easing. He swapped tear gas and riot shields for a gentler life with an Athens family, who offered“all the care, love, food and vaccinations” a dog could could need.


If Europe’s policy elites could not quite believe it before, they must now know beyond much doubt that they have lost Britain. This island is no longer part of the European project in any meaningful sense.

British defenders of the status quo were knouted on Sunday. UKIP won 27.5pc of the vote, or 29pc after adjusting for the negligence – or worse – of the Electoral Commission in allowing a spoiler party with much the same name to sow confusion. Margaret Thatcher’s Tory children are scarcely more friendly to the EU enterprise.

Britain’s decision to stay out of monetary union at Maastricht sowed the seeds of separation, as pro-Europeans fully understood at the time, though almost nobody expected EMU officialdom to clinch the argument so emphatically by running the currency bloc into the ground with 1930s Gold Standard policies and youth unemployment levels above 50pc in Spain and Greece, and above 40pc in Italy. >> Read More

14 Nations Have Debts At 200 Year Highs

06 January 2014 - 20:23 pm

The IMF published research by Harvard professors, Carmen Reinhart and Kenneth Rogoff, that highlighted that most countries in the Western world will require defaults, higher inflation and a savings tax to save their economies as debt levels reach an astounding 200 year high.

The debt crisis crippling sovereign economies may even require 1930’s style write offs or IMF tools for austerity as seen in the past.  The authors are familiar to the IMF, Rogoff was a former chief economist. They were lauded for their work, This Time is Different: Eight Centuries of Financial Folly,  but stirred controversy latter by suggesting that that growth slows sharply once public debt exceeds 90pc of GDP.

The crux of the paper highlights the following:
1. Wealthy nation’s policy makers are in denial that they are different than poorer nations and feel that their debt can be reduced by austerity cuts, growth, and tinkering.

2. Advanced economies wrote of debt in the 1930s. First World War loans from the U.S. were forgiven when the Hoover Moratorium ended in 1934, giving debt relief worth 24% of GDP to France, 22% to Britain and 19% to Italy.

3. During a further restructuring of the war reparations regime on Germany under the Versailles Treaty, the U.S. itself imposed haircuts on its own creditors worth 16% of GDP in April 1933 when it abandoned the Gold Standard.

4. The policy is essentially a confiscation of savings, mostly achieved by increasing inflation while rigging the system to stop markets taking evasive action. The UK and the U.S. ran negative real interest rates of -2% to -4% for several years after the Second World War. Real rates in Italy and Australia were -5%.

The Telegraph article by Ambrose Evans-Pritchard, illuminates that opponents of the present system find that extreme austerity without offsetting monetary stimulus is the main reason why debts have been spiralling upwards even faster in parts of Southern Europe.

Unstable eurozone states are particularly vulnerable to default because they no longer have their own sovereign currencies, putting them in a similar position as emerging countries that borrowed in U.S. dollars in the 1980s and 1990s. The eurozone is further troubled with an unstable banking system that may still require significant recapitalization.

As seen with the 2008 financial crisis, a catastrophe across the pond will ripple and affect all trading partners in our interdependent world. These type of macro economic risks continue to support the need for safe haven investments like gold and precious metals.


george_sorosAs 2013 comes to a close, efforts to revive growth in the world’s most influential economies – with the exception of the eurozone – are having a beneficial effect worldwide. All of the looming problems for the global economy are political in character.

After 25 years of stagnation, Japan is attempting to reinvigorate its economy by engaging in quantitative easing on an unprecedented scale. It is a risky experiment: faster growth could drive up interest rates, making debt-servicing costs unsustainable. But Prime Minister Shinzo Abe would rather take that risk than condemn Japan to a slow death. And, judging from the public’s enthusiastic support, so would ordinary Japanese.

By contrast, the European Union is heading toward the type of long-lasting stagnation from which Japan is desperate to escape. The stakes are high: Nation-states can survive a lost decade or more; but the EU, an incomplete association of nation-states, could easily be destroyed by it.

The euro’s design – which was modeled on the Deutsche Mark – has a fatal flaw. Creating a common central bank without a common treasury means that government debts are denominated in a currency that no single member country controls, making them subject to the risk of default. As a consequence of the crash of 2008, several member countries became over indebted, and risk premia made the eurozone’s division into creditor and debtor countries permanent. >> Read More


In the early morning hours of November 17, 1973 soldiers of the Greek military junta, supported by NATO, stormed the Technical University of Athens. They attacked workers and students on the premises and those protesting at other locations against the junta of the Colonels. At least two dozen protesters were killed.

Today, the Polytechnio is once again at the center of social and political conflict recalling the mobilization of the security forces against the Polytechnio four decades ago. Education Minister Konstantinos Arvanitopoulos (New Democracy) has threatened to place striking university staff under martial law if they do not return to work on Wednesday. He also threatened to use police to clear university buildings currently occupied by students and staff.

The Polytechnio and the larger University of Athens, together with other universities across the country, have been on strike for over ten weeks. Administrative workers are opposing the dismissal of over 1,300 employees in the government’s so-called mobility reserve. Those affected will receive up to eight months reduced pay before losing their jobs completely.

The cuts to the universities are part of a wave of redundancies across public service. A total of 25,000 employees in hospitals, schools and offices are due to be transferred to the mobility reserve this year. By the end of next year, 150,000 public service jobs are to be slashed. >> Read More


Greece’s international creditors announced Sunday a pause in their discussion with Athens over the release of rescue loans.

Teams from the International Monetary Fund, European Union and European Central Bank have been in the Greek capital since September 17 for a fresh audit of the country’s finances.

The “troika” of donors said in a statement that the break would “allow completion of technical work” and that “the government’s economic program has made good progress.”

Discussions, they said, are to resume in the coming weeks.

Greek Finance Minister Yannis Stournaras indicated Saturday that negotiations were going “well.”

In the past, “technical” pauses have sometimes been implemented by the international donors over obstacles with Athens as it grappled with accompanying austerity commitments.

On Tuesday, Greek civil servants went on strike for the second time since the beginning of the month, aiming to influence troika discussion on a vast reform of Greece’s public sector and advancement of privatization in the country.

The troika and Greek authorities have different views on the timing of public sector layoffs. >> Read More


Here are the three things you need to know.

1. How the election will impact the eurozone

Societe Generale economist Anatoli Annenkov expects that if the current CDU/CSU coalition with FDP remains in power, Germany will be unlikely to budge from its current approach toward the eurozone.

“As the current government has already shown flexibility on Europe -accepting some trade-offs of short-term austerity for long-term structural reform - we see no change in its determination to pursue reform in the crisis-struck countries, nor in its willingness to accept any form of debt mutualisation/forgiveness,” says Annenkov.

Morgan Stanley economist Elga Bartsch believes there will be “no post-election shift in [the] German stance on euro crisis,” regardless of whether the composition of the government changes or not.

“Many market participants and political counterparties seem to believe that Germany’s stance on the euro crisis will shift materially after the election,” writes Bartsch in a note to clients. “In our view, a major shift on key issues, such as debt relief, joint issuance, or direct bank recaps, is unlikely given public opinion and constitutional constraints in Germany. In fact, we are concerned that a narrow majority for the centre-right may reinforce a relatively tough stance on additional aid.”

2. What the election will change in Germany

“In our view, the election result will have greater implications for domestic than European policy,” wrote BofA Merrill Lynch economist Laurence Boone in a report published earlier this month.

“Euro-area policies have not been a major issue in the campaign so far,” said Boone. “In our view, the main challenge facing the new government will remain the implementation of ‘Energiewende’ (energy transition). This could significantly impair Germany’s competitiveness and, absenting as yet undebated structural reforms, poses a risk to Germany’s recent economic miracle.”

SocGen’s Annenkov asserts that “Germany will be less stable after the election.” >> Read More


For all complaints about painful, unprecedented (f)austerity, the PIIGS (even those with restructured debt such as Greece) sure have no problems raking up debt at a record pace. Over the weekend, Spanish Expansion reported that Spanish official debt (ignoring the contingent liabilities) just hit a new record. “The debt of the whole general government reached 942.8 billion euros in the second quarter, representing an increase of 17.1% compared to the same period last year. Debt to GDP of 92.2% exceeds the limit set by the government for 2013…” Moments ago, it was Italy’s turn to show that with employment still plunging, the only thing rising in Europe is total debt. From Reuters, which cites a draft Treasury document it just obtained: “Italy’s public debt will rise next year to a new record of 132.2 percent of output, up from a previous forecast of 129.0 percent.”


The Treasury is due to officially update its economic and public finance forecasts on Friday.


The debt-to-GDP ratio came in at a record 127.0 percent last year and is forecast at 130.4 percent for 2013. The document did not contain any new forecast for this year. >> Read More


Over the past week, some of Germany’s most prestigious newspapers have almost all but given up reporting on the election campaign under way in Europe’s biggest country. It has simply become too boring.

Yet, the elections on September 22 are ultimately very important. The interesting question is not so much who is going to be the next chancellor – that seems all but settled. The important question is whether the new German parliament is more or less likely to agree steps to a resolution of the eurozone crisis. The important player to watch will be the opposition Social Democratic party. Depending on the result, it may, or may not, shift its position.

The SPD has not gained any traction against Angela Merkel, the chancellor. Perhaps more than any other social democratic party in the west, it has bought into the neoclassical economic policy consensus. That makes it hard to find a narrative with which to attack Ms Merkel. >> Read More


The complacency of those dictating Euroland’s policies – though not its victims – is breathtaking.

“Europe, it seems, has become anaesthetised to bad news,” says Simon Tilford from the Centre for European Reform. Tentative signs of life after six quarters of contraction are deemed a vindication of shock therapy, even as the underlying crisis gets worse in almost every key respect.

“The reality is that the Spanish and Italian economies will shrink by a further 2pc in 2013. Greece is on course to contract by an additional 5pc to 7pc and Portugal by 3pc to 4pc. Far from being on the mend, the economic crisis across the south is deepening. Real interest rates are increasing from already high levels,” he said.

An end to the slump – hardly assured – is not enough to reverse a compound interest trap across Club Med as debt loads rise faster than nominal GDP, or enough to render Italy and Spain viable within EMU. Such is the “denominator effect”.

Mr Tilford says the elephant in the room is the rise in the debts of Portugal and Spain by 15 percentage points (pp) of GDP over the past year, by 18pp in Ireland and by 24pp in Greece. Italy’s ratio rose 7pp to 130pc of GDP, already at or near the point of no return. >> Read More

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Baroda, India.