Greece And The Eu

[Malcolm Robinson]

Well listening to the reports coming out of the Office for National Statistics etc anyone would believe we are out of recession and on the up again. Unemployment is falling, always a welcome sign, but we have to look a little closer to see the whole picture and one not quite so rosy. The employed figures are falling too as are hours worked and the ONS are blaming students for the apparent dichotomy of these two statements. This looks like straight political manipulation of government stats but with the unelected Dark Lord in the centre of government is anyone surprised? Any rise in 'economically inactives 'has to be of concern at a time when we need as many people as possible to contribute to our deficit reduction.

Public sector employment is 6.1 million and has risen by 7000 since Sept 2009!!!! I thought we were supposed to be reducing PSBR not increasing it? So across our green and pleasant land every time you walk past 4 people the next one works for the public sector. That's possibly unsustainable particularly at a time of recession but what really worries is that here, in our county, that ratio is one in two! For every two people you meet one of them works for the public sector, now is that really sustainable or is it payback for political allegiance?

Some members of the MPC seem to be getting jittery about inflation prospects, about time, but they are still voting unanimously. We now seem locked into importing inflation as a result of a weak exchange rate policy at the very least. 'The depreciation of sterling since the start of the year was likely to put additional upwards pressure on inflation over coming months.' They are still extolling the QE argument, I think this will be shown to be wrong at some point.

The BOE have come out with a 'normalising' exercise as they consider the financial crisis over. It is rewriting its policy regarding loan securitisations so it can get real securities, ones which the private sector will buy if needed, instead of the 'phantom' securities it has been accepting. Will this lead to a further tightening of credit lines?

One last thought before the budget of next week. Has Darling got anything in the pot to give away to bribe voters? You would think not but with a little creative accounting.........Looks like the amount of loans UKPLC needed this year (£174B?) might see an undershoot of around 20 billion (£152B?) on previously budgeted figures. (Need to see the March figures to be certain of course!) What can we expect Gordon/Alistair to do with that, not borrow it and therefore save not only that amount of capital but also the repayments? I think we might see the opposite with government maintaining its annual proposed borrowing figure which could give it up to 20 billion to sweeten the electorate. Not doing that would be the responsible thing to do as it would give international investors confidence that UKPLC was taking its recovery seriously, and who do we need to start buying our bonds instead of relying on a QE programme?

[Malcolm Robinson]

So we now have one of the Miliband boyos calling for the establishment of a national bank based on the post office network which will take on the private banking sector. It would seem an immanent election has forced this change in ideology! If it does go ahead pity it didn't come sooner and at least try to save some of the closed post offices up and down the country. Is this really a change back to the roots of the Labour party as some sort of acknowledgement of their voter demographics in the run up to an election or does it make commercial sense? It would seem to make more sense if we didn't have such big public stakes in the banking sector already as this could easily undermine those positions. It should certainly have been a serious option considered at the time we lavished such huge piles of money towards failing banks, which has then disappeared!

[threegee]

The P in PIGS gets downgraded.

http://news.bbc.co.u...ess/8584812.stm

The Portuguese Minister of Finance, Teixeira dos Santos, said it was key to maintain efforts to cut the budget deficit in order to differentiate the country from Greece.

Doing well then isn't he?

Someone was throwing a projection around after the budget saying that we were scheduled to spend more on simply servicing debt than the entire education budget. A really good use of public money! That, of course, presumed that our own debt rating would be maintained. Thing is a lot of Darling's figures are based on very optimistic projections, and some of them sound (particularly the proposed public sector "efficiency" savings) plain barmy. I'd take a bet that he's wildly wrong in more than one mission-critical assumption.

[Malcolm Robinson]

Well we have had the non event budget which very nearly turned into a party political broadcast. The ONS came out with inflation figures just before which were 'not as bad as feared.' No they weren't but taking a closer look someone had manipulated the basket of goods which are measured to produce that very sentence! Now who is at the centre of government who might be guilty of that one? You can see the hand of the unelected dark Lord all over that! This means ALL 'ONS' figures have to be suspect from now on.

The fiscal portion of the budget revealed more about the missing information than any which has been included. £100M less borrowing over the next 5 years looks little more than an exercise in creative accounting as the forecasts have had about 0.5% subtracted each year over that cycle. The structural fiscal deficit figure of 8.4% of GDP reducing to 2.5% at first glance looks to be going in the right direction but the fact that it will still be there after we have gone through an austerity package will not be unnoticed by international investors. Speaking of which it would seem opportune that Portugal had their rating downgraded by Fitch which must have taken some of the spotlight off the UK. Still we saw UK 10Y gilts up 5 basis points and let's remember we need to get £186B away soon.

The UK growth figures Darling is using seem to be optimistic to say the least even allowing him to get this year's figures right. Not hitting his 3-3.5% growth rate over each of the following years would have a catastrophic effect on borrowing needs and wipe out that projected £100M saving. As for government savings those were noticeable by the absence of any detail what-so-ever. Asset sales were mentioned but as they reiterated figures used by Chancellor Brown in 1997 probably not even worth looking into them! Bank lending, quite an optical illusion here as we heard our second Iron Chancellor telling the part nationalised banks to increase business lending to £94B next financial year. Same sort of rhetoric he has already used on them and the result, business lending by RBS has actually fallen this year!

Stamp duty looks to be a particular minefield as it would now seem government wants first time buyers to enter a house bubble market with the distinct possibity of buying straight into negative equity. Not only that the concession to those buyers is temporary whilst the increase levied at £1M+ properties is permanent. That would seem strange for a supposed meritocracy? The much heralded Mortgage Support Scheme seems to show very very limited take up if Cam's figure of 15 is correct maybe that was a clear case of grabbing headlines with no one looking at the small print?

Also the whole university issue looks to be very complicated as on the one hand there is to be a £35M innovation fund whilst at the same time £20M worth of cuts?

What is apparent is that this budget is at best a halfway house towards the next spending review if Darling still resides at number 11. With Tory promises of initiating their own budget within weeks of coming to office whoever is Chancellor will have to make a much more detailed and fiscally strategic offering next time.

[Monsta®]

how about saying it in layman's terms? for those who have no idea what your on about?

[Malcolm Robinson]

Ok then Monsta,

They are fiddling their own figures to make things look better than they are with their eyes firmly on the election. If International investors see through this it will probably result in another round of money printing and another fall in the sterling exchange rate which makes your quid worthless not only abroad but at home as well!

[Monsta®]

Ok then Monsta,

They are fiddling their own figures to make things look better than they are with their eyes firmly on the election. If International investors see through this it will probably result in another round of money printing and another fall in the sterling exchange rate which makes your quid worthless not only aboard but at home as well!

[Malcolm Robinson]

Getting back to Greece for a minute, it would seem euro membership doesn't come with any guarantees attached as we see time after time the Greek people let down by grandstanding Eurocrats. Merkel, hamstrung by her own constitutional court ruling, notwithstanding the wishes of her electorate, is pushing for an IMF bale out, Sarko is railed against that insisting the ECB does the job, and looking at the latest election ratings his party has just had in France he might not be President much longer. It looks a right mess with nothing of any worth coming-out of euroland to help the Greeks. We now see a Dutch MEP calling for the Nordic nations to hold Northern Euros and let the Southern ones hold separate South Euro notes? The Dutch are almost implacably behind the IMF plan but that would bring the sustainability of the euro, as well as the ECB not being able to sort its own troubles out, into question.

There is one thing to note at this stage and that is if the IMF are brought in to bale Greece out the austerity measures their government are trying to bring in now will look like a walk in the park, as IMF intervention carries it's own conditions!

[Malcolm Robinson]

Another day another hoped for plan of action for Greece. This time the current one does at least seem to have some legs on it, so let's have a look at it.

The assumption by the Eurocrats now that 'Greece is in very serious difficulties' would seem to have crystallised thought in this matter even if it does look like an insipid statement full of innuendo which the markets will probably test once the euphoria over actually having something done subsides!

The proposed plan now is that the IMF give 1/3 of the loans needed while 2/3 rds will be coordinated bilateral loans from other Euro zone countries. The full costs, Euros 22B.

This still has to have assent from every euro member so Germany still has a major role to play and keeps a veto. Also there was an interesting phrase added to the agreement saying that European Union members should commit to closer "economic governance” for the future. According to the FT the phrase was changed slightly at Gordon Brown's request. If politicians had put the same effort into arranging a deal as they do into wording communiqués this situation would have been sorted ages ago.

The IMF would seem to be playing quite a backseat role, not one it normally insists upon when called into action in this way? This time it cannot insist on exchange rate devaluation or even a change in interest rates, normally the bare minimum of the cost of IMF intervention! This would seem to put even more pressure on Greece and her people to service these debts at her current trading levels, I somehow doubt once the reality sinks in the Greek government will be so content with the deal as they seem to be at present!

The Eurocrats now have to go back to their own peoples and sell this deal. Just how Merkel can say on the one hand Germany hasn't used its own money to bale Greece out while at the same time sell this deal I for one can't imagine but they are seasoned politicians! One thing is for sure markets like to test fudges, they can smell the intervention money building!

The ECB seems to be the saviour at the moment, Greek banks are reported as making as much as 4B Euros using Greek debt as collateral while borrowing at 1% rates off the ECB, once normally returns to the market and Greek bonds have to stand self supporting then they probably won't qualify as redeemable collateral by the same ECB! The current ECB plan now is to run with the emergency rates for an extra year until the end of 2011. This would seem quite a departure from the speeches made by Trichet, "no government, no state can expect special treatment” and Paramo who said, "It's certainly unthinkable to change the rules to solve the specific problems of any individual country or bank”. There is now talk of other financial mechanisms employed, probably to cover the embarrassment these two officers must sustain! However nothing can change these statements made by Trichet on the same day! Firstly IMF involvement would be ""very, very bad.” and later in the day a plan involving the IMF is something which leads him to be "extraordinarily happy that the governments of the euro area found out a workable solution.” Are these guys really leading the charge?

Looking at the 'shares' in ECB membership as published by their web site we see the following,

Germany 27.12%, France 20.37%, Italy 17.9%, Spain 11.89%, Netherlands 5.72%, Belgium 3.48% the rest smaller so that is the share of bale out each country will put into the pot.

We are a 4.51% shareholder in the IMF .Gordon Brown has issued a statement denying "direct” involvement in the rescue and this is why he uses the word 'direct'. If the plan turns out to be 22 billion Euros's the UK's implied share in IMF lending is around 330 million Euros. I can hear the printing presses starting up again! Could this be a template for a Club Med bale out and possibly a UK one, time will tell but the moral hazards this plan implies could have serious repercussions. We could always copy the Swiss style????

[Malcolm Robinson]

With this new 'bailout' package last week Greece now looks set to issue around 5 billion Euros worth of bonds. With her 10yr bond rates still stubbornly high, 6.18% can she afford the repayments? Going down this route would mean about 309 million Euros a year in interest payments, given the yield on the bond issue at today's prices. So we see Greece 'forced' into austerity measures by the ECB and having to pay around 11% of her public spending on interest payments.

It would seem paradoxical to lend Greece the money it needs to invest and build its infrastructure at levels which jeopardise the needed growth to repay? Austerity measures are only one part of the changes and Greece needs to trade into profit to repay these loans. Looks to me like Greece should consider withdrawing from the euro and going down the strictly IMF route if only to get away from the self serving machinations of the rest of the euro members? At the very least that should take the needed fiscal and economic decisions out of the hands of her own leaders who seem hamstrung for political reasons.

[Monsta®]

f.eckin greeks they invented gayness!

[Malcolm Robinson]

Greeks they invented gayness!

Probably but they also gave us philosophy, reasoned thought, debate, science, government and its structure, Olympics, mathematics, etc, etc........so not just greasy kebabs!

The whole point of this thread is to show that fiscal union cannot be enacted without political union, however much the federalists would like it to! Greece is paying a heavy price for this indulgence.

There are clear similarities with the Californian situation however because they are part of a wide political union they have options Greece, and read any other of the PIGS, do not have. Ireland would seem to be at variance to this at the moment but the question has to be asked, will the end result be worth the suffering?

So monsta next time anyone says we will be better off being in the Euro ask what mechanisms are in place when things go wrong. Clearly there has never been any serious thought given to that from what we see on an almost daily basis emanating from the Eurocrats!

[Malcolm Robinson]

As I have mentioned the Irish and their plan to get out of their fiscal troubles it may be worth considering them in relation to the UK. The Irish banking sector, like the Icelandic one, holds vast swathes of property in the UK with one estimate of £22billion, not an insignificant figure! The fact that a lot of this is commercial paper is worrying especially at a time of recession. At least the Irish grasped the nettle and implemented an austery plan but that only goes so far along the path to recovery. What should be disturbing to us is that their bank bale out and nationalisation will inevitably lead to a fire sale of assets at some point in the future. As part of the bale out they have taken an almost 50% haircut on asset prices and given the state of the commercial sector at the moment that might not be enough. If Ireland and Iceland for that matter do dump their commercial paper the knock on effects will spread to our domestic housing market. Not only that if HMG do manage to privatise their banking stakes our banks will have to carry out similar revaluations which will lead to losses and almost certainly drastic action to redress the imbalances they hold. After the much heralded election is there any reason to hold our interest rates at unrealistic levels, which seem only to protect home owners, when set against rising inflation? We seem far from out of the woods yet!

[Malcolm Robinson]

There has been an interesting quote from the Governor of the Bank of Ireland on Anglo-Irish Bank'

'As the dust settles, it is clear that most of the damage in this crisis – reputational and financial – has been done by just one institution, Anglo-Irish Bank. Meeting the bank's net liabilities, in accordance with the guarantee of September 2008, has already cost the government more than €12bn and is likely to cost about €10bn more. This is a truly shocking figure, albeit one that is affordable for the state.'

As time goes by we will be able to judge more fully if Ireland can afford this burden and there are clear implications for her nearest trading partner the UK.

[Malcolm Robinson]

Getting back to the UK economy it may be worth looking at the QE program as it has now been 'stopped' for about 1 month. The BoE purchased some £200, 000 million of assets. Of this some £198,275 million was spent on UK government bonds. So very little of it actually went on UK corporate paper. This clearly differentiated us from the programme undertaken by the Federal Reserve in America. In March 2009, the Monetary Policy Committee announced that, in addition to setting Bank Rate at 0.5%, it would start to inject money directly into the economy in order to meet the inflation target. The instrument of monetary policy shifted towards the quantity of money provided rather than its price. But the objective of policy is unchanged – to meet the inflation target of 2 per cent on the CPI measure of consumer prices. Influencing the quantity of money directly is essentially a different means of reaching the same end, or so the MPC said. With inflation now at 50% over the agreed figure something hasn't worked. If we add in recent fuel price increases and exchange rate changes we can clearly see GGG's inflationary bubble starting.

What the QE measures seem to have done is produce or hold up asset bubbles in themselves and in particular things like the stock market and residential housing prices. This would seem to have had the effect of using all of our reserves, and our children's, to get us back into the position which caused the fiscal problems in the first place? That might have more to do with the transient nature of the political class who seem to be behaving in the same way the music chair game went with the toxic debt bundles, as long as it's passed on it isn't our problem!

The claimed effect was to resume normal banking operations and in particular restart bank lending. The figures don't support any claim that that has worked. The annualised 3 month figure for Feb was -1%, M4 lending figures were down £3.8 billion and we have all seen the mortgage approvals figures for Feb fell. The BoE have now half intimated their policy in this regard has had 'limited success.'

One thing is for sure the BoE do have to get all of these UK bonds off their books at some point and any correction in the self inflected asset bubbles ain't going to help it!

[Malcolm Robinson]

Given the statement I made the other day regarding California and the similarities with Greece I have had a cursory look at the Californian situation in a bit more detail.

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay. Let's not forget pensions are debts in the same way as bond issues are and need to be repaid over time. If we look at California's stated debt that would seem manageable being about 8% of its total economy but if we perm in pensions, that figure more than quadruples to 37% according to independent statisticians. If we then take in unstated debt, the stuff which has been 'deliberately' hidden such as derivatives, then the graph goes off the chart! Clearly similarities with the Greek debt problem especially when the new Greek government came in and said their national debt had been misrepresented by the previous government by a factor of 3!

Like Greece, California does have the option to default on its debts, the last state to do that being Arkansas in the Great Depression, but we have to consider the wider political union California is part of. Under the American Recovery and Reinvestment Act of 2009 the Treasury announced the implementation of the Build America Bond program. This is designed to provide the needed funding for state and local governments at lower borrowing costs. Quite a divergence to the EU offering for Greece! With California basically using IOU's for last year's operating costs giving it access to lower priced funds might be advantageous. However without full disclosure of its real debts, including its pension deficits, how can the unquantified fiscal black hole be filled? Seems a common slight of hand and one our own NCC use!

Considering the default route the California's Centre for Economic Research has concluded, "Unfortunately, a formal bankruptcy is not the likely scenario. There is no provision for it in the law. Consequently, absent framework and rules of bankruptcy, the eventual default is likely to be very messy, contentious and political”. It would appear there is no clear way forward for California if she defaults. In fact the likelihood is actually making the situation worse as she has to offer larger and larger yields to attract investment. (The paradoxical situation already mentioned for Greece!)

We do have to consider the Californian economy and its ability to repay the debt levels it needs. We already see public costs slashed in efforts to bring the deficit under control and of course the resulting populous unrest these measures always produce. With internal tax revenues dropping in the region of 25% and foreclosures still stubbornly high leading to further taxable losses hard to see how the state can trade its way back to solvency without some imposed special measures.

Arnie might not 'be back' this time!

[Malcolm Robinson]

Looking at that quote from the Gov of the Bank of Ireland made me wonder just how much of the toxic debt the Irish state will have to pick up. Clear implication here in the UK if we ever get around to actually sorting the mess out! The National Asset Management Agency, NAMA, is to be the holder of Irish toxic debts and starting the clean up this week paid 8.5B Euros for assets with a face value of 16B Euros. These are bad property loans held by the banks and the hope is once cleared off their books the banking sector will get back to normal. This would seem a haircut of around 47% and going forward this might have to be raised considerably considering the other 81B which will find its way into the coffers of NAMA. Considering this and the Tier one capital requirement the Irish regulator has just announced for the banks there it looks like only the Bank of Ireland might get away with a minority state stake! It is worth noting that the capital requirements for the Anglo-Irish Bank are almost the same as how many government bonds Ireland planned to issue this year, that gives a pretty good picture of the size of the Irish economy. So it looks like Ireland needs to trade into profit whilst implementing a pretty steep austery drive notably in public finances, never very good bedfellows! At least the planned cuts announced straightaway in her austerity budget should add up to about 6% of GDP which shows willing. The markets seem to be accepting that and Irish bonds are trading in the region of +1.39% over Bunds which is within recent trading range.

[Malcolm Robinson]

I have been talking to some American economists regarding comparisons between Greece and California and I came across this in one of their links. Its a sobering read whose end result is more to do with contemporary effects rather than causal ones!

The Great Depression was a worldwide economic crisis that in the United States was marked by widespread unemployment, near halts in industrial production and construction, and an 89 percent decline in stock prices. It was preceded by the so-called New Era, a time of low unemployment when general prosperity masked vast disparities in income.

The start of the Depression is usually pegged to the stock market crash of "Black Tuesday,” Oct. 29, 1929, when the Dow Jones Industrial Average fell almost 23 percent and the market lost between $8 billion and $9 billion in value. But it was just one in a series of losses during a time of extreme market volatility that exposed those who had bought stocks "on margin” – with borrowed money.

The stock market continued to decline despite brief rallies. Unemployment rose and wages fell for those who continued to work. The use of credit for the purchase of homes, cars, furniture and household appliances resulted in foreclosures and repossessions. As consumers lost buying power industrial production fell, businesses failed, and more workers lost their jobs. Farmers were caught in a depression of their own that had extended through much of the 1920s. This was caused by the collapse of food prices with the loss of export markets after World War I and years of drought that were marked by huge dust storms that blackened skies at noon and scoured the land of topsoil. As city dwellers lost their homes, farmers also lost their land and equipment to foreclosure.

President Herbert Hoover, a Republican and former Commerce secretary, believed the government should monitor the economy and encourage counter-cyclical spending to ease downturns, but not directly intervene. As the jobless population grew, he resisted calls from Congress, governors, and mayors to combat unemployment by financing public service jobs. He encouraged the creation of such jobs, but said it was up to state and local governments to pay for them. He also believed that relieving the suffering of the unemployed was solely up to local governments and private charities.

By 1932 the unemployment rate had soared past 20 percent. Thousands of banks and businesses had failed. Millions were homeless. Men (and women) returned home from fruitless job hunts to find their dwellings padlocked and their possessions and families turned into the street. Many drifted from town to town looking for non-existent jobs. Many more lived at the edges of cities in makeshift shantytowns their residents derisively called Hoovervilles. People foraged in dumps and garbage cans for food.

The presidential campaign of 1932 was run against the backdrop of the Depression. Franklin Delano Roosevelt won the Democratic nomination and campaigned on a platform of attention to "the forgotten man at the bottom of the economic pyramid.” Hoover continued to insist it was not the government's job to address the growing social crisis. Roosevelt won in a landslide. He took office on March 4, 1933, with the declaration that "the only thing we have to fear is fear itself.”

Roosevelt faced a banking crisis and unemployment that had reached 24.9 percent. Thirteen to 15 million workers had no jobs. Banks regained their equilibrium after Roosevelt persuaded Congress to declare a nationwide bank holiday. He offered and Congress passed a series of emergency measures that came to characterize his promise of a "new deal for the American people.” The legislative tally of the new administration's first hundred days reformed banking and the stock market; insured private bank deposits; protected home mortgages; sought to stabilize industrial and agricultural production; created a program to build large public works and another to build hydroelectric dams to bring power to the rural South; brought federal relief to millions, and sent thousands of young men into the national parks and forests to plant trees and control erosion.

The parks and forests program, called the Civilian Conservation Corps, was the first so-called work relief program that provided federally funded jobs. Roosevelt later created a large-scale temporary jobs program during the winter of 1933–34. The Civil Works Administration employed more than four million men and women at jobs from building and repairing roads and bridges, parks, playgrounds and public buildings to creating art. Unemployment, however, persisted at high levels. That led the administration to create a permanent jobs program, the Works Progress Administration. The W.P.A. began in 1935 and would last until 1943, employing 8.5 million people and spending $11 billion as it transformed the national infrastructure, made clothing for the poor, and created landmark programs in art, music, theatre and writing. To accommodate unions that were growing stronger at the time, the W.P.A. at first paid building trades workers "prevailing wages” but shortened their hours so as not to compete with private employers.

Roosevelt's efforts to assert government control over the economy were frustrated by Supreme Court rulings that overturned key pieces of legislation. In response, Roosevelt made the misstep of trying to "pack” the Supreme Court with additional justices. Congress rejected this 1937 proposal and turned against further New Deal measures, but not before the Social Security Act creating old-age pensions went into effect.

Brightening economic prospects were dashed in 1937 by a deep recession that lasted from that fall through most of 1938. The new downturn rolled back gains in industrial production and employment, prolonged the Depression and caused Roosevelt to increase the work relief rolls of the W.P.A. to their highest level ever.

Hitler's invasion of Poland in September 1939, following Japan's invasion of China two years earlier and the continuing war there, turned national attention to defence. Roosevelt, who had been re-elected in 1936, sought to rebuild a military infrastructure that had fallen into disrepair after World War I. This became a new focus of the W.P.A. as private employment still lagged pre-Depression levels. But as the war in Europe intensified with France surrendering to Germany and England fighting on, ramped up defence manufacturing began to produce private sector jobs and reduce the persistent unemployment that was the main face of the Depression. Jobless workers were absorbed as trainees for defence jobs and then by the draft that went into effect in 1940, when Roosevelt was elected to a third term. The Japanese attack on Pearl Harbour in December 1941 that started World War II sent America's factories into full production and absorbed all available workers.

Despite the New Deal's many measures and their alleviation of the worst effects of the Great Depression, it was the humming factories that supplied the American war effort that finally brought the Depression to a close. And it was not until 1954 that the stock market regained its pre-Depression levels.

[Malcolm Robinson]

Considering Greece and the ECB/IMF bale out is there another European country where we can look and see any similarities as to what might happen? There could be as Latvia is going through an IMF austerity programme over the course of which her GDP has actually fallen......30%! Of course timing has affected this as her austerity programme has taken place during a world economic contraction but still, 30%! If we look at her recent history we see she acceded the EU in 2004 and almost immediately had a debt fuelled consumer boom with loose fiscal policy by government which resulted in a housing bubble. In 2006 her economic growth rate peaked at 12.2%, which given other indicators should have warned of an overheating economy. Coming down off these highs she found herself with an inflation figure of 18% in 2008 and international investment has all but deserted her. In the 4th quarter of 2008 GDP shrank by 10.5% and government bonds had been downgraded to junk status by Standard and Poor. In December of 2008 the IMF were called in and lent 7.5B Euros. Interesting to note that the Nordic countries contributed heavily to this fund as they had invested strongly into the housing boom of only a few years previous! So she was in quite a mess and the cost of IMF involvement, an austery package which has actually made the situation worse having contracted the economy too much. In 2009 GDP was estimated to fall 5% but fell 12.2% and so we see a downward spiral which is hard and even costlier to break free of.

Greece could easily fall victim to this scenario however it is worth noting IMF involvement is only 1/3rd of the Greek bailout and the ECB might be able to counterbalance IMF implications. Problem is I can only see this bailout getting Greece through the next few months, what happens next time as her austery programme will take time to implement and add any sort of value? The Greek government have predicted a fall of around 0.3% in GDP for 2010 while DB have predicted a fall of 4% with an overall figure of around 8% over the course of her austery programme and unemployment levels about double the 10% figure they are today. Given the Mediterranean temperament and what we have already seen with regard to public sector pay freezes and cuts it doesn't take a genius to extrapolate an explosive result if these figures come anywhere near true!

I can easily see a handful of basket case economies relying on QE programmes by the major players to keep them in the game! Problem is that UK PLC has very similar figures!

[Monsta®]

you writing a book to accompany this thread? "idiots guide to greece and the eu" you'll make a fortune!

[Malcolm Robinson]

Ok Monsta just to broaden the view somewhat............

Taking a general overview of the world economic situation is there anything we should be especially concerned about? Oil prices!

Over the last year we have seen a 65% rise in oil price. This has clear implications for our domestic recovery considering our place in the global marketplace and also (our) inflation prospects. It is generally accepted that upward pressure of oil prices has preceded western recessions since the 1970's. Given our fragile economic state that is worrying. It is also worth asking if the $147 a barrel spike in July 2008 actually had a major part to play in the current world recession, notwithstanding the effects of the credit crunch? It would seem reasonable to suggest that anymore upwards movement in the oil price will have a corresponding effect on our economy and we might once again see our political leaders blame global effects for our predicament. Thing is this time they might be right as India has doubled her oil imports from Saudi and China has still increased hers by around 15% this year.

[Malcolm Robinson]

We really do need to get back to Greece owing to events over the Easter weekend. Again we see the Eurocrats posturing at the expense of Greece and her peoples. It all boils down to the 'agreement' European leaders reached over the Greek bailout. Germany is insisting the interest rate for any bilateral loans made to Greece by the other Euro members have to be at market rates and suggest 6-6.5%. Other members suggest 4-4.5% quite a difference. This is probably down to the nightmare of the German constitutional court making a ruling! Anyway the result, Greek 10yr bonds have topped 7% even worse than the 6odd% they were. Greek ministers are now publicly asking, and in pretty caustic terminology, why should they give the Germans a return on their investment of 3%+ as German Bunds are edging up to around 4% meaning Germany could borrow what it lends to Greece and made a tidy profit on the deal, not really what was hoped for!

While this is going on Greece is hawking her wares around the USA trying to get American investment, although why they think the yanks will be any kinder than Germany is somewhat unclear to say the least! We only have to look at our own 'American' debt which we took on after the war to see the sort of stipulations they make! I think we also have to consider the all but bankrupt situations many of the American great cities are facing themselves!

If the other members of the Euro club get their way and reduce the actual cost of borrowing for Greece, look to that as a template for other member states in similar financial difficulties! As it stands however the paymaster isn't having any of it.

Anyone know of any UK companies making riot gear and supplying to the Greek government, I think they are about to go onto overtime and it wont stop there!

[Andy Millne]

Anyone know of any UK companies making riot gear and supplying to the Greek government, I think they are about to go onto overtime and it wont stop there!

No but I know one that does quite nicely out of their eurofighter orders or did until they started ordering F-16s at least. Maybe that'll help persuade the yanks. $3bn I think that order is/was worth.

[Monsta®]

Ok Monsta just to broaden the view somewhat............

Taking a general overview of the world economic situation is there anything we should be especially concerned about? Oil prices!

Over the last year we have seen a 65% rise in oil price. This has clear implications for our domestic recovery considering our place in the global marketplace and also (our) inflation prospects. It is generally accepted that upward pressure of oil prices has preceded western recessions since the 1970's. Given our fragile economic state that is worrying. It is also worth asking if the $147 a barrel spike in July 2008 actually had a major part to play in the current world recession, notwithstanding the effects of the credit crunch? It would seem reasonable to suggest that anymore upwards movement in the oil price will have a corresponding effect on our economy and we might once again see our political leaders blame global effects for our predicament. Thing is this time they might be right as India has doubled her oil imports from Saudi and China has still increased hers by around 15% this year.

thing is oil is selling for 85 dollars a barrel and its hit an all time high at up to 125p per litre at the pumps! whats going on there the greedy.......

should there not be a stop to this crippling tax the government puts on fuels?

should alistar darling not be tied down a flogged for looking like a thunder bird?

[Malcolm Robinson]

Monsta,

thing is oil is selling for 85 dollars a barrel and its hit an all time high at up to 125p per litre at the pumps! whats going on there the greedy.......

You haven't been paying attention have you! It's all about supply and demand, as long as the likes of China and India keep buying at whatever price we don't stand a chance. Have a look at China's recent activity in raw material producers, they are taking them over or buying them outright to protect supply lines. This is economic warfare! Every time you buy a 'made in China' item you contribute to the problem! We have just recently seen the Indian approach to steel production, same sort of thinking, protect your own and sod the rest!

should there not be a stop to this crippling tax the government puts on fuels?

This is an interesting concept, especially when all political parties are saying they are for fiscal help during a 'recovery' stage in the economic cycle. What better way to stimulate the economy than to reduce one of the most crippling costs? Course that has to be counterbalanced with the loss of income in the chancellor's coffers but if they can print money to 'give away' then...........

should alistar darling not be tied down a flogged for looking like a thunder bird?

Yes!