Category: Greece

Greeks Vote in Local Elections amid Painful Austerity

Greeks have voted in local elections on Sunday amid fears of another set of austerity measures. The lenders of Greek bailout package IMF, EU are sending their officials to Greece, to monitor progress of Greece in implementing fiscal tightening measures imposed by the bailout package. They will have to decide whether $9 billion of emergency loan installment, due in November, can be released or not.

Greece pledged to reduce its fiscal deficit to 8.1 percentage of GDP by the end of current fiscal year. But, declining tax revenues may mean that Greece will be able to manage to cut the deficit to between 9.2 and 9.3 percentage as per Reuters on November 14. Greece Prime Minister George Papandreou is hopeful that repayment of loan will be extended, which is denied by a European Central Bank Board member.

The ruling party is reportedly won two super regions in the first round and 11 others are slated to go for run-offs on Sunday. Earlier, the Prime Minister has warned he would go for snap elections if his party delivers poor performance in local elections. But, later he has ruled out such snap elections after coming to know that he won two super-regions.

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Wave of Parcel Bombs Target Embassies in Greece Capital

Article first published as No Yemeni Connection to Parcel Bomb Sent to German Chancellor on Technorati.

Security officials at the German Chancellery detected a parcel bomb received at the office of the Chancellor Angela Merkel, who was in Belgium. The parcel addressed to Angela Merkel. French president’s office missed the parcel as it was intercepted in Athens itself.

Security Detection

Security men became suspicious of the parcel as the sender was given as the Economic Ministry of Greece. Bomb disposal squads were alerted and the bomb was deactivated. The bomb was discovered at noon on October 2, mailed from Greece capital Athens three days ago. The device was contained in a parcel with books in it.

Germany’s Interior Minister Thomas de Maiziere was quoted by Bloomberg as saying “ThisAthens suspects was a functional explosive device.” He said the detected bomb was similar to the parcel bomb exploded at the Swiss embassy in Athens.

Targeting Embassies

Besides the Swiss embassy, Russian embassy was also hit by a parcel bomb on the same day. Greek authorities intercepted similar parcel bombs sent to Chile, Dutch, Belgian, German and Bulgarian embassies. They also seized on October 1 a parcel bomb addressed to French President Nicolas Sarkozy. Another parcel bomb sent to Mexican embassy exploded at a courier firm injuring one person.

By Tuesday evening, 11 mail bombs had been detected in the Greek capital. Two more were destroyed in controlled explosions at Athens’ international airport — one addressed to the European Union’s highest court in Luxembourg and the other to law enforcement agency Europol in the Netherlands.

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China promises support for euro and euro bonds

BBC News | 3 October 2010 | 11:56 GMT

Chinese Premier Wen Jiabao says his country will continue to support both the euro and European government bonds. "I have made clear that China supports a stable euro," he said. He also promised not to cut China’s investment in European bonds, despite the recent crisis, which has weakened the value of many such bonds.

Wen Jiabao with George Papandreou Mr Wen is visiting Greece, the worst hit of the 27-nation European Union. He has promised to buy Greek government bonds the next time they went on sale. China has said it needs to diversify its foreign currency holdings and has bought Spanish government bonds. Later in the week, the Chinese leader will attend an EU-China, where the subject of the yuan is almost certain to come up.

Artificially low

China is accused of keeping its currency artificially low against other world currencies, particularly the dollar- which makes Chinese goods cheaper on world markets and non-Chinese goods more expensive within the country. That argument is hottest in the US, where the House of Representatives has backed legislation that in theory paves the way for trade sanctions on China.

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Record German Growth Drives Euro-Region Expansion

Bloomberg | Aug 13, 2010 | 4:26 PM GMT+0530

Germany’s economy grew from the first quarter at 2.2 percent in the second quarter the fastest pace since the country’s reunification two decades ago, driving faster-than-forecast expansion of 1 percent in the 16-nation euro area. Economists had forecast GDP would rise 1.3 percent in Germany and 0.7 percent in the currency bloc. Germany, Europe’s largest economy, is benefiting from a recovery in global demand after last year’s recession just as the euro’s 10 percent decline against the dollar this year makes its exports more competitive outside the region. At the same time, European governments are cutting spending to rein in ballooning budget deficits, threatening to slow growth in coming months. “It’s a Germany-driven story,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. The euro rose a quarter of a cent after Germany’s GDP report before erasing its gains. It traded at $1.2814 at 12:45 p.m. in Frankfurt.

Two-Speed Europe

Germany’s performance highlights the growth differential across the euro region in 2nd quarter. France’s economy expanded 0.6 percent in the period, Italy’s 0.4 percent and Spain’s 0.2 percent, while Greece, which was forced to seek a European Union bailout in May, experienced a 1.5 percent contraction. “Looking ahead, the peripheral economies will continue to suffer from fiscal tightening and look set to remain in, or return to, recession,” said Jennifer McKeown, an economist at Capital Economics Ltd. in London. “The German recovery will weaken as global demand slows and its own fiscal consolidation begins next year.” Stocks reversed an early rally on concern about weaker growth in Spain and Greece and the Stoxx Europe 600 Index lost 0.5 percent to 253.57 as of 12:45 p.m. in London. “Recovery is on path but it is still fragile,” European Commission spokesman Amadeu Altafaj told reporters in Brussels today. Germany, which accounts for about a quarter of the euro region’s economy, was responsible for almost two thirds of the bloc’s second-quarter growth, according to Eurostat, the E.U.’s statistics office in Luxembourg.

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Spanish Crisis Threatens Second Front as Catalonia Rates Rise

Bloomberg

Prime Minister Jose Luis Rodriguez Zapatero may face a second front in his battle to contain Spain’s fiscal crisis as borrowing costs for the country’s regional governments climb. Catalonia, which accounts for a fifth of Spanish gross domestic product, has been shut out of public bond markets since March and the extra yield it pays over national government debt has almost tripled this year. Galicia, in the northwest, has asked to freeze payments of debt it owes the central government and the Madrid region postponed a bond sale last month. Spain’s regions, which borrowed at similar rates to the central government before the global credit crisis started in 2007, are key players in Zapatero’s drive to get his budget in order and push down the country’s borrowing costs. They control around twice as much spending as the state, employ more than half of all public workers and piled on debt during the recession. “If investors focused more on the problems in the regions, they would be less optimistic on Spain’s central government debt, and see that the rally in July was a bit overdone,” said Olaf Penninga, who helps manage 140 billion euros ($182 billion) at Rotterdam-based Robeco Group, and sold Spanish bonds last year.

Risk Premium

The yield on 10-year Spanish government bonds has dropped 79 basis points to 4.09 percent since June 16, according to Bloomberg generic prices. The extra return investors demand to hold the debt rather than German equivalents was at 165 basis points today, down from a euro-era high of 221 points two months ago. The region, which attracts more tourists than any other in Spain, paid 300 basis points more than three-month Euribor for 1 billion euros of four-year bank loans last month, a spokesman said. Fomento de Construcciones & Contratas SA, Spain’s fourth- largest builder, said on Aug. 2 it agreed to pay a 260-basis point spread to extend 1.1 billion euros of loans until 2014. While government records on Aug. 9 show that Catalonia sold 1 billion euros of five-year debt via savings bank La Caixa in June, it hasn’t issued a benchmark-sized bond in public markets since March. “Debt markets closed” as Greece’s fiscal crisis spread through the euro region in the second quarter, said spokesman Adam Sedo last month. At 5.5 percent, the yield on Catalan 10-year bonds is on a par with Peru. Continue reading

Greece makes ‘strong start’ in cutting debt, IMF says

BBC News | 05/08/2010 | 10:29 GMT

Greece’s efforts to tackle its public deficit have had a “strong start”, the International Monetary Fund (IMF) and European Union (EU) have said. The comments came after a delegation of staff from the IMF, EU and European Central Bank visited the country to check on the progress. In May, the EU and the IMF agreed to loan Greece 110bn euros ($198bn; £125bn) over three years. An IMF official said he was “confident” Greece would get the next installment.

A 9bn-euros loan is due to be given to Greece on 13 September, and is dependent upon the government meeting progress targets. Greece is continuing efforts to make big cuts to government spending, moves that have sparked a number of violent protests and strikes. While the IMF and EU welcomed the work Greece had carried out so far, they also warned that “important challenges and risks remain”. They noted while central government spending was now “significantly below budget limits”, local authorities and hospitals were still over-spending. The report added that the Greek government had made “impressive” efforts regarding structural reforms, such as trimming pensions and continuing efforts to reform the labour market.  Continue reading

Time to Buy Dollars as Euro Economies Reach Limits of Austerity

Time to Buy Dollars as Euro Economies Reach Limits of Austerity – Bloomberg  02/08/2010

FX Concepts LLC, the hedge fund that bought the euro in June just as it began a 9.7 percent surge against the dollar, now says it’s almost time to get out of the currency. The firm, which manages $8 billion in assets, expects the euro’s advance from a four-year low on June 7 to come undone by September, partly because European austerity programs will start to weigh on growth. Reports last week that showed Spanish consumer confidence falling to the lowest level this year and banks tightening credit standards in the region suggest the budget measures may already be undermining the recovery. The same fiscal measures that helped restore confidence in the euro may soon weaken the region’s economies and torpedo the rally. A July 30 survey of 21 money managers overseeing $1.29 trillion by Jersey City, New Jersey-based research firm Ried Thunberg ICAP Inc. found 75 percent don’t expect Europe’s common currency to strengthen over the next three months. “Austerity is really bad for growth,” said Jonathan Clark, vice chairman at New York-based FX Concepts, the world’s biggest currency hedge fund. “In the U.S., austerity is mainly on the state level, but in Europe they are whole-hog into cutting spending to reduce deficits. Under a pessimistic scenario, the European currencies are in a lot of trouble.”

Spending Cuts

Spain, Portugal and Greece will reduce spending by an average 4.3 percent of gross domestic product from 2009 to 2011, said Gilles Moec, an economist in London at Deutsche Bank AG, Germany’s largest lender. The euro area will expand 1.5 percent this year, less than a previous estimate of 2 percent, UBS AG, the biggest Swiss bank by assets, said in a July 16 report. The cuts contrast with the U.S., where President Barack Obama signed into law a $34 billion extension of unemployment benefits last month. The Congressional Budget Office projects a record $1.47 trillion deficit this fiscal year ending Sept. 30, and $1.42 trillion in 2011. While U.S. growth is slowing, it beats the European Union, where a 750 billion-euro ($981 billion) backstop for the region’s most indebted nations stabilized the currency after it slid from $1.5144 on Nov. 25 to the June 7 low. U.S. GDP grew at a 2.4 percent pace in the second quarter, compared with 3.7 percent in the prior period, the Commerce Department in Washington said July 30. Corporate spending on equipment and software jumped at a 22 percent annual rate, the biggest increase since 1997. The median second-quarter estimate for the euro region is 1.30 percent, and 1.10 percent for the year, based on a survey of 20 economists by Bloomberg.   Continue reading