Tagged: Austerity measures

China Worries More for EU’s Growth than for Its Own People

China offered to take concerted action to help financial stability of Europe, the countries of which are haunted by sovereign debt crisis since the beginning of 2010. European officials informed that Chinese vice premiere Wang Qishan gave assurances that China was ready to support European efforts for stabilisation, while speaking to the annual China-EU High LevelWen-Jiabao Economic and Trade Dialogue on Tuesday, December 21, as per FT report.

Chinese spokesperson Jiang Yu is today quoted by BBC News as reiterating Chinese vice premiere’s pledge to support the EU to overcome debt crisis. China’s support majorly stems from bond purchases though it did not give specific details of its support. China has been buying bonds of most indebted countries of the Eurozone such as Greece, Ireland and Portugal. Many analysts are forecasting that Portugal may be the next Eurozone country to tap Eurozone stability fund. Spain’s debt costs are also on rise, prompting speculations over Spain’s ability to raise further bond funds.

China’s Prime Minister Wen Jiabao visited Greece in October. He promised to Greece that China would buy Greece bonds and increase their investments in Greece. Similarly, China’s President Hu Jintao toured Portugal in November. During his trip, he said China would take concrete measures to support Portugal that included bond purchases.

The reason for China’s enthusiasm to support EU’s financial stability is obvious. The EU is China’s largest trading partner. Two-way trade between China and the EU in first eleven months of this year stood at $434 billion and that is why Beijing is interested in regional stability. However, bond costs continued to rise during last three months even though China bought public debts of Greece and Portugal. Therefore, it is doubtful that China’s support to Eurozone would be transformed into the fiscal stability of Eurozone and the EU as a whole.

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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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Big Firm Bonuses Back to pre-Crisis Level

Article first published as Big Firm Bonuses Back to pre-Crisis Level on Technorati.

Violent Greek protests Bonuses to executive directors are back to pre-crisis level in the U.K. Though pace of increases is slowed, the levels of payment have reached almost pre-crisis level. A business advisory firm Deloitte conducted a survey to find the developments occurred in pays and bonuses after the crisis. The survey revealed that pay increases for the executives might be history for now. The BBC News quoted Stephen Cahill of Deloitte as saying, “Last year we saw a very large number of companies freezing executive salaries, but at the time it was difficult to predict whether this was a one-off. Now it appears that the years of executive salaries increasing at rates far in excess of inflation and the increase in average earnings are, at least for the moment, well and truly over.”

Toppers at Top

The survey found that the average bonuses for executive directors of FTSE 100 companies were equal to 100% of their basic salary for the year. It said the top 30 companies increased the bonuses to their executives by 140%. Coming to mid-sized FTSE 250 companies, one in Seven paid no bonus to their bosses. For the present year also the difference between the trends of bonuses in FTSE 100 and FTSE 250 companies are expected to continue. While for the bosses of FTSE 100 companies, the bonuses are expected to be greater than the last year in the present year; they would be lower for FTSE 250 companies.

Bonus vs. Austerity

While European Countries are burdened with high levels of debts and deficits and their governments are already on the path of aggressive austerity measures and spending cuts, trade unions or giving warning signals that the workers’ pay

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Pakistan’s response to floods mired in ‘doom and gloom’

Reuters | 08 Sep 2010 | 13:14 GMT

Pak floods in Balochistan Pakistan, whose economy has been battered by the worst floods in its history, needs to abide by terms of an IMF bailout loan by enforcing fiscal austerity, the chances of which happening appear close to zero. The World Bank and Asian Development Bank are still assessing damage but three things are clear — the fiscal deficit target will be missed, inflation will rise and annual economic growth could be knocked back to between zero and 2 percent. Before the floods, which killed more than 1,700 people, displaced millions and caused an estimated $43 billion in damage — almost one quarter of the South Asian nation’s 2009/10 gross domestic product — Pakistan had forecast growth of 4.5 percent.

The floods have impacted 30 percent of all farmland, a massive blow to a mainstay of the economy. The economic problems are of concern to the United States which relies on a stable Pakistan in its fight against terrorism. "The future of the economy is a big question mark, as there is no policy response from the government so far," said Muzzamil Aslam, an economist at JS Global Capital Ltd. "Doom, gloom and despair are spreading fast," said Ashfaque Hasan Khan, dean at NUST Business School in Islamabad. Part of the problem, he said, was the government’s focus. "The economy is not on the radar screen," said Khan. But the government has to abide by International Monetary Fund demands that focus on narrowing the fiscal deficit and raising tax revenue.

The IMF said last week it would give Pakistan $450 million in emergency flood aid and disburse funds in September but the status of the release of the sixth tranche of an $11 billion bailout loan is unclear. It seems to have been delayed at least until November. There’s no evidence that Pakistan will be able to meet the reform targets soon as the

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Austerity hurts consumers in Europe, Asians upbeat – Nielsen

Reuters | Sun Jul 18, 2010 | 8:53am IST

A drop in consumer confidence in Europe amid worries about the region’s debt crisis is holding back a recovery in global consumer sentiment and weighing on the broader economic outlook, a survey showed on Sunday. Sentiment in euro zone states Spain, France and Italy fell between the first and second quarters as European countries drew up austerity measures to tackle debt amid fears of contagion from Greece’s debt crisis, the survey by the New York-based Nielsen Company showed. Global consumer confidence as a result was virtually unchanged in the second quarter from the previous three months despite rising optimism in Asia and Latin America as well as a slight uptick among consumers in the United States. "While the global economy is in better shape than it was nine months ago, the ongoing European debt crisis is a major setback to the global economic recovery anticipated this year," said Venkatesh Bala, chief economist at the Cambridge Group, a unit of the Nielsen Group.

A recovery in consumer spending in the United States would depend on job creation. "In the United States consumers are still focused on repairing their household balance sheets with 45 percent allotting any remaining income (after essential living expenses) to savings and paying off debt," said James Russo, vice president at The Nielsen Company. "Until the labour market shows continuous improvement, consumer spending will not be sustainable." The survey was taken between May 10 and 26, covering 27,000 consumers in 48 countries. The survey, based on consumers’ confidence in the job market, status of their personal finances and readiness to spend, did not include debt-stricken Greece or Portugal.  

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Spanish public sector to strike against austerity plan

BBC News | Tuesday, 8 June 2010 | 03:27 GMT

Worst recession Spanish public sector workers are holding a strike in protest against an average 5% cut in pay that comes into effect this month. The cuts are part of a government austerity package aimed at reducing the country’s budget deficit, swollen by almost two years of recession. The protests come amid a European debt crisis that began in Greece. Earlier, the European Union said talks aimed at bringing member states’ finances under control had progressed. European finance ministers also started setting up the $1tn (£690bn) financial package agreed last month to defend the European single currency and stop the debt crisis in Greece from spreading.

Testing public mood

Tuesday’s strikes have been called by Spain’s biggest trade unions. More than 2.5 million Spaniards work in the public sector, and the trade unions hope hundreds of thousands will join this strike – from hospitals and schools, fire stations and local government, the BBC’s Sarah Rainsford reports from Madrid. With a budget deficit currently running over 11%, the government is under pressure from the EU to slash spending. In May, Spanish Prime Minister Jose Luis Rodriguez Zapatero announced a 5% cut in public sector pay, starting this month. Salaries will be frozen in 2011. There were also big cuts in public investment and development aid. Some pensions were frozen. The cuts are part of a 15bn euro (£12bn, $18bn) package of austerity measures also meant to reassure the financial markets that Spain will meet its debts. But the trade unions are angry that public sector workers are being penalised. They accuse the Socialist party of reneging on previous promises, and taking desperate measures now – after insisting for months that Spain would be relatively unaffected by the economic crisis.  

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Big declines in European shares

BBC News | Friday, 14 May 2010 | 15:27 GMT

Austerity measures European shares have fallen sharply as concerns continue about the impact of financial austerity measures in Greece, Portugal and Spain. Amid fears both that other countries could be affected, and that it may hit the Europe-wide economy, the UK’s main FTSE 100 index was down 3%. Shares in Spain were down 7.2% and by 3.2% in Italy. The euro fell to a fresh 18-month low against the US dollar. Meanwhile, France’s CAC index had lost 4.5% and Germany’s DAX had fallen 3.1%. US stocks were also lower, with the main Dow Jones index down 1.6%, while the NASDAQ had fallen by 2.2%.

Euro warning

Earlier, the German government denied a newspaper report that Chancellor Angela Merkel only agreed to back the aid package given to Greece after French President Nicolas Sarkozy threatened to pull France out of the eurozone. A spokeswoman for the German government said the article in Spain’s El Pais newspaper "is without any basis". Analyst Lee Kok, head of research at Phillip Securities in Singapore, said investors were concerned whether the austerity measures will hit wider economic growth. "It was taken as good news at first, but investors are starting to focus on the impact the austerity measures will have on the macroeconomic picture in Europe," he said. In afternoon trading in Europe, the euro fell as low as $1.2423 against the dollar,  

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Greek civil servants stage strike over austerity plan

BBC NEWS | 2010/05/04 | 07:54:57 GMT

Greece strikes Greek public sector workers, who are bearing the brunt of wage and pension cuts as part of Greece’s austerity programme, have begun a 48-hour strike. Their action comes ahead of a nationwide general strike on Wednesday. The programme has been introduced in return for a 110 bn euro (£95bn) world rescue package agreed for the country. It aims to achieve fresh budget cuts of 30bn euros over three years, with the goal of cutting Greece’s public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%. Union leaders say the cuts target low-income Greeks. "There are other things the [government] can do, before taking money from a pensioner who earns 500 euros (£430) a month," Spyros Papaspyros, leader of the public servants’ union ADEDY, told Greek private television.

Silent parade

In other signs of discontent, on Monday a group of teachers forced their way into the main state broadcaster’s studios in Athens to protest about education cuts. Also in Athens, some 150 members of the armed forces staged a silent parade to protest at having their bonuses cut. And early on Tuesday, protesters unfurled banners over the walls of the Acropolis to protest against the austerity measures.   

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Greece police tear gas anti-austerity protesters

BBC NEWS | 2010/05/01 | 13:17:48 GMT

Greek riot police have used tear gas to disperse angry protesters in Athens, during a march against government plans to tackle the country’s crippling debt. Clashes erupted at the finance ministry and a state TV truck was petrol bombed. A tense stand-off continues, with protesters hurling bottles and rocks. Thousands of Greeks are taking part in May Day rallies called by trade unions and left-wing parties. The EU is demanding the austerity cuts in exchange for a huge bail-out deal. The rescue package is expected to amount to as much as 120bn euros (£100bn; $160bn) over three years. The full details of the bail-out are expected to be revealed on Sunday if the Eurozone leaders finally sign off the deal, which is designed to prevent Greece from defaulting on its enormous debt obligations.

‘Unpopular measures’

During the protests, a prominent hotel has also been vandalised in the central Syntagma square. There are reports of similar scenes in the northern city of Thessaloniki as youths attacked banks and business premises with iron bars. There is huge public resistance to the wage cuts, tax rises and pension reductions that are expected to be implemented. Our correspondent says the unions hope that the rallies will demonstrate to the government, the Eurozone, the IMF and the international markets, that they can mobilise enough "troops" to defeat the new austerity programme.    

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Athens clash at finance ministry over budget cuts

BBC News | Friday, 30 April 2010 | 10:17 GMT

Protesters in Athens clashed with police as a group tried to force its way into the Greek finance ministry. Police fired tear gas to disperse the crowd as the unrest flared over austerity measures that may be taken in return for a massive bailout deal. The European Union (EU) has said it is close to approving the details of an emergency plan to help tackle Greece’s crippling debt. EU commission Chief Jose Manuel Barroso said "rapid progress" was being made. "I’m confident that the talks will be concluded soon, meaning in the next days," Mr Barroso told a news conference following the clashes. "We believe that these solutions will be conducive to our actions and will prevent further possible effects of the contagion." Officials from the EU, the International Monetary Fund, and European Central Bank are in Athens to negotiate the bailout. The Greek government says it needs a deal by 19 May to avoid a devastating debt default.

‘Measures of destruction’

Police fired tear gas at hundreds of demonstrators, after some tried to break through a police cordon guarding the Greek finance ministry. The outbreaks came after Greece began talks over extra budget cuts as conditions for the bailout loans. These cuts would be in addition to an already mooted austerity drive aimed at reducing the nation’s public deficit, which is more than four times bigger than the EU limit. Union officials say the IMF wants Athens to raise sales taxes, scrap bonuses amounting to two extra months of pay in the public sector and accept a three-year pay freeze. The union officials also claim that by next year, the IMF and the EU want Greece to shed 10 percentage points from the public deficit that reached 13.6% of output in 2009. In addition, they say Athens has been asked to get rid of 13th and 14th month bonuses for public sector workers and pensioners.   

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ANALYSIS – EU safety net not quite enough to break Greek fall

Reuters | Mon Apr 5, 2010 | 11:23am IST

Euro The thing about a safety net is that it all depends where you hang it. Remember those childhood trips to the circus. The net hung low enough for the tightrope walker to be clearly visible to the crowd and for the prospect of a fall to elicit gasps of fear, but high enough to prevent life-threatening injuries. The financial safety net that euro zone leaders agreed last month to provide for debt-stricken Greece fails the circus test. Not only did the agreement specify, at European ringmaster Germany’s insistence, that Greece would have to have almost hit the deck before it could be rescued. But even then, it would require a unanimous decision of the 16 states sharing the single European currency, giving Berlin the final say on whether the safety net is strung out at all. One corner would also be held by the International Monetary Fund on conditions that have yet to be worked out.

No wonder international investors did not stampede to buy the first Greek bonds on offer last week. On the contrary, some ran in the opposite direction, selling Greek debt on the secondary market. The premium investors charge for holding Greek debt rather than German 10-year bunds widened by nearly 50 points in a week to above 350 bps. Higher coupons add to Greece’s debt service costs, making it still harder to reduce its budget deficit from 12.9 percent of gross domestic product last year to below the European Union’s ceiling of 3 percent by the end of 2012. PIMCO, the world’s largest bond fund, said it regarded Europe’s action as ineffective in fixing Greece’s problems — a 300 billion euro ($405 billion) debt pile that exceeds the country’s 240 billion euro annual output.   

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Euro rises against the dollar on Greek austerity plan

BBC News | Wednesday, 3 March 2010 | 14:32 GMT

The euro has risen against the dollar as Greece unveiled a new series of austerity measures. The euro rose 0.3% to $1.3637 but was slightly lower against the pound at 90.60 pence. On Tuesday, the currency fell to its lowest level against the dollar for 10 months amid continuing concerns over Greece’s debt crisis. Persistent worries over Greece’s 300bn euro ($419bn; £259bn) debt have weighed on the European single currency. The pound fell against the dollar, trading at $1.505.


The Greek government approved an austerity package of tax rises and spending cuts worth 4.8bn Euros, hoping to convince financial markets that it can pay off its debts and persuade European leaders it is doing enough. Greece has pledged to reduce its deficit from 12.7% – more than four times euro zone rules – to 8.7% during 2010. The measures include raising VAT to 21% from the current rate of 19%, and cutting civil servant bonus payments during holidays – which has annoyed union leaders. But the austerity measures already proposed – such as freezing public sector pay, raising taxes and changing the pension system – have provoked huge street protests. "The fiscal    

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Greece paralysed by strike against austerity plan

BBC NEWS | 09:52 GMT | Wednesday, 24 February 2010

Hundreds of thousands of Greeks are on strike to protest at the imposition of austerity measures to save the economy. Greece’s airspace will be closed to all flights, trains and ferries will stand idle, and archaeological sites shut. It is the second general strike in two weeks and coincides with growing anger at the EU’s response to the crisis. The action is set to be the biggest since Greece’s socialist government introduced cuts to bring the country’s debt and deficit under control. Greece currently has a spiralling public deficit of 12.7%, more than four times higher than Eurozone rules allow. The government has pledged to cut this to 8.7% this year, and also reduce the 300bn-euro ($419bn; £259bn) national debt, by freezing public sector salaries, raising the average retirement age to 63 by 2015, and increasing taxes on petrol, alcohol and tobacco. It also wants to crack down on tax avoidance. Greece’s black economy is estimated at 30% of official gross domestic product.

‘Mild’ strike

The BBC’s Malcolm Brabant in Athens says that for the second time this month, Greece will be isolated from the rest of the world for 24 hours as all flights into and out of the country have been cancelled. Commuters will be left without most forms of public transport, while public schools, ministries, and municipal offices will be closed. Many hospitals will operate only with emergency staffing. Archaeological sites, including the Acropolis, will be closed to tourists, chipping away at the country’s international image, our correspondent says. Two separate    Continue reading

Greece hit by nationwide strike over austerity measures

BBC NEWS | 2010/02/10 | 12:05:55 GMT

Public sector workers in Greece have launched a national strike, rallying in protest at government measures to tackle the country’s huge deficit. Flights have been grounded, many schools are closed and hospitals are operating an emergency-only service. The government wants to freeze pay, gather more taxes and reform pensions. EU leaders will discuss Greece’s difficulties at a Brussels summit on Thursday amid concern the crisis could threaten the credibility of the euro. European finance ministers are also due to hold a teleconference on Wednesday to talk about the issue.

Public anger

Despite heavy rain, there were rallies across Greece on Wednesday, with hundreds of striking workers and pensioners gathering in the centre of Athens ahead of a planned protest there. The BBC’s Malcolm Brabant reports from the capital that the rallies have been mainly peaceful, but in one incident police fired tear gas at rubbish collectors who tried to drive through a police cordon. Some demonstrators threw stones at the police but the trouble quickly died out. The unions regard the austerity programme as a declaration of war against the      Continue reading