Greece Bailout Ping-Pong, No Deal Underway; Pension Promises Add To Greek Debt Woes; How Does Greece Compare To US?
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On March 12 the Guardian reported Greece debt: EU agrees bailout deal
Exclusive: Germany plays pivotal role in potential eurozone rescue package for Greek debtsEU Bonds For Greece Rescue
The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.
Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the "eurozone" – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency's rulebook will also be rewritten to enforce greater fiscal discipline among members.
The member states have agreed on "co-ordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European commission official said.
Other sources said the aid could rise to €25bn (£22.6bn), although it is estimated in European capitals that Greece could need up to €55bn by the end of the year.
Also on March 12 Bloomberg reported EU Said to Discuss EU Bonds to Fund Any Greek Rescue.
European Union finance ministers will discuss next week whether any Greek bailout should be funded by EU bonds guaranteed by euro region governments, said three people briefed on preparations for March 15-16 meetings.German Finance Ministry Unaware of Greek Bailout Deal
Another option would be for governments in the 16-nation euro region to give Greece loans to help the country finance its budget deficit, said the people, who spoke on condition of anonymity because the talks are private. Any EU bond sale would have to be agreed upon by all 27 EU nations, they said. Ministers from countries using the euro meet in Brussels on March 15 and will be joined by the rest of the EU the next day.
EU leaders have signaled they may offer Greece financial assistance if necessary, though German Chancellor Angela Merkel has so far refused to publicly give the green light for any such aid.
The German government has dropped its opposition to a bailout, paving the way for the EU to approve the plan to aid Greece at the Brussels meeting on March 15, the Guardian newspaper in London reported. Aid to Greece through the loans could reach 25 billion euros ($35 billion), the newspaper said.
Elmar Brok, a member of Merkel’s Christian Democrats in the European Parliament, said there is “unity in the euro group on finalizing a package that can be used to help Greece.”
The Guardian may have an exclusive story, but is it correct? On March 13 ABC News is reporting German Finance Ministry Unaware of Greek Bailout Deal.
The German Finance Ministry said on Saturday it was not aware of any agreement by euro zone members to provide a multi-billion euro bailout package for heavily indebted Greece.Bailout No Longer Needed?
"We are not aware that this is being planned," a ministry spokesman said, adding that Greece had not requested any aid.
"Greece is implementing its (savings) program and we expect that it will manage it alone," he said.
The Wall Street Journal is reporting No Need for Greek Bailout Now, France's Lagarde Says
Credible efforts by Greece's government to clean up its finances have so far negated the need for any bailout from the European Union, French Finance Minister Christine Lagarde said Friday.Patchwork Pension Plan Adds to Greek Debt Woes
In offering a strong vote of confidence in the new Greek government, Ms. Lagarde said in a Wall Street Journal interview that Greece had "for once, over-delivered from what was expected" in terms of legislation intended to cut spending.
Whereas she had expected cuts worth 1.5% of gross domestic product, the government had come up with 2%, she said.
Nonetheless, Ms. Lagarde said that "technical experts" at the EU have been working on a contingency plan, so that if the need arose, "all we would have to do is press the button."
Ms. Lagarde gave only guarded support for the creation of a European Monetary Fund, a new project currently under debate within the European Commission. "The European Monetary Fund is one of many options that we should explore [and] examine to see whether there is virtue and value in having it," she said. "I am not sure it is the ultimate answer to the issues we are dealing with at the moment."
Asked why the E.U. is so opposed to having the IMF simply fill such a role now and come to the aid of one of the euro zone's members, Ms. Lagarde said it is complicated by the presence of a monetary union. Whereas the E.U. worked with the IMF to provide support to Hungary and Latvia, both members of the broader European Union but not part of the euro zone, having the IMF involved in the euro zone "is a bit different."
"It is as if California were in terrible shape and you were to call the IMF to rescue California. That's a bit odd within the same monetary zone," she said.
In reference to the euro's slide against the dollar since the Greek crisis erupted, Ms. Lagarde said she was "kind of pleased that it has come down a bit" because it means that French exporters are "not knocking on my door" and pressuring her to do something about the high exchange rate.
While pondering the Greek bailout ping-pong match now currently set to no after being set to yes just a day earlier, please consider Patchwork Pension Plan Adds to Greek Debt Woes
Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.There is much more in the article including a nice country by country table of current debt obligations and unfunded liabilities. Here is a partial list.
“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”
“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”
Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.
As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.
The law includes dangerous jobs like coal mining and bomb disposal. But it also covers radio and television presenters, who are thought to be at risk from the bacteria on their microphones, and musicians playing wind instruments, who must contend with gastric reflux as they puff and blow.
The situation in the United States is different but also painful. The government will face its own fiscal reckoning, analysts say, as 78 million baby boomers begin drawing on Social Security and Medicare programs to support them in retirement. Without some combination of higher taxes, benefit reductions or an increase in the retirement age, both programs will run short of money to make their promised payments within the next few decades. And many American states are woefully behind on funding their pension obligations for public employees.
In Europe, the conflict has already erupted on the streets, with workers demanding that generous retirement policies be kept while governments press to pare pensions and raise retirement ages because taxpayers cannot bear any additional weight and creditors will no longer finance excessive borrowing.
According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece’s pension obligations onto its balance sheet would show that the government’s debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation’s economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece’s official debt level of 113 percent.
Other countries have obscured their total obligations as well. In France, where the official debt level is 76 percent of economic output, total debt rises to 549 percent once all of its current pension promises are taken into account. And in Germany, the current debt level of 69 percent would soar to 418 percent.
Greece...... 116% 875%
France...... 76% 549%
Germany... 72% 418%
UK............ 63% 442%
Poland...... 50% 1550%
US............. 84% 500%
For all the talk about how the US will implode because of Social Security and Medicare, it appears much of the Western world is in the same boat. This is certainly not a pretty picture.
Mike "Mish" Shedlock
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