80 Percent of Greeks Oppose More Austerity; Tens of Thousands Defy Spain's Protest Ban; Greece, ECB Deny the Obvious; IMF in Denial Regarding Portugal

The words for today are the same as the words for last week and last month: defy and denial. Let's consider a few examples.

Campers in Spain Defy Protest Ban

The New York Times reports Tens of Thousands in Spain Defy Protest Ban

Tens of thousands of demonstrators across Spain continued sit-ins and other protests against the established political parties on Saturday. They did so in defiance of a ban against such protests and ahead of regional and municipal elections on Sunday.



About 28,000 people, most of them young, spent Friday night in Puerta del Sol, a main square in downtown Madrid, the police said. They stayed even as the protest ban went into effect at midnight under rules that bring an official end to campaigning before the election in 13 of Spain’s 17 regions and in more than 8,000 municipalities.

Fueling the demonstrators’ anger is the perceived failure by politicians to alleviate the hardships imposed on a struggling population. The unemployment rate in Spain is 21 percent.

Beyond economic complaints, the protesters’ demands include improving the judiciary, ending political corruption and overhauling Spain’s electoral structure, notably by ending the system in which candidates are selected internally by the parties before an election rather than chosen directly by voters.

As the campaign ban came into force at midnight, many of the Madrid protesters stuck tape across their mouths to signal that they would continue the demonstration, even if ordered to be silent. “The voice of the people can never be illegal,” read some of the banners, while others argued, “We are not against the system but the system is against us.”

Papandreou and ECB Deny Restructuring Under Discussion

No matter how many times the ECB or the Greek prime minister "reject" restructuring, the market insists otherwise. Once again, and for the umpteenth time Greek PM, ECB officials reject debt restructuring with the bond market making fools of both of them every step of the way.

"Debt restructuring is not under discussion," Papandreou said in an interview in Sunday newspaper Ethnos.

Greece has no other option but to follow through its fiscal plan, ECB governing council member Ewald Nowotny told Greek newspaper To Vima Saturday. "For the ECB, the line is one and clear: you have to implement the commitments you have made."

Greece is considering deeper cuts in public sector wages and further tax increases on a range of products and professions to qualify for more aid, Greek newspapers said Saturday.

The plan may include scrapping bonuses to civil servants and employees in state-run companies, newspapers Ta Nea and Isotimia reported, without citing any sources.

The government may also lower or scrap tax-free thresholds on property holdings and the self-employed, raise consumption taxes on soft drinks and certain fuel types or shift a range of products to a higher VAT-bracket, other newspapers said.

Papandreou vowed Saturday to take any measure necessary to secure more funding for his country. "Greece must convince everyone of its determination," he said.

Eighty percent of respondents told pollster MRB they refused to make any further sacrifices to get more EU/IMF aid, an MRB poll for paper Realnews showed.

The same poll shows Papandreou's ruling Socialist PASOK neck-and-neck with the opposition conservatives, with both parties scoring 21.5 percent each. In the previous MRB poll in April, PASOK had an 1.8 point-lead.

But Papandreou warned that any failure to push through the plan might lead the country straight to default. "At the moment, it does not seem as if Greece can cover its 2012 borrowing needs... from the market," he said in the interview.

80 Percent of Greeks Oppose More Austerity

The party that wins the next Greek election just may be the party that rejects more austerity measures. Regardless, it is not mathematically possible for Greece to grow its way out of this problem soon if ever, by more austerity measures.

Greece is in recession now, Italy is headed there, and as much as Greece needs serious reforms in it public service sector, the short-term effect of taking those measures would be rising unemployment and more capital flight.

Moreover, Greece has a huge productivity disadvantage with Germany and France and to fix that disadvantage would require lower wages. To top it off, Papandreou wants to raise property taxes, consumption taxes, and self-employment taxes.

Papandreou's 7-Point Proposal

1. Higher property taxes
2. Higher value-added (consumption) taxes
3. Higher taxes on self-employed
4. Still lower government spending
5. Still lower wages
6. Still lower benefits
7. Selling Greek assets

Bear in mind Greece is already in recession. Yet somehow that proposal is supposed to get Greece out of trouble and growing again in 2 years. Quite frankly it is preposterous to suggest such nonsense and the bond market knows it.

Greece 10-Year Government Bonds



Greek 10-year government bond yield hit a new high on Friday, 16.57%.

IMF Denial on Portugal

Please consider IMF approves $36.8 billion loan for Portugal

Fri May 20, 2011 8:56pm EDT

The International Monetary Fund on Friday approved a 26 billion euro ($36.8 billion) loan for Portugal to help the country recover from a debilitating sovereign debt crisis, saying it would immediately disburse 6.1 billion euros to ease investor concerns over the euro zone member's debts.

The IMF said in a statement that total financing to Portugal in 2011 will include about 12.6 billion euros from the IMF and another 25.2 billion euros from the European Union. The funding is part of a joint IMF/EU 78 billion euro ($110 billion) bailout package.

"The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement.

The financial package was calibrated to allow Portugal to stay out of the market for medium- to long-term bonds for slightly more than two years, IMF Mission Chief Poul Thomsen said.

Under the agreement, Lisbon will have to carry out steep spending cuts, raise taxes, reform its labor and justice systems, and embark on an ambitious privatization scheme.

Raise your hand if you believe Portugal's problems are over.

My quick count shows zero hands are in the air. That concludes our "Deny, Defy, or Crucify" segment (bonus points to anyone who can name the song containing that exact phrase without looking it up).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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