Media reports said bondholders agreed to a 53.5% face value haircut - the equivalent of losing 75% overall. In fact, only 30% of toxic assets are involved. Most held aren't touched. Greece must make good on them, no matter the impossible burden.

Private lenders will swap current holdings for new lower face value/lower interest rate bonds. Representing bondholders, Institute of International Finance's Charles Dallara and BNP Pariba's Jean Lemierre called the deal "solid....for investors, a fair deal for all parties involved."

In other words, raping Greece for bankers is "solid" and "fair." Its citizens had no say. Without rights, what's best for them wasn't discussed.

They're left with huge wage and benefit cuts combined with mass layoffs. Greece faces less tax revenue to cover domestic priorities. In late 2011 alone, its economy shrank 7%. January revenues fell 7% year-over-year. Value-added tax receipts decreased 18.7% from last year. Death spiral financial deterioration continues monthly.

Moreover, the nation's $650 billion debt burden is double the reported amount. The more it increases, the harder it is to service and repay, the more future aid's needed, and deeper the country's economic catastrophe heads for total collapse.

The deal escrows $170 billion to assure bankers get paid. Investment advisor Patrick Young got it right telling Russia Today that dealmakers don't trust Greece living up to terms because its track record is so bad.

"So we now have a situation," said Young, "where Greece said we'll do anything you want, but the problem is" too great a burden to bear. "It's a catastrophe pushing people to the brink of starvation."

No matter. Finance ministers will give Greece some money on dreadful terms "where like a nine year old child, every Friday it has to go to daddy, say it's done its homework, say it's been a good boy, can it please have next week's pocket money to pay its civil servants. (It's) a horrible loss of sovereignty."

Troika power runs Greece - the IMF, ECB and EU. They're predators saying pay up or else.

Reports say its government will change its constitution to prioritize repaying debt ahead of vital domestic obligations.

Other terms involve lenders cutting interest rates on bailout loans by 0.5% over the next five years, and 1.5% thereafter. An estimated 1.4 billion euros would be saved by 2020.

The ECB will compensate by distributing profits on its 40 billion Greek debt holdings. In addition, Eurozone countries will contribute their Greek bond income through the end of the decade.

Still to be decided is EU/IMF burden sharing. Both agreed to contribute. Not discussed or considered is leaving 11 million Greeks on their own out of luck. They have three choices - starve, leave, or rebel.

 

 

 

 

The Rot Beneath the Surface

On February 21, Financial Times contributor Peter Spiegel headlined, "Greek debt nightmare laid bare," saying:

"A 'strictly confidential' report on Greece's debt projections prepared for eurozone finance ministers reveals Athens' rescue programme is way off track and suggests the Greek government may need another bail-out" soon after the latest one.

Even under the most optimistic scenario, imposed austerity's punishing Greece so severely, its burden's impossible to bear.

Agreed on terms are "self-defeating." Forced austerity elevates debt levels, weakens the economy, and prevents Greece "from ever returning to the financial markets by scaring off future private investors."

As a result, continued financial infusions are needed. Double or more the agreed amount's required. Current problems increase exponentially toward total collapse, default and bankruptcy.

The report explained Greece's impossible burden. It also "paints a troubling outlook for the debt restructuring, expected to begin this week." Bond swapping creates "a class of privileged investors who will chase off" others when Greece tries selling fixed income securities at market. Germany, the Netherlands and Finland opposed a deal doomed to fail.

The report warned "Greek authorities may not be able to deliver structural reforms and policy adjustments at the (envisioned) pace." Perhaps never with shrinking revenues unable to cover liabilities.

It's "now uncertain whether market access can be restored in the immediate post-programme years." Left unsaid was restoring it's impossible ever. Greece faces protracted deep depression. Its life force is ebbing. Only its obituary remains to be written.

A Final Comment

Greece's debt deal provides a model for future European sovereign restructurings. It's one of six or more troubled countries. Portugal looks like the next domino to fall, but Spain, Italy, Ireland, and others may follow.

Moreover, implementing Greece's deal entails problems. Reality may prevent fulfilling promises. If April elections are held, new MPs may balk. Declaring a debt moratorium, defaulting and leaving the Eurozone are options.

Moreover, private lenders may object. Legal challenges may follow. A sweetheart banker deal may unravel. Pressuring China and Japan to help isn't working. China Investment Corporation, the nation's sovereign wealth fund, and Chinese central bankers aren't willing to buy troubled European sovereign debt. According to one official, "(w)e aren't stupid."

How it all plays out isn't known. Technocrats run Greece. They may cancel April elections and stay in power. Public sentiment remains the wild card. Impossible to bear pain may become uncontainable rage. More than buildings may burn.

If political Greece doesn't care, people must act on their own. Revolutionary seeds are planted. They can erupt any time. Change only comes bottom up. It's long past time to get started.

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Stephen Lendman lives in Chicago and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. " style="color: rgb(69, 109, 188); font-weight: bold; "> This email address is being protected from spambots. You need JavaScript enabled to view it. .

Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

 

 

Eurozone ministers back 130bn-euro bailout for Greece

Eurozone finance ministers have agreed a second bailout for Greece after marathon talks in Brussels.

Greece will get loans of more than 130bn euros (£110bn; $170bn) and have about 107bn of its debt written off.

In return, it must slash its debt from 160% to 120.5% of GDP within eight years and accept a permanent EU economic monitoring mission.

The country needs the funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.

The euro immediately rose on reports of the deal, which was announced early on Tuesday, after 13 hours of talks.

But a report by international experts obtained by Reuters news agency and the Financial Times warned Greece would need more help if it was to meet its debt reduction target.

The confidential report was drawn up for the international "troika" set up to help Greece - drawn from the IMF, European Central Bank and European Commission.

It warned Greece would remain "accident-prone" in coming years.

Under the deal hammered out in Brussels

  • Greece will undertake to reduce its debt to 120.5% of GDP by 2020
  • Private holders of Greek debt will take losses of 53.5% on the value of their bonds, with the real loss as much as 70%
  • Greece's economic management will be subjected to permanent monitoring by eurozone experts on the ground
  • Greece will amend its constitution to give priority to debt repayments over the funding of government services
  • Greece will set up a special account, managed separately from its main budget, that must always contain enough money to service its debts for the coming three months

The Greek parliament is expected to vote on the bailout on Wednesday.

'Default avoided'

The agreement was announced early on Tuesday by Jean-Claude Juncker, prime minister of Luxembourg and chairman of the eurozone finance ministers group.

Mr Juncker said the deal would ensure Greece's future within the eurozone.

European Commission chief Jose Manuel Barroso said the agreement would prevent "an uncontrolled default with all its grave economic and social implications".

He said Greece had no alternative than to pursue fiscal consolidation and structural reform.

In a statement, the Eurogroup warned the deal hinged "critically on its thorough implementation by Greece".

The head of the IMF, Christine Lagarde, said the deal "should give enough space for Greece to restore its competitiveness".

Speaking after the bailout was agreed, Greek Prime Minister Lucas Papademos said he was "very happy" with the outcome.

"It's no exaggeration to say that today is a historic day for the Greek economy,'' he added.

The BBC's Stephen Evans in Brussels says the agreement will mean deeper cuts in public spending than Greece has planned.

The first rescue package worth 110bn euros in 2010 was not enough to avert Greece's deepening crisis.

"The funds that are coming in are not staying in Greece, are not being invested in Greece, are not here to help the Greeks get out of this crisis," Constantine Michalos, president of the Athens Chamber of Commerce and Industry, told the BBC.

"It's simply to repay the banks, so that they can retain their balance sheets on the profit side."

Anastasis Chrisopoulos, a 31-year-old Athens taxi driver, saw no reason to cheer the bailout.

"So what?" he told Reuters.

"Things will only get worse. We have reached a point where we're trying to figure out how to survive just the next day, let alone the next 10 days, the next month, the next year."

Votes scheduled

German and Dutch legislators are also scheduled to vote on approval for the deal next week. Politicians in both countries have been critical of lending more money to Greece.

Successive rounds of austerity measures, demanded by Greece's international creditors, have failed to restore growth and have provoked clashes between protesters and police.

The Greek government fell last year after ex-Prime Minister George Papandreou called for a referendum on the eurozone rescue package.

He was replaced by Mr Papademos, an unelected technocrat who is expected to lead Greece until parliamentary elections in April.

Measures passed by parliament last week set out 3.3bn euros' worth of cuts to salaries and pensions, and to health and defence spending - sparking a fresh series of protests.

 

The Globalizer Who Came in from the Cold: The IMF's Four Steps to Economic Damnation

"It has condemned people to death," the former apparatchik told me in a scene out of a Le Carre novel. The brilliant old agent comes in from the cold, crosses to our side and, in hours of de­briefing, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten. Here be­fore me was a catch far bigger than some used Cold War spy. Joseph Stiglitz was chief economist of the World Bank. To a great extent, the new world economic order was his theory come to life.

I "debriefed" Stiglitz over several days—at Cambridge Univer­sity, in a London hotel and finally in Washington during a big con­fab of the World Bank and the International Monetary Fund in April 2001. Instead of chairing the meetings of ministers and cen­tral bankers as he used to, Stiglitz was kept safely exiled behind the blue police cordons, the same as the nuns carrying a large wooden cross, the Bolivian union leaders, the parents of AIDS victims and the other "antiglobalization" protesters. The ultimate insider was now on the outside.

In 1999 the World Bank fired Stiglitz. He was not allowed a discreet "retirement"; U.S. Treasury Secretary Larry Summers, I'm told, demanded a public excommunication for Stiglitz's having ex­pressed his first mild dissent from globalization World Bank-style.

In Washington we talked about the real, often hidden, work­ings of the IMF, World Bank and the bank's 51 percent owner, the U.S. Treasury.**

In addition to the Ecuador document, I had by 2001 obtained a huge new cache of documents, from sources unnamable, from inside the offices of his old employer, marked "confidential," "re­stricted" and "not otherwise [to be] disclosed without World Bank authorization." Stiglitz helped translate these secret "Country As­sistance Strategies" from bureaucratese.***

There is an Assistance Strategy specially designed for each na­tion, says the World Bank, following careful in-country investiga­tions. But according to insider Stiglitz, the Bank's staff "investigation" consists of close inspection of a nation's five-star ho­tels. It concludes with the Bank staff meeting some begging, busted finance minister who is handed a "restructuring agreement," pre-drafted for his "voluntary" signature (I have a selection of these).

Each nation's economy is individually analyzed; then, accord­ing to Stiglitz, the Bank hands every minister the exact same four-step program.

Step l

Step 1 is Privatization—which Stiglitz says could more accurately be called "Briberization." Rather than object to the sell-offs of state industries, he says national leaders—using the World Bank's demands to silence local critics—happily flog their electricity and water companies. "You could see their eyes widen" at the prospect of 10 percent commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.

And the U.S. government knows it, charges Stiglitz—at least in the case of the biggest "briberization" of all, the 1995 Russian sell-off. "The U.S. Treasury view was this was great as we wanted Yeltsin reelected. We don't care if it's a corrupt election. We want the money to go to Yeltsin" via kickbacks for his campaign.

I have to interject that Stiglitz is no conspiracy nutter ranting about Black Helicopters. The man was inside the game, a member of Bill Clinton's cabinet as chairman of the president's Council of Economic Advisers.

Most heinous for Stiglitz is that the U.S.-backed oligarchs' corruption stripped Russia's industrial assets, cutting national out­put nearly in half, causing economic depression and starvation.

Step 2

After briberization, Step 2 of the IMF/World Bank's one-size-fits-all rescue-your-economy plan is Capital Market Liberalization. This means repealing any nation's law that slows down or taxes money jumping over the borders. In theory, capital market deregu­lation allows foreign banks' and multinational corporations' in­vestment capital to flow in and out. Unfortunately, in countries like Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the "hot money" cycle. Cash comes in for specu­lation in real estate and currency, then flees at the first whiff of trouble. A nation's reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation's own capital funds, the IMF demands these nations raise interest rates to 30 percent, 50 percent and 80 percent.

"The result was predictable," said Stiglitz of the hot money tidal waves in Asia and Latin America. Higher interest rates de­molished property values, savaged industrial production and drained national treasuries.

Step 3

At this point, the IMF drags the gasping nation to Step 3: Market-Based Pricing, a fancy term for raising prices on food, water and domestic gas. This leads, predictably, to Step 3l/2: what Stiglitz calls "the IMF riot." The IMF riot is painfully predictable. When a nation is "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up"—as when the IMF elimi­nated food and fuel subsidies for the poor in Indonesia in 1998 and the nation exploded into riots. There are other examples—the Bolivian riots over water price hikes pushed by the World Bank in April 2000 and, in early 2001, the riots in Ecuador over the rise in domestic gas prices that we found in the secret Ecuador "Assis­tance" program. You'd almost get the impression that the riot is written into the plan.

And it is. For example, we need only look at the confidential "Interim Country Assistance Strategy" for Ecuador. In it the Bank states—with cold accuracy—that they expected their plans to spark "social unrest," their bureaucratic term for a nation in flames.

Given the implosion of the economy, that's not surprising. The secret report notes that the plan to make the U.S. dollar Ecuador's currency has pushed 51 percent of the population below the poverty line, what Stiglitz called their squeeze-until-they-explode plan. And when the nation explodes, the World Bank "Assistance" plan is ready, telling the authorities to prepare for civil strife and suffering with "political resolve." In these busted nations, "resolve" means tanks in the street.

Each new riot (and by "riot" I mean "peaceful demonstration dispersed by batons or bullets") causes panicked flights of capital and government bankruptcies. Such economic arson has its bright side, of course—foreign corporations can then pick off a nation's remaining assets, such as the odd mining concession or port, at fire-sale prices.

Stiglitz notes that the IMF and World Bank are not heartless adherents to market economics. At the same time the IMF stopped Indonesia from "subsidizing" food purchases, "when the banks need a bail-out, intervention [in the market] is welcome." The IMF scrounged up tens of billions of dollars to save the coun­try's financiers and, by extension, the U.S. and European banks from which they had borrowed.

A pattern emerges. There are lots of losers in this system, but two clear winners: the Western banks and U.S. Treasury. They alone make the big bucks from this crazy new international capital churn. For example, Stiglitz told me about an unhappy meeting, early in his World Bank tenure, with the president who had just been elected in Ethiopia's first democratic election. The World Bank and IMF had ordered Ethiopia to divert European aid money to its reserve account at the U.S. Treasury, which pays a pitiful 4 percent return, while the nation borrowed U.S. dollars at 12 per­cent to feed its population. The new president begged Stiglitz to let him use the aid money to rebuild the nation. But no, the loot went straight off to the U.S. Treasury's vault in Washington.

Step 4

Now we arrive at Step 4 of what the IMF and World Bank call their "poverty reduction strategy": Free Trade. This is free trade by the rules of the World Trade Organization and World Bank. Stiglitz the insider likens free trade WTO-style to the Opium Wars. "That too was about opening markets," he said. As in the nineteenth century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin America and Africa, while barricading their own markets against Third World agricul­ture.

In the Opium Wars, the West used military blockades to force markets open for their unbalanced trade. Today, the World Bank can order a financial blockade that's just as effective—and some­times just as deadly.

Stiglitz is particularly emotional over the WTO's intellectual property rights treaty (it goes by the acronym TRIPS, of which we have more to say later in this chapter). It is here, says the econo­mist, that the new global order has "condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceuti­cal companies for branded medicines. "They don't care," said the professor of the corporations and bank ideologues he worked with, "if people live or die."

By the way, don't be confused by the mix in this discussion of the IMF, World Bank and WTO. They are interchangeable masks of a single governance system. They have locked themselves to­gether by what they unpleasantly call "triggers." Taking a World Bank loan for a school "triggers" a requirement to accept every "conditionality"—they average 114 per nation—laid down by both the World Trade Organization and IMF. In fact, said Stiglitz, the IMF requires nations to accept trade policies more punitive than the official WTO rules.

Stiglitz's greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse or dissent. Despite the West's push for elections through­out the developing world, the so-called Poverty Reduction Pro­grams are never instituted democratically, and thereby, says Stiglitz, "undermine democracy." And they don't work. Black Africa's productivity under the guiding hand of IMF structural "as­sistance" has gone to hell in a handbag.

Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana. Their trick? "They told the IMF to go packing."

So then I turned on Stiglitz. Okay, Mr. Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of what he calls "landlordism," on the usurious rents charged by propertied oligarchies worldwide, typically 50 percent of a tenant's crops. I had to ask the professor: As you were top economist at the World Bank, why didn't the Bank follow your advice?

"If you challenge [land ownership], that would be a change in the power of the elites. That's not high on [the Bank's] agenda." Apparently not.

Ultimately, what drove Stiglitz to put his job on the line was the failure of the Bank and U.S. Treasury to change course when confronted with the crises—failures and suffering perpetrated by their four-step monetarist mambo. Every time their free market so­lutions failed, the IMF demanded more free market policies.

"It's a little like the Middle Ages," the insider told me. "When the patient died they would say, 'Well, he stopped the bloodletting too soon; he still had a little blood in him.'" I took away from my talks with the professor that the solution to world poverty and cri­sis is simple: Remove the bloodsuckers.