Greek-style Austerity Measures

State Worker Jumps from Balcony in Romanian Parliament as Prime Minister Speaks

December 23, 2010

NY Daily News - A man protesting government cuts dived off a balcony in the Romanian parliament on Thursday as the nation's prime minister and other politicians looked on in horror.

Prime Minister Emil Boc had just begun addressing legislators in Bucharest when the man, identified as a state-TV engineer Adrian Sobaru, stood on the railing some 22 feet above the main floor.

"Boc, you've taken away the rights of our children," he was heard yelling as he fell, according to London's Telegraph.

Sky News reports the 40-year-old wore a T-shirt that stated, in Romanian, "You've pierced us. You've killed our children's future. Freedom."

The man, who according to reports has a son who is autistic, was distraught over losing health benefits due to government cuts.

Sobaru suffered several injuries, including fractured bones in his face, but is expected to survive. He was conscious when medical personnel removed him from the parliament, during which time he chanted, "Freedom."

Measures recently passed by the financially strapped Romanian government have led to cuts up to 25% in civil servant pay. Prime Minister Boc has also been struggling to remain in power, and was in the midst of fighting off a vote of no-confidence when Sobaru took his plunge.

Greek Parliament Approve 2011 Austerity Budget

December 27, 2010

Reuters - The Greek parliament on Thursday approved a 2011 budget that imposes yet more austerity on the debt-choked nation, hours after thousands took to the streets shouting,

"We can't take it any more."

The bill targets a budget deficit of 7.4 percent of GDP next year, down from about 9.4 percent this year, through more spending cuts and tax increases, in order to put Greece in line with terms of the bailout that saved it from bankruptcy in May.

"We will do whatever it takes to succeed," Prime Minister George Papandreou told lawmakers just before they started to vote. "We will change this country."

The budget was approved on a strict party-line vote by the 156 ruling socialist party lawmakers in the 300-strong parliament.

Public transport ground to a halt in the capital Athens on Wednesday as about 3,000 protesters rallied peacefully in front of parliament to protest against wage cuts in the public sector and other steps meant to help stem a crisis that has shaken the euro zone, spread to Ireland and threatens others like Portugal.

"We have no hope, we are just drowning," said Apostolos Kostopoulos, 46, a Public Power Corporation technician whose salary was cut. "Parliament is voting today on a budget that will plunge people deeper into poverty," he said as others waved a large Greek flag covered with "For Sale" tags.

Another 2,000 people joined a separate anti-austerity march, but overall turnout was much smaller than in previous protests. Some Greeks questioned the point of countless strikes which have failed to divert the government from its austerity path.

"We don't agree with austerity, but nothing is going to change. The government will not change policies just because we take to the streets," said Susanna Apostolaki, 43, a secretary.

The new spending cuts and tax rises in next year's budget build on an estimated 6 percentage points reduction of deficit in 2010.

But Greece is still set to miss its 2010 fiscal targets and the new measures have failed to calm fears about its ability to pull itself out of its crisis. Fitch agency said late on Tuesday it may cut the country's credit rating next month to junk.

The leader of the main opposition party, the conservative New Democracy, told parliament that the 2011 budget and the European Union/International Monetary Fund bailout would fail.

"PASOK (the socialist party) is lying when it says that the (EU/IMF) memorandum will take the Greek economy out of the crisis. It will deepen the crisis," Antonis Samaras said. "The government's policy is reducing GDP more than it reduces the deficit."

SPENDING CUTS

Athens bus and subway drivers have been holding on and off strikes for two weeks and did not work at all on Wednesday, keeping Christmas shoppers from the city center and adding to the strain of recession-hit retailers.

The socialists, who revealed a gaping budget deficit after coming to power last year, have braved public discontent and taken draconian measures to meet the EU/IMF rescue terms.

This year already, the government has cut public sector wages by about 15 percent, increased the retirement age, frozen pensions and cut public spending. But it has failed to boost tax collection as much as targeted, despite a hefty VAT increase.

Greece's lenders say it is broadly on track with fiscal consolidation plans. But partly as a result of the measures, the economy is forecast to shrink 3 percent next year after a 4.2 percent drop in 2010, with unemployment jumping to a record 14.6 percent from an estimated 12.1 percent this year.

Greek stock markets were little changed on Wednesday after the Fitch warning.

"It seems the market has already discounted the downgrade," said Vasillis Vlastarakis, analyst at Beta Securities in Athens.

The move would bring Fitch's rating in line with Moody's and Standard & Poor's, who already have sub-investment grade ratings on the country, and both are on review for further downgrades.

Papandreou said EU member states needed to deepen their cooperation to overcome the crisis or risk breaking up.

Spain Receives Debt Warning Before EU Summit

December 15, 2010

Reuters - Ratings agency Moody's warned Spain on Wednesday that its debt could be downgraded and Portugal took steps to revive its economy amid concerns about euro zone debt contagion on the eve of a European Union summit.

Moody's said it was worried about Spain's high debt funding needs, its heavily indebted banks and its regional finances, but it did not expect Madrid would have to follow Greece and Ireland in seeking an EU bailout.

The Portuguese government announced moves to cut red tape and boost growth, and said it would soon adopt quarterly fiscal targets, part of a broad effort to convince EU officials and financial markets it does not need a bailout.

Spain and Portugal have come under intense pressure in bond markets, raising concerns they could be driven into seeking an EU/IMF rescue when they hit funding crunches next year.

The cost of insuring Spanish debt against default and yields on its 10-year government bonds rose on Wednesday, an indication of the increased risk attached to Spain. The euro fell against the dollar and European stocks lost ground.

"Europe remains very fragile. Everyone sees a major crisis in the first few months of 2011 that would coincide with Spain's refinancing operations," said Arnaud Poutier, deputy head of IG Markets France.

EU leaders meet in Brussels on Thursday and Friday for their end-of-year summit, with efforts to overcome the region's year-long debt crisis at the heart of their agenda.

Jean-Claude Juncker, the chairman of the Eurogroup countries, said he regretted that discord among EU states over how best to handle the debt crisis had led to tensions and probably given markets more cause for concern.

"Unfortunately there are dissonances in public," he told Germany's Hadelsblatt newspaper. Juncker and German Chancellor Angela Merkel have publicly disagreed over anti-crisis steps.

Leaders also face protests over austerity policies announced by governments across Europe to repair their public finances.

Greek protesters clashed with police and set fire to cars and a hotel, as tens of thousands of people marched through Athens in the largest and most violent anti-austerity protests since May, when three people died...

Spain Debt Warning Hits Euro, Swiss Franc Climbs

December 15, 2010

Reuters - The euro fell against the dollar and hit a record low versus the Swiss franc on Wednesday after Moody's said it may downgrade Spain's debt rating, refocusing attention on contagion risks from the euro zone crisis.

The Swiss currency gained as worries about debt problems in some European countries encouraged investors to reduce exposure to riskier euro zone assets and seek safer alternatives.

Moody's put Spain's Aa1 ratings on review for a possible downgrade, citing concerns about its mounting debt and 2011 funding needs, though it did not believe Spain would need an EU bailout, as Greece and Ireland have.

Contributing to the euro's fall, the dollar firmed after upbeat economic data lifted U.S. bond yields, enhancing the appeal of U.S. assets.

Concerns lingered, however, that U.S. fiscal problems could worsen due to a proposed extension to tax cuts even if the move helps the economy. Traders said that for some investors this made the Swiss franc a more attractive safe-haven asset than the dollar.

"The U.S. story is still very important, and the extension of the Bush tax cuts has enhanced the Swiss franc's safe haven status," said Stephan Maier, currency strategist at Unicredit in Milan.

He said the Moody's statement had weighed on the euro, but that the euro was also weakening due to portfolio rebalancing and investors reducing risks ahead of the end of the year.

The euro was down 0.3 percent against the dollar at $1.3351, off an earlier low of $1.3285 where traders reported sovereign demand for the single currency.

The euro was down 0.2 percent at 1.2814 Swiss francs, having hit a record low of 1.2758 on trading platform...