Greek Debt Crisis is a Warning Sign to the World
Greek Debt Crisis Is A Warning Sign To Us
February 17, 2012GoldenVisionForYou.com - Greek debt crisis has been dragged for a long time.
The Greek parliament has finally approved new harsh austerity legislature required to secure a 130-billion-euro bailout from the EU as well as the IMF in efforts to avoid devastating default. This comes amid violent riots against the vote in Athens. The lawmakers voted early Monday (Feb 13th) in favor of the bill which will cut 15,000 public-sector jobs and lower the minimum wage by 20 per cent. Patrick Young, from investment consultants, DV Advisors, says whatever happens in Greece, there is no saving it from a collapse that will be felt across Europe.
And the financial crisis in Europe is going to continue to spread well beyond Greece. Moody’s Investors Service just downgraded the credit ratings of six European nations. Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook. It also lowered the ratings of Slovakia, Slovenia and Malta.
Countries such as Italy, Spain, Portugal, Ireland and Hungary are heading down the exact same road that Greece has gone. Greece was the first one to experience a full-blown depression, but soon Greece will have many followers.
Greek debt crisis is definitely a warning sign to the world. Economist Don Drummond delivers his report at a news conference in Toronto on Wednesday February 15 2012. The 700 page report outlines suggestions for ways the Ontario government can cut back spending to avoid Greek like debt crisis.
To get out of its fiscal hole, the government must cut program spending more deeply than former Tory premier Mike Harris and maintain that restraint longer than Alberta’s Ralph Klein or Saskatchewan’s Roy Romanow in the 1990s, the report said.
“I think the challenge and the solution will have to be pretty much unprecedented in Canadian post-war history,” Drummond told reporters.
Greek debt crisis is also a warning sign to each one of us. There is no free lunch. You can not count on the government to take care of you any more. Because the government is in big trouble itself. Are you prepared for tough economic times? Do you have a plan B for your income? It is time to be financial educated and explore home business opportunities.
Europe's Economic Woes Dominate G8 Gathering
May 18, 2012Reuters - U.S. President Barack Obama pledged at a summit on Saturday to work with Europe on a package that balances growth with debt reduction as world leaders try to prevent the worsening euro zone crisis from destabilizing the global economy.
At the wooded Camp David retreat in Maryland's Catoctin Mountains, Obama and leaders from other major economic powers are seeking ways to soothe financial markets after worries about Spain's banking problems and the risk of a Greek exit from the euro zone sent world stocks to their lowest levels this year.
A shirt-sleeved Obama opened the morning session on the global economy at a rustic lodge, promising to seek ways to restore healthy growth and jobs and address concerns in Europe.
"All of us are absolutely committed to making sure that both growth and stability, and fiscal consolidation, are part of an overall package in order to achieve the kind of prosperity for our citizens we all are looking for," Obama said.
After an early morning meeting with Obama, British Prime Minister David Cameron said he detected a "growing sense of urgency that action needs to be taken" on the euro zone crisis.
"Contingency plans need to be put in place and the strengthening of banks, governance, firewalls - all of those things need to take place very fast," he told reporters.
European Union leaders seemed keen to stress on Friday that they would stand firm in protecting their banks, after news of escalating bad loans raised the specter that rescuing Spain's banks would crash the euro zone's fourth largest economy.
"We will do whatever is needed to guarantee the financial stability of the euro zone," EU President Herman Van Rompuy said.
Earlier French President Francois Hollande suggested using European funds to inject capital into Spain's banks, which would mark a significant acceleration of EU rescue efforts.
Balancing a growth agenda with efforts to lower government debt through fiscal belt tightening is a crucial part of the G8 discussions. Obama has aligned himself with Italy's Prime Minister Mario Monti and the new French president in putting more emphasis on growth.
That places pressure on German Chancellor Angela Merkel, who has pushed fiscal austerity as a the prime means of bringing down huge debt levels that are burdening European economies.
Voters in euro zone countries have shown frustration with that approach, ejecting the Greek government and in France the conservative Nicolas Sarkozy was defeated by Hollande, a socialist, in the May 6 elections.
A draft of the summit communiqué shown to Reuters will stress an "imperative to create growth and jobs."
There are signs of softening in Germany's austerity stance.
Its largest industrial union IG Metall struck its biggest pay deal in 20 years early on Saturday. The 4.3-percent pay increase, more than double Germany's inflation rate, will boost worker buying power in the euro zone's richest nation and lift consumption - something the United States long has urged as a means to bolster overall growth throughout the world's second largest economic region.
GLOBAL SECURITY
Also on the summit agenda are concerns about oil and food prices as well as Afghanistan, Iran, Syria and North Korea.
Speculation has grown that Obama will use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July.
But with oil prices already sliding, a move by Obama to tap the Strategic Petroleum Reserve - alone or along with other countries - could expose him to criticism that the emergency supply should only be touched in a supply crisis.
The Camp David summit kicked off four days of intensive diplomacy that will test leaders' ability to quell unease over the threat of another financial meltdown as well as plans to wind down the unpopular war in Afghanistan.
After the Camp David talks wrap up late on Saturday afternoon, Obama will fly to his home town of Chicago where he will host a two-day NATO meeting at which the Afghanistan war will be the central topic.
Greece Bridles at Merkel Referendum Suggestion
May 18, 2012AFP - Greek political leaders reacted angrily on Saturday to a suggestion, attributed to German Chancellor Angela Merkel, that the country hold a referendum on euro membership alongside an election next month.
The chancellor's move -- despite a denial by Berlin -- went down badly with leaders sensitive to any comments from Germany, which has insisted that Athens stick to tough austerity measures agreed in return for a massive EU-IMF bailout.
"The Greek people have no need for a referendum to demonstrate their choice for the euro, they have already made enough costly sacrifices to show that," said Antonis Samaras, leader of the conservative New Democracy party which won inconclusive May 6 polls.
Merkel's suggestion, "above all coming in the run-up to the election, is regrettable and unacceptable," Samaras said in a statement.
"The Greek people has the right to respect from its (European) partners."
The office of the caretaker prime minister said on Friday that Merkel "conveyed thoughts (to the president) on holding a referendum alongside the election, on the question of whether Greek citizens wish to remain in the eurozone."
The suggestion was turned down, a statement said, because the caretaker government only has the authority to organise the new polls, expected June 17.
Berlin bluntly denied any such move.
"The information reported that the chancellor had suggested a referendum to the Greek President Carolos Papoulias is wrong," a Merkel spokeswoman said.
Alexis Tsipras, leader of the radical left Syriza party which came second in the May 6 vote on a campaign against the austerity policies, alluded to Germany's wartime record in Greece, a hugely sensitive and controversial period.
"Madame Merkel is used to talking to Greek political leaders as if she was addressing a protectorate," Tsipras said.
"Greeks are going to give a definitive answer (in the upcoming polls) and are going to put an end to the policies of austerity and submission, they will open the way for progressive forces across Europe," he added.
The leader of the socialist Pasok party, which along with New Democracy backed the EU-IMF accord and suffered accordingly on May 6, said only the Greek parliament and government had the authority to call a referendum.
"The question for Greece is not whether it stays in the euro or not, but whether it can get out of the crisis," Evangelos Venizelos said.
Greek newspapers were even more critical -- "Merkel Ultimatum," was the pro-Socialist Ta Nea front page headline.
"It's a Merkel Bomb for a euro referendum, an unprecedented political intervention which makes things worse," wrote Eleftheros Typos on the right, while financial daily Naftemporiki also spoke of a "political bomb."
The Merkel imbroglio comes at a bad time, with the chancellor in Washington for G8 talks hosted by US President Barack Obama who has shown himself more sympathetic to the need for growth than austerity as Greece tops the agenda.
Obama said Friday he supported Greece staying in the eurozone, a region of "extraordinary importance" not only for Europe but also for the global economy.
Up to now, Merkel has insisted that Greece must stick to the austerity terms in the bailout deal or risk losing access to debt funding -- effectively forcing it out of the eurozone.
But in recent months, calls for the focus to be rebalanced towards growth have increased, with new French President Francois Hollande winning office earlier this month on a pledge for change.
Despite the brickbats, it is also clear that in effect the June 17 polls are fast becoming a straight vote on Greek acceptance of the bailout deal and its continued place in the eurozone.
After recent polls put Syriza in the lead, a survey Friday showed the race narrowing, giving New Democracy 23.1 percent of the vote, up from the 18.85 percent it won on May 6, with Syriza on 21 percent, up from 16.8 percent.
Fears that the new poll might not be able to produce a viable government committed to the bailout have roiled global markets and snared Spain where the government is struggling to stabilise its stricken banking system.
"Time is clearly running out," London-based analysts Capital Economics warned in a note over Greece's continued political paralysis.
"If the government does not meet the conditions required to receive the next tranche of the bailout, it could run out of money before the end of the summer."
Mexico's Ortiz says Greece Exit Could Be Worse than Lehman
May 18, 2012Reuters - If Greece leaves the euro zone it could detonate a global financial crisis even worse than the 2008 credit crunch, dry up global trade financing and spur another U.S. recession, former Mexican central bank governor Guillermo Ortiz said on Friday.
Heavily-indebted Greece is heading toward a snap election next month and global financial markets have swooned on fears the country could reject terms of an international bailout and pull out of the euro.
"There is no legal exit clause for a country that wants to leave the euro zone, so if it occurs, it is going to be necessarily traumatic, and have global repercussions," Ortiz told Reuters at a banking conference in the Mexican resort of Acapulco.
"Of course this will affect us as the consequences of Lehman's bankruptcy affected the world, only this will probably have an even bigger impact," he said.
The collapse of U.S. investment bank Lehman Brothers in late 2008 sparked Mexico's deepest recession since the 1995 Tequila Crisis.
Ortiz said Mexico's was most vulnerable to a potential freeze in financing for international trade shipments.
"In the case of Mexico, fortunately we do not depend on cross border flows for the operation of the banking system," said Ortiz, who led Mexico's central bank from 1998 to 2009 and is now chairman of the board of Mexican bank Banorte.
"The cross border flows on which we depend have to do with the financing of international trade. If this halts, obviously there are real repercussions."
Euro area banks as a whole provide 36 percent of global trade finance loans, and French and Spanish banks together account for more than two-fifths of trade finance loans in Asia.
Mexico's banking system is dominated by units of major global banks, including Spain's BBVA, but local subsidiaries are well capitalized by local deposits and are not dependent on financing from their parent companies.
Ortiz, who is also a former chairman of the Bank for International Settlements (BIS), said a collapse in trade financing could end up dragging the United States into recession.
"A double dip (recession) would obviously hit the whole world," he said.
Mexico sends nearly 80 percent of its exports to its northern neighbor.
BIS figures show new trade finance loans fell 4.6 percent in the fourth quarter of 2011 from the previous quarter.
Trade finance, which is highly short-term - usually 30 or 90 days - is often one of the first forms of lending to be cut back in difficult times. Trade finance fell about 10 percent between October 2008 and January 2009, according to IMF calculations.
World Stock Markets Sink on US, Europe Worries
May 18, 2012AP - World stocks fell Friday after credit downgrades slapped on Spanish banks unnerved investors already worried about the stability of the 17-country euro currency union.
The fall in European shares followed a sharp downturn in Asia where markets were also rattled by weak U.S. manufacturing figures.
The nervousness about Spain's banks comes as the European financial crisis intensifies.
Political turmoil in Greece has increased the likelihood that it could leave the 17-country monetary union, a move that could have ripple effects throughout Europe and the world's financial markets.
Britain's FTSE 100 fell 0.8 percent to 5,295.30 and Germany's DAX was 0.5 percent lower at 6,279.36. France's CAC-40 lost 0.7 percent to 2,991.85.
But Wall Street looked set for a higher opening on Friday when shares of social media giant Facebook will start trading. Buyer demand is expected to be very strong. Dow Jones industrial futures rose 0.2 percent to 12,439 and S&P 500 futures added 0.2 percent to 1,304.40.
Markets were jolted by Moody's downgrade Thursday of 16 Spanish banks, said Jackson Wong, vice president at Tanrich Securities in Hong Kong.
Moody's said it took the action because the banks face a rising tide of bad loans linked to Spain's recession, a gloomy real estate market and high unemployment.
"It's very hard to predict how the euro crisis will evolve. All the news is bad, so investors like to stay on the sidelines even though stocks are very attractive right now," Wong said.
Japan's Nikkei 225 tumbled 3 percent to close at 8,611.31, its lowest finish in four months as signs of weakness in the U.S., a critical export market for Japanese companies, battered some of the country's behemoth manufacturers.
Hong Kong's Hang Seng dropped 1.3 percent to 18,951.85 and Australia's S&P/ASX 200 slid 2.7 percent to 4,046.50. South Korea's Kospi tumbled 3.4 percent to 1,782.46. Benchmarks in Singapore, Taiwan and New Zealand also fell.
Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index losing 1.4 percent to 2,344.52. The Shenzhen Composite Index fell 1.5 percent to 940.91. Shares in ports and trading related companies led the gains, while shares in banks, shipping and defense industry companies weakened.
"The investors are pessimistic over China's economic outlook, on top of the problems in Europe. It is more like a panic selling," said Guo Yanhong, an analyst at Huachuang Securities, based in Beijing.
In the U.S., meanwhile, the Federal Reserve Bank of Philadelphia said Thursday that its index of factory activity fell to minus 5.8 from 8.5 in April. Any reading below zero indicates contraction. Measures of new orders and employment also fell in May, the bank said. That suggests manufacturers in the region are cutting jobs.
Among individual stocks, Japanese vehicle makers were hit hard. Yamaha Motor Co. tumbled 5 percent and Mitsubishi Motors Corp. was down 5.1 percent. Toyota Motor Corp. lost 3.7 percent.
Asiana Airlines Inc., South Korea's second-largest carrier, plunged 5.1 percent after reporting that its earnings slid in the first quarter of 2012 from a year earlier, mainly due to soaring fuel prices, Yonhap News Agency said.
Gold miners were among the gainers. Australia's Newcrest Mining rose 3.8 percent on rising prices for the precious metal. Hong Kong-listed Zijin Mining Group Co., China's largest gold miner, rose 3.4 percent.
Benchmark oil for June delivery was down 1 cent to $92.55 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $92.56 in New York on Thursday.
In currencies, the euro fell to $1.2686 from $1.2714 late Thursday in New York. The dollar rose slightly to 79.30 yen from 79.28 yen.
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