From Volume 38, Issue 9 of EIR Online, Published Mar. 4, 2011

Global Economic News

Will the EU Seize the Parthenon to Pay Off the Greek Debt?

Feb. 21 (EIRNS)—Greece is in an uproar over the demand by the notorious "troika," the European Central Bank, the European Commission, and the International Monetary Fund, that it must sell EU50 billion worth of state assets to pay off its foreign debt. This is an increase from the EU15 billion in the original "memorandum." While Prime Minister George Papandreou and his government have issued statements denying the sale of state assets to pay off the debt, no one believes them.

Economics Prof. Epaminondas Marias at the University of Crete, wrote in the Feb. 21 Athens News, that it doesn't matter what Papandreou might be saying, the document he agreed to for the bailout spells it out clearly.

The relevant EU Council decision, published in the Official Journal of the European Union on Jan. 29, explicitly states that "a better management of public assets, with the aim of raising at least EU7 billion during the period 2011-2013, of which at least EU1 billion in 2011 and proceeds from the sale of [real-estate and financial] assets shall be used to redeem debt." This was reconfirmed by Eurogroup President Jean-Claude Juncker, on Feb. 14 in Brussels.

Going one step further, Marias points out that, according to the loan agreement signed by the Greek government for its EU110 billion "bailout," everything is up for sale or seizure in Greece, including public sector companies, publicly owned real-estate, and even the archaeological sites. The loan agreement reads: "Neither the Borrower nor any of its property are immune on the grounds of sovereignty or otherwise from jurisdiction, attachment—whether before or after judgment—or execution in respect of any action or proceeding relating to the Agreement."

Marias comments, "From the very moment Greece took recourse to the IMF, and the so-called bailout mechanism was created on 25 March 2010, this column has argued that the main objective of the memorandum was not to rescue the country but, rather, its lenders. In the meantime, it has shown that the memorandum program would not only fail to take the country out of the debt crisis but that the troika, rather, had consciously formulated and imposed a memorandum aimed at the further indebtedness of the country and the looting of its wealth-generating sources and other public movable and immovable property, even its public utilities."

The Official Journal of the European Union, which published decision by the Council of the European Union for "reinforcing and deepening fiscal surveillance," states, down to the micro-level, the brutal measures the Greek government must take. This includes a detailed "reform" of the health system, complete with mandating where the cuts will take place and the increase in fees. It even details sourcing and pricing of medications. Not only does it call for cutting wages of public-sector workers and pensioners, but demands the rewriting of labor laws.

Financial Times Fears 'Burning the Bondholders'

Feb. 22 (EIRNS)—The fear that the rallying cry of "burn the bondholders" is spreading, has taken hold in the City of London. The Financial Times, the City's daily mouthpiece, raises this fear twice in today's edition.

First, the paper's insider Lex Column has a comment on Icelandic President Grimsson's decision to again defer to a national referendum the legislation arranging to pay off the British and Dutch governments, which had covered their nationals' losses from the collapse of two Icelandic banks. The Icelandic parliament approved new legislation earlier this month to effectively reimburse foreign investors for their speculative losses. In the first referendum, held after Grimsson refused to sign the first legislative effort at making the pay-off, 90% of the voters cast ballots against the deal. The Financial Times remarked, "the first rejection had no dire effects. Indeed, credit default swaps on Iceland's sovereign debt are almost 300 basis points narrower than a year ago. The world should take notice. When the Icelandic people refused to pay for their bankers' mistakes, the sky did not fall. If they do it again, others might get some ideas."

In the same issue, the FT has an article entitled "Ireland Weighs Risks of 'Burning the Bondholders.'" It writes: "'Burn the bondholders' has become one of the rallying cries of Ireland's election campaign, reflecting widespread public anger that the investors who put in the funds that allowed the banks to lend imprudently have not yet shared the bail-out pain."

Bailouts Are Biggest Drivers of State Debt in Germany

Feb. 22 (EIRNS)—An article in the Feb. 21 German news agency Tagesschau, on the growth of German public debt, noted that, in 2010, the public debt in Germany was higher than ever before, almost EU2 trillion, and that every German has a burden of EU24,450 euros on his or her shoulders. Just from 2009 to 2010, the public debt grew by EU304.4 billion or 18%, the highest rate of increase, since statistics were first kept in 1950.

The major reason for this, says Tagesschau, is the state's bailout of the "bad banks," entities created by the troubled banks to "work off" the toxic assets. The HRE (Hypo RealEstate) and WestLB alone got more than EU232 billion, but the public debt of Germany's 16 states grew by 13% to over EU595 billion. The report also said that the debt of towns and cities grew by nearly 5%, to over EU119 billion.

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