Global Economic News
Greek Public Sector Workers Wages Cut by As Much As 40%
July 30 (EIRNS)Greek civil servants have received pay cuts of up to 40%, while the government is passing new laws without debate to cut workers' pay even further. The civil servants union federation ADEDY has threatened further strikes in August. The union federation pointed out that civil servants had already suffered a 25% cut in pay in 2010 and further cuts since Jan. 1, 2011, as well as an increase in social withholdings. As a result, ADEDY pointed out, the pay cuts for public-sector staff were now approaching 40% and in some cases have even exceeded that.
Another Brutal Downgrading of Greek Sovereign Bonds
July 25 (EIRNS)Greece's sovereign credit rating was cut three steps by Moody's Investors Service, which said the European Union's financing package for the debt-laden nation implies "substantial economic losses" for private creditors. Greece's long-term foreign currency debt was downgraded to Ca from Caa1, the ratings company said in a statement in London today.
"The announced EU program along with the International Institute of Finance's (IIF) statement representing major financial institutions implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%," Moody's said. "The financing package will consist of EU109 billion ($157 billion) from the Euro region nations and the International Monetary Fund. Financial institutions will contribute EU50 billion after agreeing to a series of bond exchanges and buybacks to cut Greece's debt load."
So much for the alleged capacity and willingness of the markets to respond constructively to the signals sent out by the eurocrats and the IIF. The real face of the "market" is visible in calls for trillions of euros more, by people like Jacques Cailloux from Royal Bank of Scotland, who said the new bailout deal is "not enough to halt the crisis at any level.... While the bailout fund (EFSF) will be able to intervene preemptively to cap Italian and Spanish bond yields, it lacks the EU2 trillion funding to be credible.... Nice tools but no firing power. A rolling crisis is still likely," Cailloux said.
London Uses Phony Debt Crisis To Push QE3Again
July 30 (EIRNS)The British are using the final countdown to the U.S. Aug. 2 debt-ceiling crisis to try to ram through their hyperinflationary QE3 bailout policy.
Yesterday, the London Guardian reported that there is "speculation that the Federal Reserve might need to embark on a third round of quantitative easingthe creation of electronic money," to deal with the crisis. And today's Financial Times demands answers to various questions posed by columnist Gillian Tett:
1. Will the government "support the U.S. money market funds" (MMF) if there is a debt downgrade?
2. Will the government "step into the markets and act as the dealer or financier of last resort, if parts of the market freeze up?"
3. What will regulators do about capital standards, "if some banks' balance sheets balloon?"
A separate FT article frets that "a serious concern for the financial system is the risk of an investor run on money market funds, some of which specialize in Treasuries." The article reminds readers that "it is legally possible for the Federal Reserve to provide direct liquidity support to MMFs." The Wall Street Journal beats the drums for an MMF bailout, recalling that "a run on these funds in 2008 was a major factor in the financial calamity that followed the collapse of Lehman Brothers.... The Treasury had to temporarily guarantee the funds and the Federal Reserve had to offer emergency loans to them."