The Watchdog

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The likelihood of a default by Greece – a trigger for the insolvency of the ECB – has grown after IMF inspectors are reported to be preparing to say this week that  Greece has failed to meet all its fiscal targets and to withhold the IMF’s share of a fifth tranche of a €110bn EU and IMF bailout.

Without an injection of cash, the Greek government could run out of money as early as June.

A default and a reintroduction of the Drachma could see Greece returning to a rapid economic recovery similar to Iceland and so help avert social unrest but a default will lead to the insolvency of the ECB with a major impact on the euro.

Bild newspaper says that Greece is verging on a “revolution” as tens of thousands of people camp in Athens squares.

A fact finding mission by lawmakers of the German Bundestag has uncovered the scale of the impoverishment of the Greek people due to the EU and IMF penal bailout, according to a report by AFP.

“I’ve clearly realised how Greece is making it really tough for its citizens” by implementing austerity measures, said Steffen Bilger, a member of Chancellor Angela Merkel’s ruling Christian Democrats (CDU) who would not normally be suspected of mollycoddling what some here condemn as spendthrifts.

His CDU colleague Juergen Klimke said he found Athens “in an awful state,” adding that this was “far from being my best trip to Greece.”

For Kai Gehring, a member of the opposition Greens whose party advocates restructuring the Greek debt, “I think it would be impossible to force new reforms” on them.
“Greece has really asked a lot of its citizens,” the Green delegation representative said.

He also deplored that the German press “does not really speak of the efforts made by the Greeks and of the reform programme which crushes both public spending and investment”, said AFP.

German economist Hans Werner Sinn has said Greece faces civil war due to the policies of the EU and ECB.

„Economists agree that Greece will not emerge from its crisis without a debt restructuring. To become competitive again, the country would have to reduce prices and wages by 20 to 30 percent,” says Ifo President Sinn. This would correspond to the devaluation that occurred in Germany in the early 1930s as a result of the emergency decrees of then Chancellor Heinrich Brüning. “This sort of thing works in theory, but in practice it leads to the brink of civil war.”,1518,765601-2,00.html

Greek EU official  Maria Damanaki said on Friday a return to the Drachma was being considered, according to the media.

Greece can take heart from Iceland if it defaults. Iceland’s economy is growing as a result of the jettisoning a demand to pay huge amounts of interest to banks for an artificially inflated national debt, and many economists expect Greece to stage a fast recovery too in the event of a return to the Drachma. The UK was able to devalue its currency by 25% since 2008, allowing it to avoid much of the financial pain of Greece.

In a last ditch effort to stop a Greek default – which will shatter the ECB balance sheets and make it insolvent –, the  EU and  European Central Bank , ECB, appear to be trying to spring in for the IMF and find extra cash for Greek banks. But a new “bailout” package would require parliamentary approval, and German, Finnish and Dutch parliaments are increasingly recognising that Greece and its banks are insolvent and not illiquid and will never be able to repay its debt.

Otmar Issing  former European Central Bank Chief Economist said that Greece will „probably be unable to meet its obligations as the euro region’s most-indebted nation is insolvent.“

CDU/CSU lawmaker Michael Fuchs said Germany should not pay more money to Greece if the IMF withholds payments. FDP lawmaker Rainer Brüderle also expressed doubts over giving more money as baillouts to insolvent governments and banks.

An Irish Minister at the weekend also cast more doubt on the ECB, EU and IMF “bailout” strategy for the eurozone by saying Ireland will also need  a second “bailout” next year, opening the prospect of limitless demands for bailuts for insolvent governments and banks across the eurozone in the near future.

Many economists agree that the EU and IMF “bailout” has piled more debt onto the existing mountain of debt driving the economy into recession and sending the budget deficit out of control. Greece’s debt burden nw stands at around €330bn.

The ECB plan for a  privatisation programme in Greece will not solve the debt problem, said the FT.

“The core issues are how to fund Greece over the next two years and whether to restructure its debt. No amount of privatisations will make these burning questions go away.”

The fire sale of government holdings in utilities, banks, telecommunications companies and other businesses could be overseen by ECB and EU officials in a new level of economic pillaging of the kind last seen in Europe when Nazi German Gauleiters entered conquered countries and removed all the assets by force.

„ Newspaper reports that Athens will have to surrender authority on tax collection, sell-offs

The Financial Times reported on Monday that European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.“


The plundering of Greece by the ECB, EU and private banks is also taking place against growing political turmoil as opposition parties refuse to support the “austerity” measures demanded by the ECB and EU.


May 31, 2011 Posted by | Internationally significant information, Jane Burgermeister Report | Leave a comment



European Central Bank (ECB) board member Lorenzo Bini Smaghi told the Financial Times that the idea a Greek debt restructuring could be carried out in an orderly way is a “fairytale” as the confrontation between the ECB and the eurozone escalates.

Last week, it emerged that the ECB has abandoned all attempt to run a conventional monetary policy for the eurozone and handed out, instead, hundreds of billions of euros in loans to insolvent Irish, Portuguese, Spanish, and Greek banks in exchange for collateral which was hugely inflated in value, and that the ECB would have to own up to gigantic losses if Greece defaulted.

Bini Smaghi admitted in the interview with the FT on Monday that it is the tax payers who will have to pick up this multi-billion euro losses that the ECB has accumulated because of its illegal activities because tax payers have to fund the eurozone national central banks, the source of ECB funding.

 “But Mr Bini Smaghi points out that the impact would fall largely on eurozone national central banks, rather than the ECB, and ultimately on taxpayers.” 

The insolvent banks used the gift of ECB loans at 0% to buy souvereign bonds of insolvent countries, which were compelled to accept a penal EU and IMF bailout, so enabling those banks to make gigantic profits from the 6% interest paid by tax payers as part of the very same „bailouts“ and hold country’s hostage.

Breaching rules, the ECB is, therefore, playing a key role in what former Argentian central bank governor Mario Blejer called a public sector Ponzi scheme: it is allowing insolvent banks to make astronomical profits at the expense of the tax payer and then transfer the losses onto the tax payer’s shoulders.

If Greece restructures its debt, the ECB will be forced to write down the value of its credits and own up to these gigantic losses and the Ponzi scheme will come to a halt. The losses could amount to 100s of billions of euros.

The FT reports that the ECB has bought 45 billion euros of souvereign Greek bonds.

“The ECB has bought about €45bn ($64bn) in Greek government bonds in emergency market support operations in the past year – which would see losses if Greece defaulted.”

But the ECB also handed out 145 billion euros of loans to insolvent Greek banks in exchange for securities that were significantly overvalued.

Even with the most creative of accountancy  – ECB chief Jean Claude Trichet had to face an inquiry in France for accounting irregularities at Credit Lyonnais – the ECB is facing astronomical losses when it has to write down the value of these and other credits in the event of a Greek default, and German tax payers will be very unhappy because they have to foot the lion’s share of the bill.

A default by Greece is also expected to have a knock on effect on Ireland and Portugal and also on the value of the ECB’s vast holdings of securities from insolvent Irish and Portuguese banks.

According to a report in the Irish Independent, insolvent Irish banks now hold 21.8 billion of insolvent Irish government bonds.

The Irish banks appear to have obtained the money to buy these bonds from the ECB in exchange for hugely overvalued asset based securities.

Irish banks appear now to be in the process of transforming their holdings of Irish bonds and sovereign debt into a revenue stream thanks to the tax payer’s of Ireland, and also getting ready off load the bonds onto the ECB for the tax payers of Europe as soon as Ireland is picked bare and the revenue runs dry.

An interactive graphic in The Telegraph shows the way private bank debt is being shoved onto public banks. While the transfer of private bank debt to the ECB and public banks is largely finished in Greece, the graphic shows how it is just starting in Ireland, the latest recipient of the penal EU and IMF bailout. By the end of the year, the “bank exposure to Ireland” graphic will no doubt also show the predominantly orange colour having flipped over to blue as the ECB increasingly holds onto the worthless debt unless public outcry forces the banks to dump it in a “bad bank.” This is what should have happened long ago.

The Irish Independent reports that German banks also hold €13bn worth of Irish debt with Hypo Real Estate and Landesbank BW.

A Greek default could impact not only on the value of the credits the ECB holds from insolvent Irish banks but also on the credits of Portuguese banks.

The ECB has been violating rules in handing out billions of euros to insolvent banks and insolvent governments, a fact that pushed Axel Weber to resign as head of Deutsche Bundesbank in February.

ECB chief Bini Smaghi is, however, still refusing to accept the fact that Greece is insolvent and that te ECB will have to write down the credits, perferring to try to keep up the illusion Greece is just illiquid and wring money from Greece as long as possible.

“Germany’s Otmar Issing, the bank’s chief economist until 2006, who warned that Greece was insolvent and unlikely ever to repay its debts. But Mr Bini Smaghi a former Italian finance official who has an economics PhD from the University of Chicago, insists he is wrong,” writes the FT.

It was also reported today that Greece is considering setting up a Spanish-style “bad bank” to clean up its lenders’ accounts from “toxic” Greek bonds. It looks as if ECB recognises it can no longer hide the bonds from insolvent Greek governments and banks on their balance sheet due to growing media attention, and banks are scrambling for some other method to deal with the debts.

The confrontation between the ECB and the eurozone tax payers comes amid growing warnings of unrest and civil war.

A commentary in the Suedduetsche Zeitung with the headline „Restructuing of Greece: relinquish dogma, save Europe“ indicated that „peace“ in Europe was at risk from the ECB’s „policies.” It said time was running short.

May 31, 2011 Posted by | Internationally significant information, Jane Burgermeister Report | Leave a comment

JANE BURGERMEISTER REPORT: ‘Der Spiegel reports on Titanic battle between ECB and German government over the future of the euro’

Der Spiegel reports on Titanic battle between ECB and German government over the future of the euro

The Haircut War

Tensions Worsen Between Berlin and European Central Bank

By Christian Reiermann and Michael Sauga, Der Spiegel

What’s best for Greece and Europe – a soft debt restructuring or billions of euros in loans for years to come? Berlin and the ECB are deeply divided over the best way to handle the crisis. A number of influential Germans fear the threat of austerity measures could be greater than a “haircut” of Greek debt.

It wasn’t all that long ago that Europe’s top monetary policy experts and the leader of the European Union’s most important member state were politely exchanging compliments. Jean-Claude Trichet, president of the European Central Bank (ECB), praised German Chancellor Angela Merkel for having made Germany into an “example for all of its neighbors.” Merkel, for her part, thanked the Frenchman for his decidedly “successful actions.”

A few years and a crisis later, the relationship has cooled off considerably. Merkel feels that the Frankfurt-based monetary watchdogs are pressuring her inappropriately, while Trichet and his fellow bankers have taken to characterizing the Berlin government’s proposals as “incorrect,” “illusory” or simply as a “catastrophe.”

Today, members of the German government and the ECB seem to have trouble spending time in the same room together. At a recent meeting of finance ministers in Luxembourg, Trichet stormed out of the room after being confronted with yet another crisis plan from Germany that he didn’t like.

The controversy revolves around the future of the common currency, which instruments ought to be used to rescue the euro and, not least, a workable plan to support ailing Greece. While Merkel has long advocated a cautious restructuring of Greece’s debt, Frankfurt-based Frenchman Trichet categorically rejects any form of debt deferral for Athens.

Read more at:,1518,765601,00.html

May 31, 2011 Posted by | Internationally significant information, Jane Burgermeister Report | Leave a comment

JANE BURGERMEISTER REPORT: ‘Irish Minister admits Ireland will need more money from the EU and IMF’

Irish Minister admits Ireland will need more money from the EU and IMF

Irish Transport Minister Leo Varadkar said in an interview with The Sunday Times that Ireland will need another emergency loan from the European Union and IMF. Varadkar is absolutely right as Tom Molloy points out in The Irish Independent. The penal EU and IMF bailout to pay interest on private bank debt that the government assumed without asking the people or parliament is crushing the Irish economy as it crushed the Greek economy.

“Leaving politics aside, it is difficult to quibble with Varadkar’s analysis. It is almost impossible to imagine a situation where the National Treasury Management Agency could return to the markets next year to borrow money on our behalf. The problem is that we must either borrow money from the markets or from Europe because the present bailout fund will run out in 2013 at the latest and we still show no great appetite for changing our lifestyle to live within our means,” writes Molloy.

“Optimists inside government note that we may not need to return to the markets next year even if we are committed to doing so. They believe the banks won’t require all of the €35bn that has been set aside to bulletproof their balance sheets under the bailout deal. This could leave the Government with as much as €11bn to shell out on the day-to-day expenses linked with running the country. Even accepting that the nasty surprises from the banks are a thing of the past, such a scenario only brings us sometime into 2013 before the cash runs dry.

Running out of money in late 2013 will force us to borrow from Europe and the International Monetary Fund once again but under very different political and financial circumstances. French President Nicolas Sarkozy and German Chancellor Angela Merkel will probably both have been kicked out of office, victims of the general dissatisfaction with politicians throughout Europe and their own voters’ worries about the bailout of Greece, Portugal and ourselves. Anybody who believes their socialist successors will be any more flexible than Sarkozy or Merkel lives in cloud-cuckoo land. A far harsher tone, like the one coming from Finland these days, is much more probable.”

Read more at:

May 31, 2011 Posted by | Internationally significant information, Jane Burgermeister Report | Leave a comment

JANE BURGERMEISTER REPORT: ‘Euro is running out of time’

Euro is running out of time


Roger Bootle, The Telegraph

They can try to ‘delay and pray’ but the euro is running out of time As a doomsayer from the start, who has written several times on the subject, I have recently been reluctant to burden my readers with more jeremiads about the euro.

But fasten your seatbelts. Here I go again. My excuse is that this crisis keeps surprising the unwary. There is so much to say that I will have to have several bites.

Before we can find solutions, which I will discuss at a later date, first the causes. Why is the euro in crisis? Because it was fundamentally flawed at its inception. Only good luck, strong economic growth and enlightened economic management could keep it together. In fact, the eurozone has had to suffer the opposite of all three.

Giving up sovereign currencies is a serious challenge. Exchange rates act as a safety valve. When you remove them, the pressure either has to be reduced or it will find some other way out. In a fixed exchange rate system, such as the ERM, currency speculation could and did break the system. Advocates of the euro project drew comfort from the fact that, by contrast, a full monetary union is immune from such attacks.

Read more at:

May 31, 2011 Posted by | Internationally significant information, Jane Burgermeister Report | Leave a comment

NBR: ‘Welfare reform to be made election issue – Key’ (

31 May 2011

Welfare reform to be made election issue – Key

Prime Minister John Key says proposed reforms of the welfare sector will be rolled out in the lead up to the general election, but changes will mean that if people can work, they must.

The Welfare Working Group’s final report, released in February, gave the Government 43 recommendations to reform the welfare system into a work-focused programme.

Mr Key said the Government had ruled out one of the more radical recommendations, that solo parents look for paid work when their second child turned 14 weeks, saying he was “uneasy” about the short length of time.

The Government had expected to announce a package in response to the group’s recommendations before the election but was pushed aside by the Canterbury earthquake.

He had now asked ministers to look at the group’s recommendations and develop a comprehensive package of welfare reform.

The Government would announce policies in due course and campaign on them.

“It’s important we to signal to New Zealanders that if we are afforded a second term that there will be reform in welfare.”

However, while ruling out the one recommendation he had earlier indicated was unpalatable, he would not go into detail on the remaining 42 recommendations.

Mr Key said it was unacceptable that the proportion of working age population on benefits had increased from 2 percent in 1970 to 13 percent today.

The welfare system should send a clear message that if you could work and support yourself, then you must, he said.

It was not doing enough to send that message, which was not fair on taxpayers, not affordable and not fair on beneficiaries who fell short of their potential, he said.

It was also not fair on the approximately 220,000 children growing up in welfare-dependent households.

Mr Key said the proposals would not mean instant reform of the welfare system but that more workers would be needed as the budget anticipated 170,000 jobs created over next four years.

The welfare group’s February report said the cost of welfare would go from $47 billion to $34b by 2021 if its reforms proceeded — cutting the 360,000 on welfare by 100,000, by putting work obligations on them in exchange for support such as childcare.

It said the Government should set clearer expectations for people on the welfare system to look for paid work, and if recipients do not meet their obligations, they should face gradual reductions of assistance.

Social Development Minister Paula Bennett will lead the group of seven ministers going over the recommendations to develop the Government’s policy.

Back to NBR homepage

Comments and questions


Where is the Government review of corporate welfare beneficiaries – the numbers of consultants and private contractors employed across all state sectors doing work that used to be carried out by in-house public servants?


Penny Bright

Penny Bright | Tuesday, May 31, 2011 – 10:11am
In response to Penny Bright | Tuesday, May 31, 2011 – 10:11am

Granted that some contractors are likely taking more than the value they’re providing to government (likely all those employed by the previous government). However, lets not confuse these people with the use of outsourced talent, who invariably are more in touch with the real world (because that’s where they derive their livelihood from) than academic bureaucrats who have never had to make a business decision and always got their paychecks just from turning up to their bloated office environments, which regularly achieve … absolutely nothing. Roll on the downsizing of government. Let’s use our taxpayer dollars wisely.

Kevin Pitfield | Tuesday, May 31, 2011 – 10:40am

About time too.

NZ does not need beneficiaries becoming even more dependant on the State for their survival – so I’m pleased to hear National will not be offering election “bribes” and lolly scrambles like Labour have done in the past with their student fees, Family Welfare populist bribes and such like.

Our government should be doing everything possible to encourage people to be able to stand on their own two feet and be accountable for their own actions and situation – and provide a “leg up” to those wanting to better themselves and are prepared to do what ever it takes to educate / better themselves.

Election bribes and “vote for us for free hand-outs” are not only unjust to the individual by encouraging them to be more reliant on the state through apathy and “easy money” but it also denies that individual the opportunity to fully develop their own self ability for increased mana and self esteem, better education and opportunities throughout life.

Shackling entire demographics to more and more hand-outs via election promises is not only costly for us tax payers, but it should also be seen as a form of political corruption by those in “power” preying on the most vulnerable. Wolf in sheep’s clothing comes to mind. Yet it’s far more insidious than that, with the future of entire younger generations at risk because of certain politicians promising “more free money” for nothing instead of encouraging and motivating individuals to achieve a better life for themselves and their dependants through hard work, application and education – not free hand outs.

MooseKnuckle | Tuesday, May 31, 2011 – 10:46am
In response to Kevin Pitfield | Tuesday, May 31, 2011 – 10:40am

Where’s the ‘cost-benefit analysis’ which PROVES that the use of consultants/ private contractors is a more cost-effective use of taxpayer monies than former ‘in-house’ provision’?

Where are the FACTS to back up the MANTRA that ‘public is bad – private is good’?

Where also are the transparent, publicly-available ‘Registers of Interest’, which can be used to double-check for ‘conflicts of interest’ between those who grant and those who receive these public contracts?

Where, (while we’re at it) is the publicly-available ‘Register of Lobbyists’ – so the public can check ‘who’s meeting the Minister’ to push for particular legislative changes?

Where is the publicly-available ‘Register of Interests’ for those policy analysts who provide the advice for Government Departments/ Cabinet through the mechanism of ‘Regulatory Impact Statements’ – and the like?

With whom are these policy analysts consulting, and what are their connections with whom they are ‘consulting’?

Or is this where the form of grand corruption known as ‘State Capture’ occurs in ‘clean, green New Zealand’ – perceived to be the ‘least corrupt country in the world’?

‘State Capture’ being where vested interests ‘get their way’ at the ‘policy’ level – before legislation is passed.

I learned about ‘State Capture’ at the 14thTransparency International Conference which I attended last year).

Penny Bright

Penny Bright | Tuesday, May 31, 2011 – 11:43am

May 31, 2011 Posted by | Fighting corruption in NZ, Transparency in Govt spending | Leave a comment