The Watchdog

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JANE BURGERMEISTER REPORT:’ECB, EU and IMF postpone Greek default at the price of their credibility’

ECB, EU and IMF postpone Greek default at the price of their credibility

*EU, IMF and ECB disburse bailout funds to Greece, postponing default

*New package will drive Greece deeper into debt

*Failure to acknowledge Greece is insolvent undermines credibility of EU, IMF and ECB

* German and Greek lawmakers rebel amid growing social unrest in Athens, financial crisis turns into political crisis

*Frankfurther Allgemeine Zeitung carries scathing commentary on EU, IMF and ECB for concealing the insolvency of Greece and violating rules for the benefit of the banks, says ECB is only looking after interests of banks

Speculation that Greece would be forced to default on its government debt in July because it hadn’t met the targets needed for the next installment of a €110bn Greek bailout ended yesterday when the EU and the IMF breached rules to disburse the funds anyway in a move which has postponed a default by Greece but at the price of diminishing EU and IMF credibility.

After conducting a review of Greece’s economic progress, officials from the troika of IMF, EU and ECB said 12 billion euros would be disbursed in spite of the fact that Greece has met none of the fiscal targets set as part of a bailout deal. Plans for a new 65 billion euros of tax payer money to cover  maturing Greek debt over the next two years were also announced.

The failure of the IMF/EU and ECB to address the widely recognised fact that Greece is insolvent and not illiquid has led to a hardening of the negative perception of the EU/IMF and ECB not just in Greece but also in Germany.

“Only who believes that?” asked Holger Steltzner in a piece in the Frankfurter Allgemeine Zeitung, which listed many of the reasons why so many people now have difficulty believing a word the EU, IMF and ECB say about the Greece bailout. What is new is to see  a piece of furor teutonicus directed against the EU, IMF and ECB bailout scam in one of Germany’s leading newspapers.

“The International Monetary Fund is not allowed according to its own rules to pay out the next slice of credit because Greece cannot service its own creditors in the next twelve months,” he said.

The justification used by the IMF, EU and ECB for giving these astronomical sums of money to banks is that Greece is suffering a temporary liquidity problem when it is  insolvent as noted by  German FDP lawmaker Frank Schäffler in Stern today.

“Greece became insolvent long ago but no one has the courage to look the truth in the face,” he said, adding he thought the German parliament should vote against the new bailout plan.

The distinction between liquidity and solvency is crucial. If Greece is just illiquid, then the bailouts are indeed a form of credit: tax payers will get their money back as soon as a government carries out reforms to balance its budget. But if Greece is insolvent, then tax payers will never get their money back while the banks holding the Greek bonds enjoy bumper profits at those tax payer’s expense.

One year after an 110 billion euro bailout, there is no prospect of Greece being able to finance its growing debt burden on the bond market in the next ten years, let alone next year. Greece’s credit rating cut to Caa1 by Moody’s the same as Cuba. Moody’s said Greece will not meet the deficit reduction targets set as part of its EU and IMF  bailout deal. Moody’s said there was now a 50% chance of the country defaulting on its debts. The markets, therefore, have concluded Greece is insolvent.

Engaging in an act of deceit yet again, the IMF and ECB and EU, however, said yesterday that Greece is only suffering a liquidity problem – and once more it its money or the tax payer’s money that is to be used to keep up the fiction that  Greece is not insolvent because the markets have long since realized what the troika refuse to acknowledge, namely that Greece is suffering a solvency problem, and are wisely avoiding their bonds.

In the meantime, it has become increasingly clear that not only the economic analysis of EU, IMF and ECB concerning whether Greece is illiquid or insolvent has been widely inaccurate. The solution of the troika has also been catastrophic for Greece itself .

The penal interest rates attacjed to the “bailout” for banks and the austerity measures implemented to fund them  have significantly added to the malaise of Greece by increasing its mountain of debt to 160& of the BIP and its interest payments while crushing the economy.

Greece’s debt is now so large in proportion to its annual tax revenues – about seven or eight  times – that Greece has no prospect of ever repaying its debt. Continuing to pay the penal interest payments is destroying the economy.

And yet more of the same disastrous policies are just what the IMF, EU and ECB are proposing for Greece.

Under the new plan put forward on Friday, Greece is to make more cuts amounting to €6.4bn in 2011 and also conduct a fire sale of state assets at rock bottom prices to raise 50 billion euros.

Banks and corporations will for sure cherry pick the best assets – the one’s generating much needed revenue for the Greek state – and leave the Greek people totally and utterly impoverished in their own country, facing an ever growing mountain of debt they can never ever begin to repay with an ever declining economic base.

The decision to disburse the funds has postponed the default of Greece but the price the EU, IMF and ECB have had to pay is the last vestiges of their credibility.

“The next cash injection is assured but the future of Greece isn’t by any means; after the disbursement of new billions the battle with default goes on,” says Der Spiegel.

The problem the IMF/EU and ECB are now facing is that virtually everyone can now it is acting for benefit of the banks as part of a public sector Ponzi scheme by former Argentinian central banker Mario Blejer and mistrust is reaching new levels.

Steltzner expresses the growing fury at the scam looting not just Greeks but also Germans and Irish and indeed virtually every citizen  in the eurozone.

“In the “donor” countries the rejection of the EU is growing and in Greece the fury at Brussels,” he says.

Steltzner notes that the deceit of the EU, IMF and ECB.

“The “bailout Europeans” have cleverly concealed a violation of the Maastricht Treaty by disguising financial help between states prohibited by the treaty as credit,” writes Steltzner.

“Now everyone can see it: Greece is insolvent and cannot repay its debts.” Steltzner noted.

“Of course a state bankruptcy of Greece or its exiting the currency union would be bad for the country and the eurozone. But the eternal bailouts are also bad.”

Steltzner puts his finger into the growing credibility gap of the political and financial elite.

„The bailout politicians have broken their word. The bailout will not cost any money, it is only a question of credit that will be paid back, promised saviours like Wolfgang Schäuble. Now the Finance Minister is preparing with other “bailout” Europeans the next help package. Fresh money is supposed to be given only for reforms again. Who is supposed to believe that?”

“That is a dangerous signal. Breaking the rules is going to be rewarded again.”

Steltzner also focuses on the role of the ECB in shuffling Greek bonds around in such a way that the banks get the profits while the tax payer’s get the losses.

“ECB President Jean Claude Trichet has turned the central bank into a giant bad bank. He is looking to save himself when he proposes a finance ministry. The financial crisis was created because European finance ministers didn’t adhere to the rules anchored in contracts and institutions. How that is supposed to get better under the formation of a European Super Finance Ministry is Trichet’s secret,” says Steltzner.

“The sums are in the meantime so huge that they even threaten the euro system of the central banks. The European Central Bank has been buying up Greek bonds on the market party at moon prices to the delight of the banks and insurance companies. To supply Greek banks with liquidity, the ECB threw its own security standards overboard and accepted even garbage bonds as collateral for refinancing. The result of the double violation of taboos is a monetary political catastrophe. The ECB has dubious bonds from Greece in the volume of about half the Greek state debt in its books. On top of that come the dubious papers from other crisis countries. Additional billion euro risks are buried in the bilances of other state banks such as KfW, HRE or in the regional banks.”

“In the meantime, it is estimated that two thirds of the Greek state debt are in public hands. Out of concern for banks and insurance companies, the “bailout” Europeans want to buy more time with new credits to transfer the debts. When the time comes for the inevitable hair cut, it will be the tax payer above all who has to bleed,” he says.

The problem is that the ECB, IMF and EU has got it wrong not just with Greece but also with Ireland and Portugal.

The outstanding debt of Greece – and of Ireland and Portugal – is being rolled over onto all the remaining eurozone tax payers by the EU and IMF and ECB via various funds that breach EU treaties.

“A single, gigantic European tax pot, free of all parliamentary control, which EU bureaucrats can dip into without being held to account by the voters of the tax payers – that is an old Brussels dream,” says Steltzner.

The new plan of the IMF, EU and ECB for Greece still has to be approved by parliaments in Germany and Greece, and it may not be so easy.

16 Greek lawmakers from the ruling PASOK party have already written to Giorgos Papandreou demanding a debate on the new plan as public fury mounts over the wage cuts, pension cuts and tax increases to fund the bank “bailouts.”

The inability of the troika of the EU/IMF and ECB to base their decisions on the solid ground of facts or to adhere to the rules has just destroyed its last vestiges of credibility and is undermining the last vestiges of faith of Europeans in the eurozone political institutions.

What was a financial crisis has, in the meantime, become a full blown political crisis.

For once in European history, the people of Greece, Germany, Ireland, Spain and Finland are all united in a common cause – because they are all victims of this multi layered Ponzi scheme by the ECB, EU and IMF and their various finance ministers and central bankers.


June 4, 2011 - Posted by | Fighting corruption internationally, Internationally significant information, Jane Burgermeister Report

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