Germany’s finance minister Wolfgang Schaeuble, has admitted for the first time that Greece will need another bailout. Germany had been reluctant to publicly say this ahead of the countries elections in September. Any new bailout will be very unpopular in Germany.
However, it is believed that a third bailout will be considerably smaller than the previous two the country has received.
Read More: The BBC
Mario Soares, who led Portugal to democracy in the 1970s after the Salazar dictatorship, has called on the government to default on its debts. The economic pressure on Portugal has been mounting in recent weeks, and the nation is losing patience with the EU imposed austerity. The Portuguese are looking at the death spiral in Greece, caused by their various rounds of bailouts and austerity.
Soares told Portuguese television channel Antena 1, “Portugal will never be able to pay its debts, however much it impoverishes itself. If you can’t pay, the only solution is not to pay. When Argentina was in crisis it didn’t pay. Did anything happen? No, nothing happened”.
Last week Portugal’s top court ruled that the government’s decision to slash pension payments and public sector wages was illegal. The ruling means the government is struggling to find the budget cuts required from elsewhere.
Portugal received an EU/IMF bailout in 2011, and as the crisis deepens again, many think it highly likely they will need another bailout very soon. If Portugal were to default, it would almost certainty mean their expulsion from the eurozone, and may lead other nations to follow their example.
In a last minute deal Cyprus managed to secure the €10 bn bailout it requires to avoid bankruptcy. The Cypriot parliament agreed on a deal which will see bank deposits over €100,000 taxed. The troubled Laiki Bank will also be wound up, and split into two parts a “good” bank and a “bad” bank. The largest Cypriot bank, the Bank of Cyprus, will undergo major restructuring. Deposits in the Bank of Cyprus over €100,000 have now been frozen.
It is believed the levy on bank deposits will be around 30%. The Cypriot finance minister said they were keen to protect individuals and small depositors. The majority of account holders with over €100,000 are wealthy Russians. The deal has angered Moscow, who have accused the eurozone of using the crisis to go after Russian money.
Laiki and Bank of Cyprus remain closed with ATM withdrawals limited to €100 a time.
The troubled island nation of Cyprus is running out of time to secure a bailout form it’s eurozone partners this weekend. If it fails to secure the bailout the nation will default on it’s debts, and will go bankrupt. Cyprus needs to raise 5.8 billion euros ($7.5 billion) in order to secure 10 billion euros in loans form the eurozone.
Lawmakers in Nicosia have rejected a plan to raise part of the 5.8 billion euros ($7.5 billion), by taxing private bank accounts. The banks in Cyprus have been closed all week, and the ECB has told Cyprus to keep them closed until Tuesday, in order to prevent a run on the banks. However, Cypriots have spent the week queuing at ATMS to withdraw as much of their money as possible, fearful of what the government may do.
The European Central Bank has told Cyprus they will not continue to provide emergency funding past Monday, if a plan is not in place to secure the 5.8 billion euros.
The uncertainty has caused stock markets to fall throughout Europe. Russia has been angered by the prospect of bank accounts being taxed, as Cyprus is a favourite place for Russians to do business. However, Germans will be unwilling to be seen to bail out wealthy Russian oligarchs. Cyprus and Russia currently do $¼ trillion of business annually, and Cyprus has debt repayments of $53 billion annually to Moscow. The close business ties between the two nations has led many to speculate that Russia will offer to bailout Cyprus, if Europe will not.
Lawmakers are looking at ways to restructure the countries ailing banks. It looks likely that Laiki Bank will close, with it’s assets moved to other banks. Laiki Bank has suffered heavy loses due to it’s exposure to the Greek debt crisis.
The small European island nation of Cyprus faces bankruptcy if they do not receive a €10 billion bailout from Brussels. However, part of the bailout deal under discussion will see a one off levy on all bank savings. The deal will see small saving up to €100,000 taxed at 6%, and deposits over €100,000 taxed at nearly 10%.
The proposals have angered Cypriots who feel betrayed by Brussels and their government. Many see the levy as a way for the eurozone to access the vast deposits in Cyprus made by wealthy Russians. As well as the proposed bank account tax Cyprus also faces the same strict spending cuts and tax hikes Greece has experienced as part of their bail-out deal.
The Cypriot government was due to vote on the bail-out package today, but the vote has been postponed until tomorrow, over fears the government would lose the vote.
The uncertainty caused by the bailout deal has seen markets slide across Europe and America and many have argued that a tax on savings will see investors pulling their money from Europe in general.
Banks in Cyprus will remain closed until Wednesday, over fears of a run on the banks, as people have been withdrawing as much as they can from ATM’S over the last 24 hours.
The saga of austerity, recession and bailouts continues in Greece. Today the nation has been brought to a standstill as the unions call a 48 hour General Strike. The strike is ahead of a crucial vote on more austerity measures, the package would see a further €18bn of cuts and reforms. The measures are required if Greece is to receive the next instalment of bailout money. Greek prime minister Antonis Samaras is under massive pressure to carry the vote through parliament. He has only a slim majority, and politicians are deeply divided over the issue.
The EU is concerned that Antonis Samaras ruling coalition could fall apart, as a collapse in government would most likely see the far left and far right make major gains – both sides are opposed to the EU/IMF imposed austerity conditions.
The far right, Golden Dawn party, has capitalised on the problems in Greece, making huge gains across the country. In some areas where crime is out of control the Golden Dawn lead groups patrol the streets and attack migrants, who they see as the problem. The overstretched police have failed to stop the attacks.
Once prosperous areas of Athens are now “no go” areas as gangs take control and crime increases. Residents are now looking to the Golden Dawn to protect them.
Angela Merkel recoils from Greek showdown on Spain contagion fears – Telegraph.
The German Chancellor Angela Merkel has been visiting Athens today, for the first time in three years. She comes at a time when Greece is looking for the next €31.5bn tranche of aid. Without the aid Greece will run out of money by the end of November. Recent figures show Greece has been in recession for 5 years, it’s economy has shrunk by 22%, and youth unemployment is currently at 55%.
Mrs Merkel was met with angry protestors and required 6,000 police officers to protect her. Greeks, and the Greek media, greeted her with Nazi insults.
Both the EU and IMF have been insistent that Greece steps up austerity measures in order to receive the money. However, Mrs Merkel came to Athens with a softer tone than Athens has previously heard.
There has been mounting pressure on Germany not to allow Greece to default, thus forcing her out of the eurozone. If Greece were to exit, then Spain would likely follow, and the euro would break up. Also tougher austerity measures could result in the collapse of the pro-Europe ruling coalition. If the Greek government collapses it would likely be replaced by either a far-right or far-left alternative. That could destabilise the entire region, affecting the Balkan region and Turkey, something no one wants to see.
It is likely Greece will receive the next instalment of money, however the €31.5bn will only keep Greece afloat a few more months. And as time passes both Spain and Portugal are edging closer to requiring more bailouts.
It is thought Spain’s banking sector will require another bailout of more than more than €100bn.
Spanish banks face a record number of bad debts with 1 in 10 loans in arrears.
Spain already received €100bn in June to recapitalise it’s banks, but at the time many economists warned the amount was not sufficient and it would only be a matter of time before Spain required more cash.
The political mood in Spain is also deteriorating with the Catalonian region threatening to break away from the rest of Spain because of the financial crisis and the austerity measures.
via Debt crisis: Spain ‘will need extra bail-out’ – Telegraph.
Spanish bail-out impossible’, experts warn – Telegraph.
As the economic situation in Spain worsens by the day, many think it is only a matter of time before Spain will need a full bail-out.
However, economists looking at Spain’s borrowing needs, their crippled banking sector, and their ailing economy now believe the required bail-out would be more than the eurozone could manage.
Head of economic research at Open Europe, believe Spain will require around €650bn.
The situation may force Germany into finally deciding whether to work towards the break up of the eurozone, or the pooling of all the eurozone sovereign debt. The pooling of the debt would lead to a full economic union, and inevitably to much stronger political ties. With Greece likely to require yet another bailout before the end of the year, and the fall out from the current situation nudging Italy ever closer to the economic death spiral, it is only a matter of time before Germany will have to make some very difficult choices. The question is will the people of Europe accept the outcome, whatever that may be?
The stock market did an amazing rebound on suprise Euro Emergency Fund Banking system bailout.
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Suprise Euro Bailout
At the G20 summit in Mexico European leaders have agreed on a deal which will see Spain and Italy being bailed out using a €750 billion bail out fund. In the deal European governments will buy up Italian and Spanish debt, in effect transferring the debt to other countries within the eurozone; instead of bailing out the individual governments.
This is a step towards the issuing of eurobonds, which would in effect be under written by Germany
For further information: The Telegraph
The former UK Prime Minister Gordon Brown has spoken ahead of next week’s G20 summit in Mexico, about the prospect of a required bailout for Italy and France. Gordon Brown has called for the G20 to begin to draw up a “concerted global action plan” to deal with the crisis.
This comes after German Chancellor Angela Merkel, attacked the French President Francois Hollande for allowing the French economy to stall. She also echoed Mr Brown’s comments, warning that Hollande’s socialist policies could lead to France being enveloped by the debt crisis.
Last year, when officials began to speak of the contagion spreading to Italy and Spain, no solid measures were put in place, and now we are on the brink of Spain requiring a full bail-out (the bailout currently under consideration is only to bailout their struggling banking system). Spain and Italy were both labelled at the time as “too big to fail”. At that time the thought of a French bailout was unthinkable.
However, it is expected that the summit in Los Cabos, Mexico, will see world leaders continuing to pressure Chancellor Angela Merkel to agree to Eurobonds. Mrs Merkel has left Germany for the summit, remaining steadfast in her tough austerity stance – in the face of French opposition from Francois Hollande, and with President Obama also backing the new French President.
Reuters | June 13, 2012 | 07:01 AM EDT
Greeks pulled their cash out of the banks and stocked up with food ahead of a cliffhanger election on Sunday that many fear will result in the country being forced out of the euro.
Bankers said up to 800 million euros ($1 billion) were leaving major banks daily and retailers said some of the money was being used to buy pasta and canned goods, as fears of returning to the drachma were fanned by rumors that a radical leftist leader may win the election.
The last published opinion polls showed the conservative New Democracy party, which backs the 130 billion euro ($160 billion) bailout that is keeping Greece afloat, running neck and neck with the leftist Syriza party, which wants to cancel the rescue deal.
As the election approaches, publishing polls is now legally banned and in the ensuing information vacuum, party officials have been leaking contradictory “secret polls”.
On Tuesday, one rumor making the rounds was that Syriza was leading by a wide margin.
“This is nonsense,” one reputable Greek pollster said on condition of anonymity. “Our polls show the picture has not changed much since the last polls were published. Parties may be leaking these numbers on purpose to boost their standing.”
via CNBC
As the crisis in Greece continues, EU leaders and officials from the IMF, are publicly talking about the possibility of Greece leaving the Euro.
Before now, this was said to be unthinkable.
But as the crisis deepens an exit is looking more likely despite the high financial costs.
Chancellor Angela Merkel of Germany has called on the Greece to hold a referendum on the Euro.
Despite the Greek people voting against EU-IMF austerity in the elections, polls still show about 70% of the country want to remain in the Euro.
However, Germany have made it clear, to remain in the Euro, they have to stick to their austerity obligations.
Also in Europe, Ireland’s banks are still struggling and it’s thought Ireland will soon need a second bail-out.