May 2012: Barack Obama is warned before the Camp David G-8 summit that the financial maelstrom seizing Europe could turn out even worse. If much of Europe slides back into double-dip recession, as Britain has done, millions of Americans will be smacked hard, from Toyota workers in Kentucky to lettuce pickers in sunny California. And almost certainly, Mr. Obama will have turned over the keys to the White House come next January to the “vulture capitalist” Mitt Romney.

Here is the dreadful scenario that growing numbers of analysts fear: Long lines of Greeks, Spaniards and Portuguese pound on bank doors demanding to pull their money out before it is replaced by devalued drachmas, pesetas, escudos. Long-suffering Greek voters fail on June 17 to elect political parties that can form a governing coalition, and Greece takes a messy exit from the Euro. Europe’s already faltering financial system then collapses, sending the entire world into a long-lasting global depression for the new President Romney to tackle.

Continue Reading...

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece – as well as his own poll numbers. Britain’s conservatives have been taking a beating.

In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other.

It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

Continue Reading...

Greece and its euro zone partners saved their marriage by agreeing on a $170 billion bailout, but it hasn’t squashed talk of a messy breakup.

Some analysts see a Greek debt default as inevitable. Even Greece’s lenders fear the program is “accident prone,” as they said in a report for euro zone finance ministers before they approved Tuesday’s bailout.

It’s far from a universal opinion. Greek leaders lauded the agreement, naturally, saying it saved the country from a chaotic default. Others add that Greeks — despite the occasional violent protest against austerity measures — grudgingly accept that reforms are necessary.

Still, more of the same won’t cut it, said Costas Michalos, president of the Athens Chamber of Commerce and Industry.

“It’s a bad rescue package,” he said. “It’s not the right mixture of economic policies. If we follow the same economic policies of the past two years, there will be no other option than default, which I’m sure no one wants.”

Continue Reading...

Now all it has to do is help the country pull out of a five-year recession, get the one-in-five unemployed Greeks back to work and make sure that Portugal, Ireland, Spain and Italy don't end up sharing a similar fate.

Tuesday's agreement among euro zone finance ministers came after another tense bout of all-night negotiations at the end of months of bickering between Brussels, Berlin and Athens on whether the Greek government could be trusted to make good on austerity pledges given in return for the rescue funding.

"In the past two years and again tonight, I've learnt that marathon is indeed a Greek word,” said the EU's Economic Affairs Commissioner Olli Rehn. “But in the end we came to an agreement."

The deal is certainly a major achievement in the battle to get both Greece and the whole of the euro zone out of their economic mess. But nobody has any illusions that the euro zone is anywhere near the finishing line of its long-distance race to get out of the economic hole.

Continue Reading...

As lawmakers in Athens debated a bill Sunday that would impose yet-more severe austerity on the country, outside the parliament building tens of thousands of people gathered to voice their opposition to the deal. Violence flared, as buildings were set on fire, and the police engaged in running battles with rioters.

Around 150 shops were looted and over 40 buildings, including the Attikon, a 19th-century theater-turned cinema, were torched. Unrest also flared in the second largest city of Thessaloniki, and on the islands of Corfu and Crete.

The violence may have been perpetrated by a minority, but there is little doubt that the onslaught of yet more cuts to wages, spending and public jobs is massively unpopular in Greece.

Continue Reading...

Until recently, European politicians didn’t publicly acknowledge that any nation might abandon the currency. But late last week, Luxembourg's Prime Minister Jean-Claude Juncker said, "We would like Greece to remain a member, but we’re not saying Greece has to stay a member at all costs."

This was followed by the news that TUI, Germany's largest package-tour operator, sent a letter to Greek hotels requesting that they accept payment in drachmas in the event that Greece is forced to return to its old currency.

With Greek politics in turmoil since last Monday, when then-Prime Minister George Papandreou called for a referendum related to the euro zone bailout, sources in the European Commission acknowledge that contingency planning is underway for a possible Greek exit from the euro.

Continue Reading...

Greek Prime Minister George Papandreou decided in favor of democracy Monday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.

(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)

If Greeks accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.

If Greeks reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.

Continue Reading...

Papandreou, addressing the Greek Parliament, said, "Let each Greek person decide; with a ballot paper in his hand, let each person decide for his country and for himself."

Last week it seemed as if the Greek sovereign debt crisis had been more or less settled. Banks holding Greek bonds agreed to a 50 percent haircut — or write down of their value. In return Papandreou agreed to continue the austerity program he has initiated, shrinking the size of the public sector. This includes large scale lay-offs and clawing back of pension promises.

Continue Reading...

Many observers have been predicting this end game since the beginning of Europe's sovereign debt crisis, if only because the austerity forced upon Greece by the terms of its bailout has so damaged the Greek economy as to make it impossible for the country to grow at all. But whatever might or might not happen to Greece has never been the primary cause for concern. European banks own lots and lots of Greek debt. What happens to those banks when Greece defaults?

Continue Reading...

Graham, in turn, said that the real threat to the nation is the burden of unsustainable debt.

"What is calamitous is the path we're on as a nation," he said. "We're becoming Greece."

Graham's assertion is laughable on multiple levels. Steve Benen offers a concise summary:

The U.S. has extremely low interest rates and foreign investors are happy to loan us money; Greece has extremely high interest rates and no one is eager to loan the country money. The U.S. has our own currency; Greece has the Euro. We have a great credit rating (for now); Greece has an awful credit rating. We have a manageable debt; Greece has a debt crisis. We're a large country with an enormous economy; Greece is a small country with a small economy. We have one of the world's most stable systems of government (at least until six months ago); Greece's government structure is a little shaky.

Continue Reading...

The loose-knit network behind the stranded aid flotilla that has garnered international attention has little to tie it together except a cause, and now it is dispersing after at least two weeks in Greece. Many American activists flew home on Wednesday, and a peaceful sit-in by Spanish protesters at their embassy in Athens was dwindling in size.

Members of this genial Tower of Babel, including veterans of leftist politics, gave formal news conferences in casual attire in the past week to drum up publicity, one of the few tools at their disposal in the face of government pressure blocking their flotilla.

The movement included Dror Feiler, an Israel-born musician who moved to Sweden decades ago; Vangelis Pissias, a professor at the Technical University of Athens; and Jane Hirschmann, a psychotherapist from New York City and member of a group called "Jews Say No!"

Continue Reading...

Clashes with Greek police, clad in riot gear, have been a consistent fixture in Athens (with waxing and waning intensity) since 2008 when 15-year-old Alexis Grigoropoulos was shot dead by the police. Although the city has a much longer history of popular resistance and occupation of popular space.

Numerous reasons account for the relentlessness with which the Greek resistance movement has stayed strong: Palpable anger at the damage austerity measures have wreaked on the lives of many Greeks (unemployment for young people up to the age of 25, for example, is nearly 45 percent) is of course paramount, as is the growing rage at the Greek police's violent repression of protest. Among other reasons: geography.

Continue Reading...

But the euro retreated Wednesday in the immediate aftermath of the vote. The euro had risen nearly 3 cents this week in anticipation of the so-called austerity measures passing.

The euro had "strengthened pretty substantially" in the run-up to the vote, said Brown Brothers Harriman currency strategist Mark McCormick. It was a "buy the rumor, sell the fact" effect -- traders bet on the euro before the vote and were taking profits now that that hurdle had passed, he said.

Analysts predicted the country would have defaulted as early as next month without help. European banks that hold Greek bonds would have been at heavy risk and the ensuing rise in borrowing costs across Europe would have sent economic ripples throughout the continent.

In morning trading in New York Wednesday, the euro traded at $1.4369 from $1.4364 late Tuesday, retreating from a high of $1.4448 before the vote cleared.

And Greece is not yet all clear. Another vote on Thursday will determine how the country implements the cuts and tax increases, which are very unpopular with Greek citizens.

Continue Reading...

The latest austerity measures must pass in two parliamentary votes Wednesday and Thursday if Greece is to receive bailout funds from the EU and the IMF to stave off a possible default in July. If the votes don't pass, Greece could become the first eurozone nation to default on its debts, sending shock waves through the global economy.

The clashes with police came at the start of a two-day strike called by unions furious that the new euro28 billion ($40 billion) austerity program will slap taxes on minimum wage earners and other struggling Greeks. The measures come on top of other spending cuts and tax hikes that have sent Greek unemployment soaring to over 16 percent.

"The situation that the workers are undergoing is tragic and we are near poverty levels," said Spyros Linardopoulos, a protester with the PAME union blocading the port of Piraeus. "The government has declared war and to this war we will answer back with war."

Continue Reading...

European leaders breathed a sigh of relief but kept up the pressure on Greek Prime Minister George Papandreou, who faces a vote June 28 to push though more spending cuts, tax hikes and asset sales. Still, fearing the financial chaos that any Greek default would ignite, EU leaders promised Papandreou additional funds to help the shrinking Greek economy to get back on its feet.

Greece's creditors, particularly its partners in the 17-country eurozone, are demanding that Papandreou get parliamentary approval for euro28 billion ($40.24 billion) in budget cuts and new taxes and for a euro50 billion ($72 billion) sell-off of government assists by the end of June. Only then will they hand over euro12 billion ($17 billion) in bailout funds that Greece needs to avoid bankruptcy in mid-July.

A default could drag down Greek and European banks, endanger the finances of other weak eurozone countries such as Portugal, Ireland and Spain, and spark financial uncertainty across world markets.

Continue Reading...

After two days of political chaos that threatened to bring down the government, Germany also appeared ready to provide billions more in aid to carry the debt-ridden country through 2014. German Chancellor Angela Merkel indicated that the private sector would not be forced to share in the pain of a second bailout.

Together, the developments in Athens and Berlin boosted hopes Greece will get a second bailout and avoid a default, which at one point on Wednesday seemed to be just weeks away. Yields on Greek 10-year bonds dropped more than a percentage point to the still sky-high level of just under 17 percent, while the Athens Stock Market closed up 3.8 percent at 1,254.02.

Despite the more benign market backdrop Friday, Greece faces years of trying economic times if it is going to get on top of its euro350 billion debt mountain.

"The country must be saved and it will be saved," said Evangelos Venizelos, who moves from the defense ministry to take over the reins at the finance ministry. "I am leaving defense today to go to the real war."

Continue Reading...

The critical position which has been held by George Papaconstantinou since the debt crisis began in late 2009, will now be taken over by Evangelos Venizelos, a Socialist heavyweight who challenged Papandreou for the party leadership four years ago.

Venizelos, a 57-year-old constitutional law professor and party stalwart, is considered Papandreou's main internal Socialist rival. A veteran of several ministries, he handled the run-up to Greece's hosting of the Olympic Games in 2004 as culture minister, and has also held the justice, development and transport portfolios in the past.

Papaconstantinou will move to the environment and energy ministry, government spokesman Giorgos Petalotis added.

Government portfolios were also redistributed to address demands for faster reform from Greece's debt monitors at the European Union and International Monetary Fund. A new ministry for administrative reform was created to help scale back the country's bloated public sector.

Continue Reading...

A deal would help ensure approval of a new austerity plan that has enraged a nation already hit hard by draconian welfare cuts but is also essential to avoid a default that would knock the global economy.

The emergency talks came as riot police clashed with thousands of youths in the main square outside Parliament. Police fired repeated volleys of tear gas to repel rioters hurling firebombs and ripped-up paving stones. A crowd of youths smashed the windows of a luxury hotel in the square.

As unrest spiraled, the coalition talks appeared to come at a high cost: Papandreou's job.

Papandreou's government had already been facing an internal party revolt over the new austerity package that's the main condition for continued funding from an international bailout and avoiding a devastating default which would undermine the future of the eurozone.

Continue Reading...

On Wednesday a number of horrific images will likely emerge from Greece as a general strike is already prompting violent clashes with a notoriously oppressive, harsh Athens police force. One unexpected horror, however, has also come out of the beleaguered nation today: an image that has indelibly scarred our memories. Newt Gingrich. Sunbathing. Shirtless. TMZ obtained the photo, taken during Gingrich's recent Greek getaway. Reclining in the Mykonos sun, Gingrich has the relaxed countenance of a man who has not just launched an historically disastrous presidential campaign. As TMZ aptly puts it: Gingrich is "on a rock, in a hard place."

We can't find the words, but we're hoping you can. Welcome to the topless Newt Gingrich caption competition. Write your caption for the photo in the comments section and at the end of the day, we will select and publish our favorite.

Continue Reading...

That's why he is on what seems at first glance to be a luxurious cruise liner, where week-long cruises start at $2,499 a person, with his wife, Callista. But look at where that cruise ship -- the Seabourn Odyssey -- set off from: Greece! Newt Gingrich is clearly using his many thousands of ideas to save Greece from its sovereign debt crisis. (Idea No. 1: Have the pope annul your debt?)

As for what he's doing in Turkey, where the ship docked today, he is probably personally stopping the next killer humanitarian aid flotilla from heading for Gaza.

Continue Reading...