EU officials meeting in Brussels over the weekend agreed to a massive rescue package totaling near 1 trillion dollars that would guarantee sovereign debt within the Eurozone. The deal includes an array of measures including $560 billion in new loans, $76 Billion under an existing facility as well as additional credit for the IMF of up to $321 Billion.
To further buttress the moves of the fiscal authorities, monetary officials from the Fed, the ECB, the BOE, the BOC and the SNB all agreed to reopen currency swap lines in order to ease liquidity in the money market and the interbank markets.
The concerted effort by the EU finance ministers and G-7 monetary authorities was a clear sign to the markets that the union stood ready to rebuff the speculative runs at the credit of Southern European economies that have threatened the financial stability of the Eurozone and the prospects of the euro itself.
However many analysts continued to express skepticism as to whether the deal which creates a special purpose vehicle with a three year duration and which will be dependent on “national constitutional arrangements” will be robust enough to withstand the possible stresses to come. Several key Eurozone members are facing massive rollover risk in the credit markets with Italy having 600 Billion euros come due over the next two years while Spain will have to refinance 220 Billion euros and Portugal will need to raise more than 40 billion euros over the same time frame.
At the very minimum today’s action stabilized the beleaguered currency for the time being with EUR/USD recovering to an early morning high of 1.2980. The short euro trade has become incredibly crowded over the past week and today’s price action punished the late euro shorts as they scrambled for cover in the wake of the EU announcement. However, 1.3000 remains a key resistance level for the pair and so far the unit has been unable to mount a rally through that figure.
More importantly today’s opening created a gap and given the recent price history in the currency market that gap will likely be filled over the next several days. The key test of euro strength may come once that price action occurs. If the euro can hold the panic lows set late last week, the unit could then mount a more sustainable recovery rally as confidence slowly returns to the market. Long term however, the direction of the euro remains very much an open question given the highly dilutive measures taken today.
Monday, May 10, 2010
Why and how Greece collasped
Bureaucracy: Greece's bureaucracy is famous in the whole of Europe ! To open a cafe or pub there are 25 processes to go through !! This is a country of rules and regulations.
Bloated civil service: There are 1.05 million civil servants (excluding police and armed forces) . The population of Greece is only 10 million !! More than 10% are govt servants !! Salary increases every year and benefit for civil servants in Greece is one of the best in Europe !! More and more money is needed to upkeep this bloated civil servants . The retirement age is 62 yrs old.
Corruption: Greece is the most corrupted nation in the Eurozone. Citizens pay "under table " money to:
# admit into a public hospital
# pass a driving licence
# to enter public service
# renovate your business premises or your home
# avoid income tax
Every govt project is awarded to political cronies and at hugely inflated prices ! Transparency International compared the prices of the construction costs of stadiums built for the Athens Olympics recently with similar structures in China --500% more expensive than the Chinese , compared to Los Angeles and Sydney -- 50 % more expensive !!! All these with tax payers money ! and borrowings !!!
Tax evasion: Officially 80% of its citizens are supposed to pay tax but only 37% are doing so. Big businessmen and corporations have refined tax evasion to a fine art ( or have the tax men taken some coffee money ? )
No transparency in governance: The politicians and bureaucrats falsified economic data and painted a rosy and manageable picture while the economy was rotting away .
Unabated borrowings: Meanwhile, the politicians and bureaucrats continue to issue govt bonds to keep afloat, series after series. They were trying to cover up the financial mess they have created creating one big hole to cover up the previous !!
Lacking political will power to reform: To keep hold on to political power, politicians are prepared to lie, commit economic and political fraud. If reforms were taken some five years ago , the country need not go bankrupt and its citizens need not suffer so much. Political expediency and greed to political power over-rides everything and hence Greece is now a bankrupt country. Luckily, it is part of the European Union and its currency is EUROs, otherwise Greeks will have to eat grass to survive !!
Laid back attitude: Tourism is THE ONLY industry in Greece and over the years the Greeks have had an easy time. Many flocked to see the historical sites. enjoy summer vacation on the islands. But they forgot that not many tourists will return after visiting the sites --there are so many other tourists attractions in the world, maybe more exotic and perhaps cheaper !! So once tourism vanes and coupled with higher costs of living --the Greeks could not and refused to adapt and transform --still partying and having a nice time -- maybe the Greek Gods will bless them !!! Greece have no natural resources, no electronics industry , no R & D --no anything !! They were so laid back --cannot see what is coming and crashing down on them. Even now, the civil servants refused to take a pay cut -- the world owes them a living !!
Bloated civil service: There are 1.05 million civil servants (excluding police and armed forces) . The population of Greece is only 10 million !! More than 10% are govt servants !! Salary increases every year and benefit for civil servants in Greece is one of the best in Europe !! More and more money is needed to upkeep this bloated civil servants . The retirement age is 62 yrs old.
Corruption: Greece is the most corrupted nation in the Eurozone. Citizens pay "under table " money to:
# admit into a public hospital
# pass a driving licence
# to enter public service
# renovate your business premises or your home
# avoid income tax
Every govt project is awarded to political cronies and at hugely inflated prices ! Transparency International compared the prices of the construction costs of stadiums built for the Athens Olympics recently with similar structures in China --500% more expensive than the Chinese , compared to Los Angeles and Sydney -- 50 % more expensive !!! All these with tax payers money ! and borrowings !!!
Tax evasion: Officially 80% of its citizens are supposed to pay tax but only 37% are doing so. Big businessmen and corporations have refined tax evasion to a fine art ( or have the tax men taken some coffee money ? )
No transparency in governance: The politicians and bureaucrats falsified economic data and painted a rosy and manageable picture while the economy was rotting away .
Unabated borrowings: Meanwhile, the politicians and bureaucrats continue to issue govt bonds to keep afloat, series after series. They were trying to cover up the financial mess they have created creating one big hole to cover up the previous !!
Lacking political will power to reform: To keep hold on to political power, politicians are prepared to lie, commit economic and political fraud. If reforms were taken some five years ago , the country need not go bankrupt and its citizens need not suffer so much. Political expediency and greed to political power over-rides everything and hence Greece is now a bankrupt country. Luckily, it is part of the European Union and its currency is EUROs, otherwise Greeks will have to eat grass to survive !!
Laid back attitude: Tourism is THE ONLY industry in Greece and over the years the Greeks have had an easy time. Many flocked to see the historical sites. enjoy summer vacation on the islands. But they forgot that not many tourists will return after visiting the sites --there are so many other tourists attractions in the world, maybe more exotic and perhaps cheaper !! So once tourism vanes and coupled with higher costs of living --the Greeks could not and refused to adapt and transform --still partying and having a nice time -- maybe the Greek Gods will bless them !!! Greece have no natural resources, no electronics industry , no R & D --no anything !! They were so laid back --cannot see what is coming and crashing down on them. Even now, the civil servants refused to take a pay cut -- the world owes them a living !!
Subscribe to:
Posts (Atom)