EU, IMF craft 120b euro rescue package for Greece

[makapaaa]

<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 3, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>EU, IMF craft 120b euro rescue package for Greece
Athens agrees to sweeping budget, wage cuts and tax hikes amid worker protests

(ATHENS) Greece sealed a deal with the European Union and IMF yesterday that opens the door to a multi-billion euro financial bailout and will require big sacrifices from the Greek people, Prime Minister George Papandreou said yesterday.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>Those sacrifices amount to budget cuts of 30 billion euros (S$54.6 billion) over three years, on top of measures already agreed and aimed at bringing a towering budget deficit back to the EU limit by 2014.
The government told Greeks, who have already taken to the streets in protest against the austerity drive, that they had to chose between a rescue or an economic collapse.
Tens of thousands of demonstrators marched across Greece on Saturday, including hundreds of black-clad youths who clashed with police here.
Police estimated that 17,000 people protested in Athens. They said that 10 people were arrested, and reported no serious injuries. The protests, and a planned strike on Wednesday, are a sign of the challenges ahead for Greece.
'This crisis is not my fault, I won't accept these austerity measures and I want to know where all the money has gone,' Emily Thomaidis, 29, the owner of a coffee shop, said as she marched through central Athens.
The bailout package, expected to total up to 120 billion euros over three years, represents the first rescue of a member of the 16-nation eurozone and is aimed at stemming a debt crisis that has shaken markets worldwide.
'It is an unprecedented support package for an unprecedented effort by the Greek people,' a sombre Mr Papandreou told a televised Cabinet meeting.
'These sacrifices will give us breathing space and the time we need to make great changes,' he added. 'I want to tell Greeks very honestly that we have a big trial ahead of us.'
Finance Minister George Papaconstantinou gave details of the agreement before heading to a meeting later yesterday with his eurozone counterparts in Brussels, where the aid is expected to win the bloc's formal backing.
The deal's size would be announced in Brussels but it would cover a large part of Greek borrowing needs for the next three years, Mr Papaconstantinou told a news conference.
'We are all being called to make a choice,' he said.
'The choice is between collapse or salvation. The choice is between fleshing out a very ambitious and difficult three-year programme of fiscal consolidation, a programme of structural reforms . . . or the country reaching an absolute dead-end.'
Athens promised to slash its budget deficit to the EU limit of 3 per cent of gross domestic product (GDP) by 2014 from 13.6 per cent last year.
'Today, we have to flesh out an economic programme which sees fiscal efforts to cut the deficit by 11 (percentage) points of GDP, or 30 billion euros, starting from today and over the next three years,' Mr Papaconstantinou said.
Salaries and pensions in the public sector would be frozen during the three- year programme while a fund backed by the IMF and EU would be set up to help Greek banks. Value-added tax and duties on fuel and alcohol will rise sharply.
Mr Papaconstantinou forecast that Greece's public debt would soar to nearly 150 per cent of GDP but then start falling from 2014. However, the plan would cover a large part of Greece's borrowing needs for the next three years, with Athens returning to commercial borrowing when 'appropriate'.
In a statement, European Commission President Jose Manuel Barroso recommended that Europe activate the aid, calling the package of austerity measures 'solid and credible'.
German Chancellor Angela Merkel says that she will push for Germany to free up funding for the Greek bailout by Friday.
Ms Merkel told reporters in Bonn yesterday that she welcomed Athens agreeing to a plan and would present the legislation to her Cabinet today.
She said that she would push Germany's parliament to pass legislation needed to free up funding for the bailout by Friday.
Greece and its international backers hope that the deal can prevent the crisis from spreading to other eurozone members with fragile finances such as Portugal and Spain.
Economists say that if the rescue agreed yesterday fails to calm markets, European countries could end up footing a bill of half a trillion euros to save several other nations in the eurozone.
Both Portugal and Spain saw their debt downgraded by ratings agencies last week and could become targets for the market unless they tackle their own deficits swiftly. -- Reuters, NYT
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[singveld]

die sparta die twice

borrow money to build olympic venues, borrow money to buy designer goods, now cannot pay back debt, kpkb now go and riot.

what a useless people, since their peak of hammering everyone, by alexandar the great, what have they achieve?

roman hammer them, ottaman hammer them, nazi hammer them.

 

[makapaaa]

<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 3, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>GREEK DEBT CRISIS
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Tax dodging a Greek way of life
But that is going to change. As Greece struggles to get its financial house in order, it is going after tax cheats as never before


(ATHENS) IN the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned swimming pools.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>Rampant tax evasion: A Greek protester carrying a sign reading 'Tax the rich' before a demonstation against the government's austerity measures in central Athens last week </TD></TR></TBODY></TABLE>So tax investigators studied satellite photos of the area - a sprawling collection of expensive villas tucked behind tall gates - and came back with a decidedly different number: 16,974 pools.
That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, point to the staggering breadth of tax dodging that has long been a way of life here. Such evasion has played a significant role in Greece's debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before.
Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as US$30 billion a year to tax evasion - a figure that would have gone a long way to solving its debt problems.
'We need to grow up,' said Ioannis Plakopoulos, who like all owners of newspaper stands will have to give receipts and start using a cash register under the new tax laws passed last month. 'We need to learn not to cheat or to let others cheat.'
Many Greeks say they feel chastened by the financial crisis that has pushed the country to the edge of bankruptcy. But even so, changing things will not be easy. Experts point out that ducking taxes is part of a broader culture of bribery and corruption that is deeply entrenched. Mr Plakopoulos, who supports most of the government's new efforts, admits that he and his friends used to chuckle over the best ways to avoid taxes.
To get more attentive care in the country's national health system, Greeks routinely pay doctors cash on the side, a practice known as fakelaki, the Greek word for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros (S$547) will get you an emission inspection sticker.
Some of the most aggressive tax evaders, experts say, are the self-employed, a huge pool of people in this country of small businesses. It includes not just taxi drivers, restaurant owners and electricians, but engineers, architects, lawyers and doctors.
The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighbourhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than US$40,000. Thirty-four of them claimed less than US$13,300, a figure that exempted them from paying any taxes at all.
Such incomes defy belief, said Ilias Plaskovitis, the general secretary of the Finance Ministry, who has been in charge of revamping the country's tax laws. 'You need more than that to pay your rent in that neighbourhood,' he said.
He said there were only a few thousand citizens in this country of 11 million who last year declared an income of more than US$132,000. Yet signs of wealth abound.
'There are many people with a house, with a cottage in the country, with two cars and maybe a small boat who claim they are earning 12,000 euros a year,' Mr Plaskovitis said, which is about $15,900. 'You cannot heat this house or buy the gas for the car with that kind of income.'
The Greek government has set a goal for itself of collecting at least US$1.6 billion more than last year - a modest goal, Mr Plaskovitis believes. But European Union officials were so sceptical, Mr Plaskovitis said, they would not even allow the figure to be included in the budget forecast used in negotiations over the bailout package. 'They said, 'Yes, yes, we have heard that before, but it never happens',' he said.
Over the past decade, Greece actually lost ground in collecting taxes, even as the economy was booming. A 2008 European Union report on Greece tax shortfalls found that between 2000 and 2007, the country's average growth in nominal gross domestic product was 8.25 per cent. Its taxes grew at just 7 per cent.
How Greece ended up with this state of affairs is a matter of debate here. Some attribute it to Greece's long history under Turkish occupation, when Greeks got used to seeing the government as an enemy. Others point out that, classical history aside, Greece is actually a relatively young democracy.
Whatever the reason, Kostas Bakouris, the president of the Greek arm of the anti-corruption organisation Transparency International, said that Greeks were constantly facing the lure of petty corruption. 'If they go to the mechanic, it is one price without a receipt and quite a bit more with it,' Mr Bakouris said.
He said his own sister had recently told him that she was uncomfortable asking her doctor for a receipt. 'I said that's crazy,' he said. 'But still, that feeling is out there.'
Various studies have concluded that Greek's shadow economy represented 20 to 30 per cent of its gross domestic product. Friedrich Schneider, the chairman of the economics department at Johannes Kepler University of Linz, studies Europe's shadow economies; he said that Greece's was at 25 per cent last year and estimated that it would rise to 25.2 per cent in 2010. For comparison, the US's was put at 7.8 per cent.
The Finance Ministry believes that the new tax laws, which also increased the weight on income and value-added taxes, have laid the legal groundwork for better enforcement. In the past, the tax code gave many categories of workers special status. Entire professions were allowed to file a set income. For instance, newsstand owners could simply claim that they earned an income of 12,000 euros and no questions were asked.
Now, most of these exceptions have been eliminated and the tax code has been simplified. It also offers various incentives to make people collect receipts - an important step, officials say, in shrinking the off-the-books economy. In addition, the tax department is being reorganised so that regional offices will have far less autonomy.
Mr Plaskovitis said that tax collectors had already begun using technology to cross-check claims and that they had taken steps like asking luxury car dealerships for a list of their clients. A lot of Greeks, he said, listed luxury cars as company cars, a practice that would be challenged in the future. 'We do not believe you need a Porsche to sell Coca-Cola,' he said.
Soon, Mr Plaskovitis said, people will see results. 'In the coming weeks,' he said, 'we are going to be closing down companies, restaurants and doctor's offices because they have not paid taxes.'
But how fast progress will come is an open question. The changes have provoked protests and deep resentment in some circles. For instance, the president of the union for doctors who work in state hospitals, Stathis Tsoukalos, 60, calls the loss of a special tax status for his doctors wrong-headed and unfair. He contended that the special low tax rate was given to make up for the fact that doctors received very low pay.
Speaking of the doctors in the Kolonaki neighbourhood who claimed small incomes, he said, they may have just opened their practices or bought real estate there with help from their parents.
Whether the country's tax collectors are up to the task is also unclear. Many Greeks say tax collectors have a reputation for being among the easiest officials to bribe. Some say tax troubles are usually solved in a three-way split: You pay a third of what you owe to the government, a third to the collector and a third remains in your pocket.
Froso Stavraki, who has been a tax collector for 27 years and is now a high-ranking official in the union, readily concedes that there is some corruption in the ranks. But she contends that the politicians never wanted toughness.
'The orders from above were to do everyday tax processing,' she said. 'We were busy going over forms, checking on those who pay taxes, not those who didn't.' - NYT
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[makapaaa]

<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 3, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>GREEK DEBT CRISIS



</TD></TR><TR><TD vAlign=top width=452 colSpan=2>S&P downgrades draw ire for role in crisis

(NEW YORK) Standard and Poor's starring role in the latest chapter of the European debt crisis has rekindled criticism on Wall Street about the role of rating agencies in credit markets.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>Under pressure: Greek markets, such as Athens' stock exchange (above), were hit by S&P's move to downgrade the country's debt to junk status</TD></TR></TBODY></TABLE>S&P downgraded Greek debt to junk status and also cut ratings for Portugal and Spain last week in a series of swift moves that pressured the euro and drew ire from European officials.
Even some Wall Street analysts were puzzled over the timing of S&P's moves. 'I don't know what happened - the timing of their announcements I thought was peculiar,' said Ward McCarthy, chief financial economist at Jefferies & Co in New York. 'Why this week and not last week or even months ago? I don't know that there are any particular events that warranted a downgrade.'
The agencies are no strangers to controversy. Investors and lawmakers have claimed they contributed to the 2008-09 financial crisis by inflating ratings on risky mortgage-backed bonds before downgrading them as the underlying subprime loans began to default in large numbers.
This time, top European officials have chided S&P for acting too hastily, saying the EU and IMF had already agreed to an emergency aid plan for Greece and were in negotiations with Athens about its size and conditions.
'We're seeing...these questions again of the role of ratings agencies and the reliance on them,' said Jacques Cailloux, chief European economist at RBS Securities in London.
Investors have been selling Greek assets for months, a trend that began when the country revealed last year that its 2009 budget deficit was twice as high as markets thought.
Even before S&P acted, yields on Greek two-year bonds had climbed into the high teens - representing a higher cost of borrowing than for many emerging markets. After the country's downgrade to junk status, the two-year yields briefly rose as high as 25 per cent from around 12 per cent last Monday.
Being labelled junk also raised the risk of a new and more severe problem: that the European Central Bank may soon not be able to accept Greek government bonds as collateral.
'The ECB will probably have to revise its collateral policy,' Mr Cailloux said. Otherwise, if Greek debt were to be rendered unacceptable, 'you have a full-blown crisis that wouldn't have happened without the downgrades.'
In a BBC interview last Thursday, David Beers, S&P's global head of sovereign risk, defended the agency's decision. 'We've actually been looking very closely at the economic as well as fiscal divergences in the eurozone and taking ratings actions based on that analysis going back six years now,' Mr Beers said. 'So this has been a problem that the markets have been ignoring for a very long time.'
Some analysts consider credit default swaps (CDS) a more accurate measure of credit-worthiness for a market weary of the ratings agencies. At the height of Greek default fears, a five-year Greek CDS - which insures a Greek bondholder against default - cost nearly seven times that of comparable insurance against a default by Brazil.
'The CDS market is in essence an expression of credit risk, and is a better expression of market sentiment than ratings are,' said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. 'And it's clear the ratings agencies are late to the game.'
But relying on CDS has its own pitfalls. The market can be manipulated, and it may be too volatile to be used as a stable measure of credit-worthiness. The changes in CDS costs have been swift - they move at the pace of other expressions of market sentiment, such as changes in bond yields - and even more dramatic in scale, in some cases, than the ratings downgrades.
But Mr Gilmore sees the larger CDS moves as an advantage. 'If we look at what happened in CDS and then what was done on the ratings front, I would argue that the ratings agencies are being very conservative.'
One piece of evidence that suggests financial markets may already put more weight on CDS spreads than on credit ratings was the muted reaction to S&P's downgrade of Spain last Wednesday. The gap between yields on 10-year Spanish government bonds and comparable German debt widened only slightly after the move. 'The market has in a lot of cases already discounted the ratings agencies' movements,' Mr Cailloux said. -- Reuters



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[singveld]

standard and poor is from USA, they mess up the world economic nevermind, now they want to screw up europe.