It's a Crisis of the PIIGS, Not Just Greece

That's the verdict from markets, overnight.

The IMF/EU bluff does not appear to be calming markets. WSJ has the details:

...investors were focused on Europe, where worries about sovereign debt weighed on European equities and sent the euro 0.5% lower. The unease stemmed from concerns over Greece's aid package and speculation over the possibility of another debt downgrade for Spain. The Stoxx Europe 600 slid 1% in late morning trade.

The Greece aid package "as it now stands is certainly to be welcomed and may have assuaged market concerns had it been announced three to four months ago," said Michael Hart, a strategist at Citi. "But at this point, the situation has developed from a mere Greece-crisis into a full blown euro-zone sovereign crisis. And European policy makers continue to trail events in formulating their response," he said.

"Talk about Spain is weighing on the market, given that banks would be most exposed since they hold government bonds," said a London-based analyst, referring to what he said was market speculation that Spain could ask for an aid package. "Any news on sovereign debt reflects directly on bank stocks."

The Greek Bailout Patch Job

Goldman analyst Erik Nielsen breaks it down:

It is now clear that the total financing package will be “only” EUR110bn (as opposed to the EUR135bn that I had expected following the rumours on Thursday) with EUR80bn coming from the 15 Euro-zone countries and EUR30bn from the IMF. I maintain my estimate that the total financing requirement will be about EUR150bn over the next three years, so this means that the program will not be fully financed throughout, and that the IMF and EU expect them to regain access to commercial financing probably towards the end of the second year of the program. The program is surely fully financed for the next 12 months.

Nielsen's numbers have a built in assumption that the IMF demanded "austerity program" is for the most part successfully imposed by the Greek government on the Greek people. As Aerosmith might say, dream on. Here's Nielsen again on what the IMF austerity program calls for:

In terms of fiscal policies, the famous 13th and 14th month salaries for public employees will be eliminated for those earning over EUR3,000 a month and capped at EUR1,000 for those earning less.

In addition, all public sector salaries will be frozen until 2014 and allowances (another income stream for public employees) will be chopped by another 8% (on top of the 12% cut already announced.)

On the revenue side, the VAT rate will increase by an additional 2% (to 23%) on top of the increase announced in March of 2% to 21% and excise taxes on fuel, tobacco and alcohol will increase by another 10%.

In addition, there’ll be new taxes on properties and the gaming industries; all topped off with a one-off tax on what’s been reported as “highly profitable” businesses.

All in all, these measures are estimated to cut the budget deficit from 13.6% of GDP last year to 8.1% of GDP this year, to 7.6% in 2011, to 6.5% in 2012, 4.9% in 2013 and to 2.6% by 2014; all under the assumption that GDP will contract by 4.0% this year, followed by -2.6% next year, and then stage positive growth of +1.1% in 2012 and +2.1% in each of 2013 and 2014. If so, public debt to GDP will peak in 2013 at 149.1%, and decline to 144.3% in 2014.

I can't see the Greek government getting any of these items passed, much less all of them, so the problem starts in the here and now. There is no way that the budget deficit drops from 13.6% of GDP to 8.1% this year.

Announcing the deal with the IMF on nationwide television, Greek prime minister George Papandreou said: "I have done and will do everything not to let the country go bankrupt...With our decision today our citizens will have to make big sacrifices."

The response from the citizenry was immediate. A bomb exploded at a branch of HSBC bank in Athens.

Papandreou said the size of the bailout was "without precedent" in the world.That's true, but the record is likely to be surpassed within months as Spain enters stage left.

Bottom line: This patch job allows for a further bailout of banksters, who are hoping to fully get out of Greece before this patch job blows.

What Really Patches Up the PIIGS Crisis (Short Term)?

$2 trillion dollars patches up the problem through 2013. Total current IMF bailout capacity: $700 billion. A bit short.

Further, keep in mind that these countries are black holes for money. $2 trillion would only resolve the current money needs. There is no indication at all that any of these countries have any plan to resolve their continuing crises  in any way other than counting on bailout money.

Here's a Bank America table that  details the debt coming due and the deficits, for the next three years, on a country-by-country basis,  for the PIIGS:

Click on table for larger view.

(ViaZeroHedge)

It's Time for the Greek Riots

Prime Minister George Papandreou is trying to sell Greeks on the idea of a tighter government budget, in order to get IMF/EU bailout money.

Here's the response of Spyros Papaspyros, head of the ADEDY civil servants union, after meeting with Papandreou:

We find ourselves before the most savage, unprovoked and unjust attack. The answer will be given in the street.

EU and the IMF want Greek budget cuts of around 24 billion euros ($32 billion). Greek unions want cuts of 0.

Retailers plan to shut their stores on May 5, joining a strike organized by the GSEE, another union, the country’s largest.

Sixty-five percent of Greek voters polled by researcher Alco for the Proto Thema newspaper last week said Papandreou must reject any measures that lead to more wage and pension cuts, according to Bloomberg.

Plotters Arriving for the G20 Meetings at the IMF Headquarters in Washington D.C.

Is the Bank Tax a Major Step Toward World Government?

Finance ministers and central bank governors are in Washington D.C. this weekend for a G-20 meeting, in preparation for the G-20 Summit to held in November in South Korea.

Hyun Song Shin, special economic advisor to the President of South Korea, gave a briefing today at the National Press Club on the G-20 activities. I attended.

During the Q & A, I asked Shin if the plans for a global bank tax had caused concern by anyone at the G-20 meeting that the tax was moving in the direction of creating a one world government. His answer scared the hell out of me.

He said that, no it was not moving in that direction because "There is no legal basis for the meetings."

In other words, there are no restrictions on the G-20 participants. They are not part of any agency that has a specific mandate. They are not part of any global agreement. It's a wild west show, without any adult supervision.

Expect future moves in global domination to take this ad hoc approach. It results in fewer roadblocks and opposition because there is no, as Shin put it, legal basis for such meetings. It's just "members coming together where there is mutual benefit."

Once they have most of a particular plan down and in place, they will form some organization to patrol what they have created for a given sector, but the serious planning is done at these wild west events.

As for the specifics of the global bank tax, as I pointed out on Wednesday, when discussing the tax:

One key point to note is that the tax will be based on "riskiness" where government paper will most assuredly be ranked as least risky, thus driving banks funds in the direction of propping up the government debt sector at the expense of the productive private sector.

The tax can thus be used to drive funds to the government financial securities markets and to other politically favored investment sectors. If a sector isn't in good favor with the global elite, they will tax financial instruments coming out of that sector at a higher rate. Banks will  make a lot fewer loans in sectors where instruments are heavily taxed.

Manipulative macro madness will be upon us with this move. The coming control of the financial sector at a global level will be something never before seen on the planet.The global elite are winning.

Friday is IMF Day for Geithner

On Friday, Treasury Secretary Geithner will attend the G-20 Meeting of Finance Ministers and Central Bank Governors at the International Monetary Fund (IMF) in Washington.

 

Mid-day, Secretary Geithner will participate in a G-20 Finance Ministers and Central Bank Governors family photo at the IMF.

 

At 6:00 PM EDT, Secretary Geithner will hold a press conference at the conclusion of the G-20 Meeting of Finance Ministers at the IMF.

 

In the evening, Secretary Geithner will attend an International Monetary and Financial Committee (IMFC)-G20 working dinner at the IMF.

Major Plan for Global Tax of Banks, Just Ahead

Using the current crisis environment to expand global control of the banking sector, which will ultimatley lead to the directing of bank funds towards global government favored projects, the IMF plans to call for extensive new taxation of the banking sector.

The news of the IMF plan was strategically leaked last night ahead of the G-20 meetings in Washington D.C. to kep finance ministers and other delegates of smaller nations on topic at the meetings.

The UK's Guardian reported the news this way:

Tough proposals to cut the world's biggest banks down to size by taxing their profits and pay were outlined by the International Monetary Fund tonight in an attempt to spare taxpayers another massive public bailout of the financial sector.

In measures more stringent than Wall Street and the City had expected, the fund called for the introduction of a twin-track approach to the three-year banking crisis that would both force firms to pay for any future support packages and raise new taxes on their profits and remuneration.
The report, prepared by the Washington-based institution for the G20 group of developed and developing nations, was seized upon by Gordon Brown as evidence that his push for an international crackdown on the banking sector was gaining support.

Leaked in advance of the fund's meeting this weekend, the blueprint emerged as the investment bank Goldman Sachs released better than expected first quarter revenues and admitted its bonus and pay pool had reached $5.5bn (£3.3bn) in the first three months of 2010.

The anticipated study called for a financial stability contribution (FSC), which should be paid by all financial institutions, not just banks, and used to bail out weak and failing firms. It would initially be paid at a flat rate but eventually be tailored to suit institutions' size and riskiness.

While banks had been braced for the FSC plan, they were caught unawares by the proposal for a financial activities tax (FAT), which would be based on the profits and the pay structure of the firms.

One key point to note is that the tax will be based on "riskiness" where government paper will most assuredly be ranked as least risky, thus driving banks funds in the direction of propping up the government debt sector at the expense of the productive private sector.

G-20 Meeting of Finance Ministers in Washington, DC This Week

The Department of the Treasury today announced that Treasury Secretary Tim Geithner will attend the G-20 Meeting of Finance Ministers and meetings of the International Monetary Fund’s (IMF) International Monetary and Financial Committee (IMFC) and the Joint World Bank-IMF Development Committee (DC) in Washington, DC, April 23-25, 2010. Additional details regarding Secretary Geithner’s schedule will be released in the days ahead.

Friday, April 23, 2010
9:30 am
G-20 FINANCE MINISTERS AND CENTRAL BANK GOVERNORS MEETING
IMF Headquarters
Washington, DC


11:30 am
G-20 FINANCE MINISTERS AND CENTRAL BANK GOVERNORS FAMILY PHOTO
IMF Headquarters
Washington, DC


6:00 pm
SECRETARY GEITHNER PRESS CONFERENCE
Room B702, IMF Headquarters
Washington, DC

7:30 pm
IMFC-G-20 WORKING DINNER
IMF Headquarters
Washington, DC


Saturday, April 24, 2010
8:00 am
IMFC MEETING
IMF Headquarters
Washington, DC


Sunday, April 25, 2010
8:00 am
DC MEETING
World Bank
Washington, DC

Europeans Agree on "the Check Is in the Mail" Bailout for Greece

The EU has announced it is backing a deal under which they and the International Monetary Fund would jointly bail out Greece should the country's debt troubles intensify.

One is tempted to say this is a "the check is in the mail" bailout, with everyone hoping that a check really doesn't have to be put in the mail.

Putting Greece on an IMF austerity program would be similar to putting  Paris Hilton on a $200 a week budget. It might be fun to watch, but you have to shake your head in wonderment that any one is proposing such with a straight face.

As far as this being a long-term solution, it isn't by a long shot, especially given that this is not just a Greek tragedy but PIIGS in mud. It leaves many questions unanswered. Where is the money going to come from to actually bailout Greece, if required? Are  we talking higher fees for IMF members? Does this mean the other PIIGS will be backstopped in similar fashion?

The best outcome, which the EU and the IMF, you can be sure, are hoping for is that this "agreement" will calm the waters and no further action  will be required. Call this the Alice in Wonderland option.

The more likely scenario is that somebody, maybe many, will print money to bailout Greece, i.e.  eurozone money printing and money printing by IMF members. I can't help but think we also will begin to hear growing chatter about the importance of a key role for the SDR.

If you start to hear talk about the SDR, you may want to employ a slightly altered version of that drinking game where you down a shot everytime you hear someone say a particular word. Every time you hear an official say SDR, go out and buy yourself a gold coin.