World View: Massive Anti-Austerity Riots Hit Athens

This morning's key headlines from
  • Police fire teargas at massive anti-austerity riots in Athens Greece
  • Eurozone agreement forged in June appears near collapse
  • Greece accuses Turkey of ramming in the Aegean Sea
  • Japan vows no compromise on Senkaku Islands
  • Egyptian Sunni and Shia activists come to blows in tv debate

Police fire teargas at massive anti-austerity riots in Athens Greece

More than 50,000 people marched to Syntagma Square in Athens Greece to protest the new round of austerity measures that European leaders are demanding in return for the next bailout. The rally was peaceful at first, but as it ended, dozens of black-clad youth threw stones, molotov cocktails and petrol bottles at riot police, who responded with several rounds of teargas. Greece has promised to implement an additional 12 billion euros of new austerity cuts. These include cutting wages, pensions and welfare benefits. With Greece in its fifth year of recession, analysts say patience is wearing thin leading to a strong public backlash, with possible violence. Independent (Dublin)

Eurozone agreement forged in June appears near collapse

A much-ballyhooed deal that the eurozone leaders reached at the end of June ( "30-Jun-12 World View -- Germany and Angela Merkel cave in to Italy and Spain") has now collapsed, throwing the bailout dreams of Spain and Italy into chaos. 

I summarized the terms of that deal, and it's worth taking a moment to review those terms so that you can see the game-playing going on:

  • Bailout money will be provided from the European Stability Mechanism (ESM), a bailout fund with much of the money coming from Germany.
  • In previous bailouts, the money was loaned to the country, along with demands for austerity measures, such as raising the retirement age, privatizing public sector businesses, or cutting the number of public sector workers.
  • The big change in the new agreement was that ESM would lend the bailout money to the countries' banks, rather than to the countries. That way there are no nettlesome austerity requirements, and no increase in the countries' debts.
  • The banks could then use the money to buy the country's bonds, thus pushing down bond yields (interest rates).
  • With interest rates lower, the countries will be able to borrow even more money by selling more bonds.
  • Thus, Germany will be indirectly purchasing other countries' bonds, which Merkel had said would not happen in her lifetime.

This whole agreement was never more than a farce. It was being called a "growth pact," but it would not create one iota of growth. It was strongly favored by Spain and Italy because it would permit unlimited profligate behavior to continue, with expenses largely paid by Germany.

And so on Wednesday, four nations announced a re-interpretation of the June deal. Germany, Finland, the Netherlands and Austria. They've added the following sentence to the deal: "The ESM can take direct responsibility of problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities." 

In other words, the really huge legacy debts will still remain on the books of Spain and Italy. This means that the possibility of default remains for Spain and Italy, which means that bond yields (interest rates) will not fall, which means that they will be unable to sell them as cheaply as they had hoped. Reuters

Greece accuses Turkey of ramming in the Aegean Sea

A Greek coast guard vessel and a Turkish patrol boat collided on Wednesday in the eastern Aegean Sea. Greece's Foreign Ministry is accusing the Turkey of having brought about the collision on purpose in order to challenge Greece's territorial waters, and therefore the European Union's territorial waters. Although no one was armed, both sides are said to have armed their weapons during the standoff. Kathimerini and Greece Foreign Ministry

Japan vows no compromise on Senkaku Islands

After China said on Tuesday that "Fascist" Japan must "abandon illusions" about retaining sovereignty over the Senkaku/Diaoyu islands, on Wednesday, Japan's Prime Minister Yoshihiko Noda, speaking at the United Nations, made a statement that was equally firm, though not as offensive: 

"As for the Senkakus, they are an inherent part of our territory in light of history and also under international law.

There are no territorial issues as such. Therefore, there cannot be any compromise that represents a retreat from this position.

I must say clearly to China that there is no excuse for violence and strongly urge China to protect Japan's citizens and business."

The reason that China and Japan are fighting over two insignificant, uninhabitable rocks in the middle of the East China Sea is because the owner of the islands gets with them control over a 200 mile Exclusive Economic Zone (EEZ) around the islands, and it's believed that the region around the islands contains trillions of dollars in oil and gas deposits, as well as rich fishing waters. Reuters

Egyptian Sunni and Shia activists come to blows in tv debate

In an Egyptian TV show airing on September 9, the Egyptian Sunni Walid Ismail and Egyptian Shia activist Mahmoud Ahmad Mahmoud come to blows. Here are some excerpts: 

Moderator: "Let's just talk about one more thing, since we have only a few minutes left. Let's talk about the citizen and citizenship. Are Egyptian Shi'ites more loyal to Egypt or to Iran? In Lebanon, Hassan Nasrallah said: 'I'm more loyal to Iran than to Lebanon.' Is it the same case with the Shi'ites in Egypt?"

Shi'ite activist Mahmoud Ahmad Mahmoud: "Things are much simpler than that. There is this bunch of really stupid people, who are like a woodworm gnawing away at the Egyptian people. I'm talking about the Wahhabis. They are the ones who are responsible for everything – they are the ones who have driven a wedge between Muslims and Copts, and between Muslims and Muslims. They themselves are divided into different sects.

"Secondly, I was a Salafi and then I became a Shi'ite. I wasn't born a Shi'ite. My father has a Masters degree in Sunni jurisprudence..."

Sunni activist Walid Ismail: "He renounced you..."

Mahmoud Ahmad Mahmoud: "You are a liar."

Walid Ismail: "He did, and so did your brothers."

Mahmoud Ahmad Mahmoud: "You are a liar..."

Walid Ismail: "By God, they all renounced you..."

Mahmoud Ahmad Mahmoud: "Your wife is contacting Shi'ites, offering to engage them in 'pleasure marriage.'"

Walid Ismail: "That's inappropriate..."

Mahmoud Ahmad Mahmoud: "Do you want me to provide recordings?"

Walid Ismail throws something at Mahmoud Ahmad Mahmoud, who jumps out of his chair

Walid Ismail: "Shame on you! That was below the belt! You're being insolent."

Moderator: "That's enough, Walid. [To Mahmoud Ahmad Mahmoud:] How dare you mention his wife?! Shame on you!"

Mahmoud Ahmad Mahmoud: "I didn't say anything like that."

Moderator: "Show some respect! Shame on you!"

Mahmoud Ahmad Mahmoud: "I didn't say anything like that."

Moderator: "That's it, Walid. I apologize... Dear viewers, let's take a short break. We'll return shortly."

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