22-Jul-11 World View — Europeans Announce Bailout Plan Allowing Greece To Default

This morning’s key headlines from GenerationalDynamics.com.

East Africa famine – a catastrophe in the making


Famine on the Horn of Africa (Spiegel)
Famine on the Horn of Africa (Spiegel)

After the worst drought since 1950, with no precipitation at all in the last two rainy systems, countries in east Africa (Somalia, Ethiopia, Kenya, Djibouti, and Uganda) are facing a humanitarian catastrophe, with some 12 million people already facing starvation, and with that number being only the beginning. A new rainy season is set to begin in autumn, but after the last two years, there’s no guarantee that there’ll be any precipitation this time either. According to one analyst, “The population has grown significantly, production has sunk dramatically, the climate is changing and many areas used for agriculture have been lost to the nomads. The land, he says, can simply no longer feed the population.” Spiegel

Europeans announce bailout plan allowing Greece to default

European leaders announced a €109 billion ($157 billion) bailout plan for Greece, going beyond last year’s bailout of €120 billion. As demanded by the Germans, the plan provides a way for investors, mostly big banks, with Greek bonds in their portfolios, to “voluntarily” take a haircut of around 20%, by exchanging Greek bonds for guaranteed euro bonds. “It is a voluntary approach by the private sector, and it is therefore a solution with the markets, not against them,” said European Commission President Jose Manuel Barroso. “We now have a program and a package of decisions which create a sustainable path for Greece, a sustainable debt management for Greece, and this in the end will mean not only the funding of a program but will also mean the lightening of the burden on the Greek people,” said Georgios Papandreou, the Greek prime minister. Market Watch and Institute of International Finance Inc.

No one has come out and said that Greece is going to default on bondholders who don’t exchange their bonds; instead, there’s just a lot of arm-twisting of big banks to do all this “voluntarily.” Since this is clearly a coercive deal, the credit ratings agencies will give Greece’s bonds a default rating. Felix Salmon/Reuters


Greek Prime Minister Georgios Papandreou (Kathimerini)
Greek Prime Minister Georgios Papandreou (Kathimerini)

Nobody really cares any longer about whether Greece defaults or not. Greece, Portugal and Ireland account for just 6% of the euro’s problems. The real fear is “contagion,” with the panic spreading to Spain and Italy, which account for 23%, and would require a €2 trillion bailout fund. One analyst said that this will be the day that the EU lost control of the system, because the bailout won’t stop contagion. Bond yields (interest rates), which are the rates that a country has to pay to borrow money, have been going up in Spain and Italy, and there’s little expectation that Thursday’s action is going to stop that spiral. What does it mean for things to go out of control? It would mean a run on banks, with people withdrawing their money from unsafe banks and putting it under their mattresses or into other “safe” banks. (Recall that we’ve already seen major bank panics in 2007 — in California’s Countrywide Bank, and in Britain’s Northern Rock.) Greeks are already moving their funds from Greek banks to Swiss banks. (Bloomberg TV)

An escalation of the Greek crisis would affect far more than Italy and Spain. Romania, Bulgaria, and other central/east European and Baltic countries which have benefited from the European credit bubble could be devastated by a slowing European economy. FT Beyond Brics

S&P says U.S. has 50% chance of rating downgrade as early as August

Standard & Poor’s reiterated that the U.S. may lose its AAA credit rating as soon as August. The rating may be lowered to the AA+ range with a negative outlook next month even if an agreement to raise the debt ceiling in time to avert a potential default without a “credible” plan to lower deficits, S&P said in a report. The chance of a downgrade in the next three months is 50%. Bloomberg

Syrian forces massively assaulting city of Homs

The security forces of Syria’s president Bashar al-Assad are perpetrating a major military assault on densely populated neighborhoods of Syria’s third largest city, Homs. Starting with gunfire at worshippers in a mosque early on Thursday morning, the army used tank shells and machine guns, shooting randomly at people in the streets. People who were dead or injured were left lying the streets, because no could pick them up without being slaughtered by gunfire. Al-Jazeera

Syria is getting closer to economic collapse since the unrest began. According to recent reports, business and trade are down 50 percent, unemployment has doubled, food and electricity shortages are escalating, $20 billion has already left the country, banks fear a run on their assets and the government is printing pounds at a furious pace, which risks a rapid devaluation of the national currency. Global Post

Libya is new source for smuggled arms to Gaza

Libya has become a new source of smuggled weaponry for Palestinians in the Gaza Strip. The arms are being supplied to Gaza by Bedouins, originating from rebel-held territories in eastern Libya. Reuters

US and France signal that Gaddafi could stay in Libya

Discussions about a negotiated end to the humanitarian kinetic military action in Libya are exploring the possibility, possibly endored by the U.S., France and other countries, that Muammar al-Gaddafi can stay in Libya, and avoid prosecution by the International Criminal Court, provided that he steps down and agrees to a political transition to the rebel National Transitional Council. Guardian


Israel won’t apologize for Turkish flotilla deaths

Israel’s Minister of Strategic Affairs Moshe Yaalon told foreign reporters on Thursday that he’s been holding talks with Turkish officials, but Israel is not ready to apologize for the deaths of nine Turkish activisits on last year’s “Freedom Flotilla.” However, he hinted that there are disputes within the cabinet, and that Israel’s position could still change. AP

Russian and Swiss armed forces sign a military-technology cooperation agreement

Russian military officials hope that a ground-breaking agreement between Russia and Switzerland will boost Russia’s mountain warfare capabilities, for use in the North Caucasus region as the 2014 Olympics games in Sochi approach. Russian officers, non-commissioned officers (NCOs) and soldiers will be trained in each country by the Swiss armed forces, focusing on enhancing the capabilities of Russia’s mountain warfare units. The Russians also hope that the deal will jump-start the military’s fight against massive corruption. Jamestown

Russia blocks a United Nations ‘green helmets’ climate peacekeeping force

Yes, Dear Reader, the headline is not a joke. Western nations, including the U.S., want the UN Security Council to adopt climate change as an international security matter, and to fund an international “green helmet” climate peacekeeping force. The issue was deadlocked by Russian objections, leading US ambassador Susan Rice to say, “This is more than disappointing. It’s pathetic. It’s shortsighted, and frankly it’s a dereliction of duty.” But the Russian envoy said, “We believe that involving the security council in a regular review of the issue of climate change will not bring any added value whatsoever and will merely lead to further increased politicisation of this issue and increased disagreements between countries.” Guardian

Pentagon braces for much deeper military cuts

The Pentagon is bracing for spending cuts far deeper than what it was expecting just a few weeks ago, including the possible elimination of an aircraft carrier group and other weapons programs, as an increasing number of lawmakers float proposals for slashing the once-sacrosanct defense budget. Washington Post

Pentagon searches for a ‘meme tracker’

The Pentagon’s Defense Advanced Research Projects Agency (DARPA) has made a broad announcement seeking proposals for a “meme tracker,” to be used as a battlefield tool. The meme tracker would allow the tracking of cultural items through blogs, social networking sites and media-sharing technology like YouTube. “The effective use of social media has the potential to help the Armed Forces better understand the environment in which it operates and to allow more agile use of information in support of operations,” the research solicitation says. Fierce Government IT

Sydney Opera House appears on cover of terror magazine

The Sydney Opera House, a world famous landmark in Sydney, Australia, appears on the cover of the latest edition of Inspire, an English-language terrorist magazine published by Al-Qaeda on the Arabian Peninsula (AQAP), raising security concerns. Telegraph

Ten reasons why the French lost the Battle of Agincourt

First reason: The French were heavily weighted down by up to 50 kg of heavy armor, on a plowed field where it had been raining for two weeks, giving them a big disadvantage against the lightly attired British archers. The French lost at the Battle of Agincourt in 1415, but they got their revenge in 1429 in the Siege of Orléans, under Joan of Arc. Telegraph

Couple says image of Jesus appears in Walmart receipt


Walmart receipt
Walmart receipt

A South Carolina couple who dropped their Walmart receipt on the floor of their apartment discovered three days later that the receipt has changed and was displaying an image of Jesus. [It doesn’t look like Jesus to me; it looks like Jimmy Durante.] KDRV (Denver)

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