4-Oct-11 World View — Belgium's Dexia Bank May Be Near Collapse

This morning’s key headlines from GenerationalDynamics.com.

* Euro finance ministers signal that Greece will get its money anyway

* Greece’s Papandreou angrily rejects demands to reduce public salaries

* Belgium’s Dexia bank may be near collapse

* Civilians flee Sirte, Libya, ahead of rebel onslaught

* Administration lobbies Congress to restore Palestinian aid

* Anti-China tariff bill advances in Congress

Euro finance ministers signal that Greece will get its money anyway


Jean-Claude Juncker on Monday (EPA)
Jean-Claude Juncker on Monday (EPA)

After this weekend’s shocking announcement (shocking to anyone with his head in the sand) that Greece will substantially miss the deficit targets for 2011 and 2012 that have been set as conditions for the next €8 billion installment of the second Greek bailout, a meeting of euro finance ministers on Monday signalled the intention to allow the bailout payment to go forward anyway. Greece has informed the committee that the funds will be required by the second week of November, so no decision was made on Monday, and a previously announced October 13 meeting has been postponed. However, Eurogroup chairman Jean-Claude Juncker said,

“We had no one advocating a default for Greece. Everything will be done to avoid that and it will be avoided. Nobody was advocating an exit of Greece from the euro area. I have to firmly deny all these rumors that Greece could decide to leave the euro area and I have to firmly deny any rumors of a Greek default.”

When asked what Greece has to do, after failing to meet previous targets, EU economic affairs commissioner Olli Rehn said,

“There has been a slippage this year. … What is essential is that Greece will have to meet or exceed its target in 2012 with regards to its fiscal deficit, and it must improve its track record in 2011.”

All the signs point to another round of “kicking the can down the road. Reuters

Greece’s Papandreou angrily rejects demands to reduce public salaries

Greece’s Prime Minister George Papandreou reacted angrily to the suggestion, offered by the “troika” (European Commission, European Central Bank, International Monetary Fund) inspectors that Greek law be changed to allow employers to to bypass union contracts and allow lower salaries. “Collective labor contracts apply. We are not, nor do we have any intention of becoming, India or Bangladesh,” said Papandreou. Kathimerini

Belgium’s Dexia bank may be near collapse

Belgium’s Dexia SA bank may be broken up, the first major bank casualty of Greece’s debt crisis. The bank lost €4.03 billion in the second quarter, the largest loss in its history, after it wrote down its holdings of Greece’s debt. France and Belgium bailed out Dexia in 2008, and apparently only a new bailout will save Dexia now. After panic selling of Dexia shares on Monday, Belgium’s finance minister said, “The French and Belgian governments are behind their banks, whether that is Dexia or another. To help banks and to help, for example French and Belgian savers, the first thing to do is to help Greece.” Bloomberg and Guardian

Civilians flee Sirte, Libya, ahead of rebel onslaught


Civilians fleeing Sirte pass a checkpoint on the outskirts of the city on Sunday. (Reuters)
Civilians fleeing Sirte pass a checkpoint on the outskirts of the city on Sunday. (Reuters)

Fearing a coming bloodbath, tens of thousands of civilians are fleeing their homes in Sirte, the birthplace of Libya’s former leader Muammar Gaddafi, as thousands of rebel troops encircle the town. Sirte is one of the last major strongholds of Gaddafi supporters, and the fighting has been fierce. Residents are desperate to flee the city, despite the fact that Gaddafi supporters are blockading exit roads and threatening to kill anyone who tries to leave. Der Spiegel

Administration lobbies Congress to restore Palestinian aid

Fearing a collapse of the Palestinian Authority, the Obama administration is lobbying Congressional leaders to restore $200 million in aid that was blocked in retaliation for the bid to the United Nations to recognize a Palestinian state. On Monday, State Department spokeswoman Victoria Nuland said, “We think it is money that is not only in the interest of the Palestinians, it is in U.S. interest and it is also in Israeli interest and we would like to see it go forward,” Reuters

Anti-China tariff bill advances in Congress

The Smoot-Hawley Tariff Act was enacted by Congress in 1930, against the advice of almost all economists of the time. The effects were enormous. The bill erected large trade barriers for numerous products, virtually shutting down product exports to the United States. Both Germany and Japan were particularly affected. The Smoot-Hawley act was arguably the first hostile act of World War II. A bill with similar intent, and with strong bipartisan support, is now being considered by the Senate. It would let American businesses seek duties on Chinese imports, supposedly to make up for the weak yuan. Bloomberg

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