5-Oct-11 World View — Euro / Greek Financial Crisis Heads For Dénouement

This morning’s key headlines from GenerationalDynamics.com.

* Euro / Greek financial crisis heads for dénouement

* Europeans consider ‘Private Sector Involvement’ as ‘haircut’ increase to 50%

* Greece rejects any new austerity measures

* Italy government bonds downgraded by Moody’s

* U.S. outrage over Russia/China vetoes of U.N. Syria sanctions

* Palestinians in Israeli jails stage growing hunger strike

* Putin’s plans to return to Russia’s presidency raising questions

* Money flies out of Russia faster than predicted

* Amanda Knox … errrrrrr … something something something

Euro / Greek financial crisis heads for dénouement


Athens high school girls shout anti-government and anti-austerity slogans in protests on Monday (Reuters)
Athens high school girls shout anti-government and anti-austerity slogans in protests on Monday (Reuters)

Analysts were shocked on Tuesday after Monday’s announcement by the Eurogroup (euro finance ministers) that the October 13 decision on providing the next bailout installment to Greece would be postponed until November, following Greece’s admission on Suday that they’d miss their 2011 and 2012 cost-cutting targets. Everyone now seems to be saying what has been obvious for 18 months — that either Europe can continue bailing out Greece every few months for years, or Europe can allow Greece to default. The pressure now seems to be on a dual track — providing the next debt installment to Greece, and using the time gained to provide for an “orderly default.” Whether an “orderly default” is even possible is highly doubtful, but that seems to be the new strategy, as European leaders abandon the obvious fairy tales that Greece can overcome its debt problems. Spiegel

Europeans consider ‘Private Sector Involvement’ as ‘haircut’ increase to 50%

European officials have invented a new acronym, PSI, standing for “Private Sector Involvement,” meaning that investors, mainly banks, will have to bear part of the burden of the Greek debt crisis, by losing some of the money that they invested in Greek bonds. But the possible collapse of Belgium’s Dexia bank that we reported yesterday has made it clear that Europe’s banks cannot afford a Greek default, since the banks, especially in France and Germany, are too deeply invested in Greek bonds. What makes this much worse is the fact that the “haircut” that investors will have to take is growing larger every day. When the July 21 bailout deal was struck, it was thought that the “haircut” would be only 21%. But now it’s expected to be 50-60%, which means that just continuing to bail out Greece may be thought to be the cheapest option for Europe. Reuters

Greece rejects any new austerity measures


Greek Finance Minister Evangelos Venizelos on Tuesday
Greek Finance Minister Evangelos Venizelos on Tuesday

Finance Minister Evangelos Venizelos said on Tuesday that there will be no more austerity measures announced in the next month, as the parliament is still considering whether to approve the measures already announced. “There will be no new measures,” he said, noting that the implementation of measures announced already would be adequate “as long as the state mechanism functions and we see cooperation by citizens.” Kathimerini

Italy government bonds downgraded by Moody’s

Adding to the general sense of gathering panic in Europe, Moody’s Investors Service dowgraded Italy’s government bond ratings three notches, with a negative outlook. Although Moody’s says that the chance of default by Italy remains remote, “Nonetheless, Moody’s believes that the structural shift in sentiment in the euro area funding market implies increased vulnerability of this country to loss of market access at affordable rates that is incompatible with a ‘Aa’ rating.” AP

U.S. outrage over Russia/China vetoes of U.N. Syria sanctions

Susan Rice, U.S. ambassador to the United Nations, expressed outrage on Tuesday after China and Russia vetoed proposed Security Council resolutions providing for “tough, targeted sanctions” against Syria’s president Bashar al-Assad:

“The United States is outraged that this council has utterly failed to address an urgent moral challenge and a growing threat to regional peace and security.

Today two members have vetoed a vastly watered down text that doesn’t even mention sanctions.

Let me be clear: the United States believes it is past time that this council assumed its responsibilities and imposed tough targeted sanctions and an arms embargo on the Assad regime.”

Russia and China are known to be furious that the West far exceeded its mandate in Libya after the Security Council approved, with abstentions by Russia and China, a humanitarian effort to protect civilians. AFP

Palestinians in Israeli jails stage growing hunger strike

Some 500 Palestinian prisoners in Iraeli jails have joined a hunger strike to protest worsening prison conditions. Thousands of Palestinians stage rallies in both the Gaza Strip and the West Bank showing solidarity with prisoners. The strike was called after prime minister Benjamin Netanyahu toughened restrictions on Palestinian prisoners as part of an effort to force Hamas to free kidnapped IDF soldier Gilad Schalit. Jerusalem Post


Putin’s plans to return to Russia’s presidency raising questions

Russian Prime Minister Vladimir Putin’s announcement that we recently reported to the effect that he would run for President in 2012, replacing Dmitry Medvedev, has raised constitutional questions. Russia’s constitution prohibits anyone from becoming president for more than two consecutive terms, and that’s the reason why Putin could not run for president in 2008. Putin’s announcement appears to confirm that Medvedev was just a “placeholder” for Putin, so that Putin could stay in power for 16 or more years, violating the spirit, if not the letter, of the Russian constitution. Jamestown and Spiegel

Money flies out of Russia faster than predicted

Russia’s central bank reported on Tuesday $18.7 billion in capital outflows in the third quarter, on top of $30.6 billion that had left Russia between January and June. These figures were far greater than had been predicted. Government officials have blamed the capital flight on a fragile business climate in which investors complain of red tape and the inability to defend their rights in court. AFP

Amanda Knox … errrrrrr … something something something


Amanda Knox
Amanda Knox

This is the most important international news story in the world today, more important than the European debt crisis, more important than Libya, more important than the Mideast, more important than anything. Since the Amanda Knox story is so important, I’m doing this item on Amanda Knox, so that all of my readers can be well informed about everything important that’s going on in the world. Now you know. AP

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