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Global Economic Crisis Watch
Topic Started: Apr 28 2010, 11:23 PM (39,450 Views)
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Greek financial crisis could hit Britain, warn economists

Businessmen and economists are warning the crisis affecting Greece could be coming to Britain unless the next Government takes drastic action to cut the national deficit.

By Christopher Hope, Whitehall Editor
Published: 5:32PM BST 28 Apr 2010

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Photo: EPA

They warned that hedge funds and speculators would pick off weaker European economies “like they did with the banks”, while senior businessman said the party that wins the election had to be on a “war footing” to deal with the scale of the crisis.

A widespread stock market sell-off was triggered yesterday when ratings agency Standard & Poor’s cut Greek debt to junk status, while a downgrade to Portugal reignited worries about a growing eurozone crisis.

Financial Crisis in Greece, Europe Could Threaten US> and World Economy

Tribune Washington Bureau
April 28, 2010 | 3:25 p.m.

WASHINGTON -- Just as the American economy was gathering steam -- with consumers starting to spend more and the housing market showing signs of stabilizing -- a widening financial crisis in Europe is threatening to put a damper on the recovery both here and abroad.

Germany offered a hopeful word Wednesday, putting aside months of reluctance and saying it could rush through a plan to foot its share of an IMF-EU bailout for Greece that now looks to exceed $132 billion.

But the credit contagion that began in heavily indebted Greece spread to Spain as that much-larger economy's sovereign rating was downgraded -- only one day after Athens' own bonds were slashed to junk status and Portugal's debt fell as well.

And despite German officials' pledge to act swiftly, many economists saw a likelihood damaging fallout from the crisis.

Jacob Kirkegaard, a European specialist at the Peterson Institute for International Economics in Washington, said he doubts there's enough political will in Germany to back such a hefty bailout plan, and even if it does, the government is likely to face constitutional challenges to taking such measures.

"If German parliamentary approval doesn't come through" -- officials said a vote could taken next week -- "the risk of contagion goes up dramatically. And you could have the kind of Argentinean scenario for Greece," Kirkegaard said, referring to the financial meltdown and economic collapse of that South American nation a decade ago – a crisis that infected the entire region...

..."Their money problems in Greece are dramatically affecting us," said company president Roy Paulson.

And it isn't just shipments to Greece that Paulson and other American businessmen are concerned about. The spreading financial woes have sown fears about the stability of the European banking system and cast a deepening gloom over the continent's economy.

The depressed euro, which touched a one-year low against the dollar Wednesday, has made U.S. exports more expensive in Europe and less competitive in some other markets as well. If the troubles persist, American companies face the prospect of softer overseas sales, or worse, a broader and deeper hit to their revenues from weakening global growth.,0,6024638.story

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Greek PM suggests global financial governance to address economic crisis 2010-04-29 05:08:14
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Greek Prime Minister George Papandreou speaks at the 14th Roundtable with the Greek Government organized by the Economist in Athens,
capital of Greece, April 28, 2010. Papandreou suggested on Wednesday evening a global financial governance to address the deep economic crisis
that now seems to spread from Greece to other Euro-zone member countries. (Xinhua/Marios Lolos)

ATHENS, April 28 (Xinhua) -- Greek Prime Minister George Papandreou suggested on Wednesday evening a global financial governance to address the deep economic crisis that now seems to spread from Greece to other Eurozone member countries.

"We are in front of an emergency which becomes wider and needs a global financial governance fast," Papandreou said, addressing the 14th Roundtable with the Greek Government organized by the Economist in Athens.

Underlining that current interest rates of Greek bonds, which have exceeded the 1,100 basis points on Wednesday, are unreasonable, the Greek premier said that the latest developments confirmed the earlier warnings of the Greek government that the country and the Eurozone in total are under attack of speculators.

During his speech on the theme of "Shaping the agenda in the face of a crisis for Greece and the EU", Papandreou stressed that Greeks are dealing with their problems today, and European partners should do their part and prevent "a small fire to get out of control".

"We do not ask for rescue, but reasonable loans through the EU- IMF safety net, so that we continue our reforms," Papandreou added repeating that his government has taken the historical responsibility to put the Greek finances back on the right track and do whatever necessary to protect the country from dangers.

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In the meantime Greek media reported on Wednesday evening that by the upcoming weekend, the consultations on the final terms of the financial aid package to Athens by the European Union and the International Monetary Fund (IMF), will most probably have been completed.

After the latest worrying developments with the increase of Portuguese and Spanish bonds, Germany seemed to finally realize that what is at stake now is not just the Greek economy, but the stability of the Eurozone, Greek analysts noted.

According to unconfirmed sources from the IMF the funds, on the support mechanism for Greece could eventually reach the 120 billion euros (158.4 billion U.S. dollars), over the next three years.
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IMF chief warns financial crisis in Greece could spread in Europe

Posted on April 29th, 2010 in World
By Sanjay Yadav

The head of the International Monetary Fund has warned that the financial crisis in Greece could spread throughout Europe.

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Dominique Strauss-Kahn said a European-led rescue package for Greece needs to be implemented quickly as the situation is getting worse all the time and could affect other countries.

World financial markets, recovering slightly on Wednesday, have been badly hit by fears of contagion from Greece.

Germany said the total financial aid package for Greece could be more than double the 60 billion dollars that was previously expected. The German Chancellor Angela Merkel said Greece had to agree to make real cuts.
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The Global Economic Riots Are Getting Worse!


Athens clash at finance ministry over budget cuts

Clashes between police and protesters outside the finance ministry in Athens

Protesters in Athens clashed with police as a group tried to force its way into the Greek finance ministry.
Police fired tear gas to disperse the crowd as the unrest flared over austerity measures that may be taken in return for a massive bailout deal.
The European Union (EU) has said it is close to approving the details of an emergency plan to help tackle Greece crippling debt.
EU commission chief Jose Manuel Barroso said "rapid progress" was being made.

Deal deadline

"I'm confident that the talks will be concluded soon, meaning in the next days," Mr Barroso told a news conference following the clashes.
"We believe that these solutions will be conducive to our actions and will prevent further possible effects of the contagion."

Officials from the EU, the International Monetary Fund, and European Central Bank are in Athens to negotiate the bailout.
The Greek government says it needs a deal by 19 May to avoid a devastating debt default.
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Spain unemployment tops 20 percent

MADRID, Spain (CNN) -- Unemployment in Spain has reached 20 percent, meaning 4.6 million people are out of work, the Spanish government announced Friday.

The figure, from the first quarter, is up from 19 percent and 4.3 million people in the previous quarter. It represents the second-highest unemployment rate in the European Union, after Latvia, according to figures Friday from Eurostat, the EU's statistics service.

Spanish Prime Minister Jose Luis Rodriguez Zapatero told Parliament on Wednesday he believes the jobless rate has peaked and will now start to decline.
The first quarter of the year is traditionally poor for Spain because of a drop in labor-intensive activity like construction, agriculture and tourism.
This week, Standard & Poor's downgraded Spain's long-term credit rating and said the outlook is negative.

"We now believe that the Spanish economy's shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," Standard & Poor's credit analyst Marko Mrsnik said.

Gross domestic product growth in Spain is expected to average 0.7 percent annually through 2016, compared with previous expectations of 1 percent annually, he said.
Spain's economic problems are closely tied to the housing bust there, according to The Economist magazine. Many of the newly unemployed worked in construction, it said.

The recession revealed how dependent public finances were on housing-related tax revenues, it said.
Another problem in Spain is that wages are set centrally and most jobs are protected, making it hard to shift skilled workers from one industry to another, the magazine said.

Average unemployment for the 27-member European Union stayed stable in March at 9.6 percent, Eurostat said Friday. That percentage represents 23 million people, it said.
The lowest national unemployment rates were in the Netherlands and Austria, which had 4.1 and 4.9 percent respectively, Eurostat said.

-- CNN's Al Goodman contributed to this report.


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Greek riots turn deadly: What it means

Dina Kyriakidou, Reuters
Published: Wednesday, May 05, 2010

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A riot policeman falls after being hit with molotov cocktail near the Greek parliament
in Athens Wednesday.

ATHENS -- Greek protesters set fire to a bank, killing three people, on Wednesday in the most violent reaction to date to the government's austerity plan.

Groups of masked youths hurled petrol bombs, stones and sticks at riot police as nearly 50,000 striking workers and public servants marched to parliament, where a bill dictating pay cuts and tax hikes was due for debate.

Eyewitnesses said marchers chanted "Thieves!" and hurled water bottles at riot police, who had formed a cordon around the parliament building in central Athens, reflecting increasing anger among ordinary people at politicians.

Here are some of the implications for Greece:


The ruling socialists, who came to power in October pledging to tax the rich and help the poor, are keenly aware of the need to sustain public support in imposing harsh austerity measures.

Opinion polls, which showed solid support for the government through the early months of the crisis, are registering increasing public discontent.

The socialists are bound to tread more lightly in imposing some of the reforms for fear more violent protests may completely derail their plans to cut the deficit by 30 billion euros.

This may complicate some fiscal efforts, targets may be missed and Greece may eventually be forced to restructure its 300 billion euro debt despite a 110 billion euro international aid injection under a eurozone/IMF deal.


The biggest protest since the December 2008 riots that helped bring down the outgoing conservatives, are bound to prod the government to satisfy public demands for social justice. Most of the slogans chanted by tens of thousands condemned corruption and demanded those responsible for the crisis are punished.

Prime Minister George Papandreou has promised to revive the state through meritocracy and transparency but no politician has been brought to justice during his seven months in office over the economic crisis or years of scandals.

After Wednesday's protests, the government can no longer brush aside calls for justice if it wants to pursue tough belt-tightening measures. Any further delay in bringing top financial criminals and corrupt politicians to justice will fuel further protests in the months to come.


News of the deaths rattled investors, with Greek stocks falling by almost 4% and the euro losing ground to the U.S. dollar.

Markets have been sceptical about whether the plan to bail out Greece can prevent a default, in a crisis shaking weak economies on the eurozone's periphery. They are closely watching Mr. Papandreou's struggle with angry unions and leftists to sustain the painful austerity steps.

This comes on top of concerns about whether the Greek economy, mired in a deep recession and characterised by a lack of competitiveness, can survive the austerity measures and remain in the euro zone, where it cannot devalue its currency or control its own interest rates.

Such violent protests not only cast doubt on the austerity plan but slow down an economy in dire need of a boost.

© Thomson Reuters 2010

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The Coming Economic Collapse Of Japan – And Why You Should Be Extremely Concerned About It

Most Americans pay very little attention to what is going on in the economies of other nations. But they should. The reality is that in today's global economy, what is happening on the other side of the world can have a dramatic impact on the U.S. economy. In particular, the ongoing implosion of Japan's economy should greatly concern us all.

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Japan is the 3rd biggest economy in the world and is one of America's most important trading partners. If Japan experiences a total economic collapse it will create a tsunami of financial panic around the globe. In fact, it is likely that a default by the government of Japan would plunge the world into such an economic nightmare that the American Dream would quickly vanish for millions of American families.

So just how close is Japan to a financial collapse? Well, Fitch Ratings says that Japan's gross public debt has reached 201 percent of GDP and is likely to continue to pile up into very dangerous territory for the foreseeable future...

...We have all seen what happened when Standard & Poor's cut its rating on Greek debt, and Japan's economy is much, much larger.

When a debt crisis does happen in Japan, it could happen very, very quickly.

According to Kumano, there will likely come a "tipping point" when world markets will recognize that the government of Japan simply cannot afford to finance its debt any longer....

"It's hard to predict when the bond market might collapse, but it would happen when the market judges that Japan's ability to finance its debt is not sustainable anymore."

When you start to see world headlines about a debt crisis in Japan, hold on to your hats, because that could be the start of something really, really bad for the world economy.
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John Williams: A Hyper-Inflationary Great Depression Is Coming

ShadowStats' John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is in a depression and why a "Hyper-Inflationary Great Depression" is now unavoidable. John also shares why he selects gold as a metal for asset conversion in this exclusive interview with The Gold Report.

The Gold Report: John, last December you stated, "The U.S. economic and systemic crisis of the past of the past two years are just precursors to a great collapse," or what you call a "hyper-inflationary great depression." Is this prediction unique to the U.S., or do you feel that other economies face the same fate?

John Williams: The hyper-inflationary portion largely will be unique to the U.S. If the U.S. falls into a great depression, there's no way the rest of the world cannot have some negative economic impact.

TGR: How will the United States' decreased economic power impact global economies? Will the rest of the world survive?

JW: People will find to their happy surprise that they'll be able to survive. Most businesses are pretty creative. The thing is, the U.S. economic activity accounts for roughly half that of the globe. There's no way that the U.S. economy can turn down severely without there being an equivalent, at least a parallel downturn outside the U.S. with its major trading partners.

When I talk about a great depression in the United States, it is coincident with a hyper-inflation. We're already in the deepest and longest economic contraction seen since the Great Depression.

If you look at the timing as set by the National Bureau of Economic Research, which is the arbiter of U.S. recessions, as to whether or not we have one, they've refused to call an end to this one, so far. But assuming you called an end to it back in the middle of 2009, it would still be the longest recession seen since the first down-leg of the Great Depression.

In terms of depth, year-to-year decline in the gross domestic product, or GDP, as reported in the third quarter of 2009, was the steepest annual decline ever reported in that series, which goes back to the late '40s on a quarterly basis. Other than for the shutdown of war production at the end of World War II, which usually is not counted as a normal business cycle, the full annual decline in 2009 GDP was the deepest since the Great Depression. There's strong evidence that we're going to see an intensified downturn ahead, but it won't become a great depression until a hyper-inflation kicks in. That is because hyper-inflation will be very disruptive to the normal flow of commerce and will take you to really low levels of activity that we haven't seen probably in the history of the Republic....

...TGR: Major economic indicators suggest significant improvement; even
the IMF has stated that we've averted a global depression. What are
you seeing that these governing bodies are not?

JW: What I'm using is a leading indicator of economic activity: year-
to-year change in inflation-adjusted broad money supply. We're now
seeing a very sharp year-over-year decline, which has not been seen
since the 1990 recession. This indicator does not work always in the
upside; it doesn't necessarily give you a signal for a rising economy.
It is, however, basic. If you strangle liquidity you can always
contract an economy.

Deliberately or not, liquidity's being strangled.

You're seeing very sharp declines in consumer credit, commercial and
industrial loans and commercial paper outstanding.
You are getting happy news from governments, central banks, financial
markets, Wall Street analysts and the popular media, which does tend
to cater to Wall Street. Such is standard practice. Happy news is what
sells and you don't want to discourage people.

The Obama administration, interestingly, started talking-down the economy when
it wanted to get its stimulus package in place. As soon as that was
done, it started talking-up the economy. Everything was just fine and
dandy again. This is the most extraordinary downturn most people
living today have ever seen. In terms of modern economic reporting,
which basically started after World War II, we've never had a downturn
as long or as severe. Perversely, the extreme nature of the downturn
actually has warped recent reporting of seasonally-adjusted data to
the upside.

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Bernanke Warns Against Move to Audit Fed


WASHINGTON—Federal Reserve Chairman Ben Bernanke sought Thursday to head off legislation that would subject the central bank's monetary policy decisions to congressional audits, warning it could stoke inflation and threaten economic stability.

With U.S. senators moving toward a possible vote later in the day on an amendment to the financial regulatory bill that would significantly increase congressional oversight of the Fed, Mr. Bernanke warned of the consequences in a letter to Senate Banking Committee Chairman Christopher Dodd (D., Conn.).

"Such amendments, if enacted, would seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation," Mr. Bernanke wrote.

In the past few days, Mr. Bernanke has reached out to about a half-dozen lawmakers to help make the Fed's case against the bill.

Dow falls 900+ points over Greece worries

NEW YORK (AP) -- Stocks extended their plunge into a third day Thursday as investors succumbed to fears that Greece's debt problems would spread.

The Dow Jones industrial average fell more than 900 points in afternoon trading.

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U.S. Stocks Plunge Most in Year as ’Panic Selling’ Grips Market

By Michael P. Regan and Rita Nazareth

May 6 (Bloomberg) -- U.S. stocks tumbled the most in a year on concern Europe’s debt crisis will halt the global recovery. The selloff briefly erased more than $1 trillion in market value as the Dow Jones Industrial Average fell almost 1,000 points, its biggest percentage loss since 1987, before paring the drop.

The Dow average ended down 347.8 points, or 3.2 percent, at 10,520.32 at 5:50 p.m. in New York. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest intraday plunge since December 2008, before closing down 3.2 percent at 1,128.15. It was the biggest percentage drop on a closing basis since April 20, 2009, for both measures.

“It’s panic selling,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $379 billion. “There’s concern that the European situation might cool down global growth and freeze the credit markets.”

New York Stock Exchange spokesman Rich Adamonis said “there were a number of erroneous trades” during the plunge. The NYSE told CNBC that there were no system errors as speculation of bad trades swirled through the market. Nasdaq OMX Group Inc. said it is working with other markets to review transactions during the plunge.

Citigroup Inc. said it found “no evidence” of erroneous trades after CNBC said the bank made a potentially bad transaction amid the Dow’s plunge of as much as 9.2 percent, its biggest intraday drop since Oct. 19, 1987. CNBC cited “multiple sources.”

Procter & Gamble Co. said it’s looking into electronic trading of its stock to determine whether it was made in error. Its shares sank as much as 37 percent and closed down 2.3 percent.

Euro Tumbles

The euro tumbled the most since the collapse of credit markets in 2008, dropping 1.5 percent to $1.2620 at 5:10 p.m. in New York and touching a 14-month low of $1.2529, even as Greece’s parliament approved austerity measures demanded by the European Union and International Monetary Fund as a condition of its 110 billion euro ($139 billion) bailout.

European Central Bank President Jean-Claude Trichet held interest rates at a record low of 1 percent today and said the bank didn’t discuss whether to purchase government bonds to stem the region’s debt crisis, defying market speculation that he would take such measures.

“The ECB can fix this instantly by doing what the Fed has done -- instantly providing liquidity by buying bad fixed-income instruments and paying cash in U.S. dollars,” said David Kovacs, head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $18 billion. “The reason the market is horrified now is Trichet said it’s not even being discussed. Smart investors are basically selling risk assets.”

2010 Gains Wiped Out

The MSCI Asia Pacific Index joined the MSCI World Index and the Stoxx 600 Index in wiping out its advance for 2010. The Dow and S&P 500 briefly erased their yearly gains before paring losses.

Bank of America Corp., Hewlett-Packard Co. and American Express Co. tumbled more than 4.3 percent to help lead declines in the Dow as all 30 of its companies dropped at least 1.6 percent.

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