RE: Alchemist7 is this why dollar up? Gold not mentioned here but things look pretty bad in Euro zone. If paper no good over there what makes investors think that American paper is better?...they are something like 12 trillion in debt.
Greece under EU protectorate as funds shift fire to Portugal
The European Commission has ordered Greece to slash public spending and spell out details of its austerity plan within "one month", invoking sweeping new EU Treaty powers to impose a radical shake-up of the Greek economy.
By Ambrose Evans-Pritchard
Published 03 Feb 2010
https://www.telegraph.co.uk/finance/economics/7150118/Greece-under-EU-protectorate-as-funds-shift-fire-to-Portugal.html
Greece's labour federation immediately called a general strike for February 24, dashing hopes that Europe's provisional backing for Greek crisis policies would restore investor confidence.
Joaquin Almunia, the EU economics commissioner, said tough measures were "extremely urgent" to prevent a further flight from Greek debt. "The huge imbalances from which the Greek economy is suffering are not sustainable in the long run. The fact of the matter is that markets are putting on pressure. This pressure cannot be ignored."
Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. "In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big," he said.
Yields on 10-year Portuguese bonds jumped 21 basis points yesterday as funds switched their fire to the next "domino", questioning whether the government of Jose Socrates can deliver spending cuts without a parliamentary majority. "The lightning rod has been passed to Portugal: who is next – Spain?" asked Marc Chandler, from Brown Brothers Harriman.
George Papandreou, the Greek premier, has agreed to a rise in fuel taxes and a partial freeze in public wages to stop the country "falling off a cliff". Even this will not be enough to satisfy Brussels – itself under pressure from Germany and the European Central Bank. The EU's hard-line faction is afraid that fiscal discipline will break down altogether across "Club Med" nations unless Greece first suffers public flagellation.
Brussels invoked new EU powers under Article 121 of the Lisbon Treaty, allowing it to reshape the structure of pensions, healthcare, labour markets and private commerce – a step-change in the level of EU intrusion.
The EU told Greece to "spell out the implementation calendar of (budget) measures within one month". Athens must be ready to "adopt additional measures if needed" and to submit quarterly updates.
To cap the humiliation, the EU is taking Greece to court over past falsification of budget figures. "This is the first time we have established such an intense and quasi-permanent system of monitoring," said Mr Almunia. The Greek Left said the measures reduce Greece to an economic protectorate
The gap between what EU demands and what ordinary Greeks seem willing to accept is so wide that it may prove extremely hard for Mr Papandreou carry the country. The top union bloc said the government had "succumbed to the will of the markets" but would now have to face the stronger will of the people.
Samir Patel, from the consultancy BH2, said austerity plans will "almost certainly send Greece into a deflationary spiral", and tip its banking system "into the Mediterranean Sea". Greece is being told to carry out IMF-style retrenchment without the IMF cure of devaluation.
One banker described events as eerily similar to market confusion before the failure of Bear Stearns and Lehman Brothers in 2008, this time involving sovereign states rather than banks. It is assumed that Europe must in the end rescue Greece, but Germany is so far sticking to its "no bail-out" mantra and nobody knows for sure how the drama will end.
The legal and political structure is simply not ready to cope with an escalation of the crisis and the problems spreading to Spain, should that occur. Spain's budget deficit reached 11.4pc last year, and is on a worrying trajectory for a country that has lost so much intra-EMU competitiveness and cannot let the currency take the strain. Spanish bank BBVA shocked markets last week with a 94pc fall in profits, largely due to property losses. Spain's mortgage association said days later that the "real estate sector is bankrupt" and threatened the financial system.
Spain's total public and private debt is over 300pc of GDP, much higher than Greek debt. With unemployment already above 4m – or 4.5m including regional jobless schemes – Madrid will not react well to the sort of austerity imposed on Athens. Fears that the slow fuse on Spain's political crisis may soon detonate a timebomb is creeping into the markets.