Cameron's 2020 Vision - Austerity Until 2020

It appears that the world will be mired in recession until 2020.

That at least is the view of David Cameron, who says that he now expects the crisis in the eurozone to drag on for years.

When asked by The Telegraph as to whether the austerity programme would now last a decade until 2020, the Prime Minister replied:

“I think it’s going to be...this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off. 

I don’t see a time when difficult spending choices are going to go away.”

That kind of talk will not help the economy, as consumer economies are underpinned by hope/expectations of growth and prosperity.

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The EU "Master Plan"

The EU has decided to try to stop the ongoing meltdown of the Eurozone, by publishing new crisis management measures to avoid future bank bail-outs. The aim is to ensure losses are borne by bank shareholders and creditors, and minimise costs for taxpayers.

The main resolution tools are the following:

• The sale of business tool whereby the authorities would sell all or part of the failing bank to another bank;
• The bridge institution tool which consists of identifying the good assets or essential functions of the bank and separating them into a new bank (bridge bank) which would be sold to another entity. The old bank with the bad or non-essential functions would then be liquidated under normal insolvency proceedings;
• The asset separation tool whereby the bad assets of the bank are put into an asset management vehicle. This tool cleans the balance sheet of a bank. In order to prevent this tool from being used solely as a state aid measure, the framework prescribes that it may be used only in conjunction with another tool (bridge bank, sale of business or write-down). This ensures that while the bank receives support, it also undergoes restructuring;
• The bail-in tool whereby the bank would be recapitalised with shareholders wiped out or diluted, and creditors would have their claims reduced or converted to shares. An institution for which a private acquirer could not be found, or which could be complicated to split up, could thus continue to provide essential services without the need for bail-out by public funds, and authorities would have time to reorganise it or wind down parts of its business in an orderly manner. To this end, banks would be required to have a minimum percentage of their total liabilities in the shape of instruments eligible for bail-in. If triggered, they would be written down in a pre-defined order in terms of seniority of claims in order for the institution to regain viability.

Sadly, as with all EU "plans", there is a caveat. Even if these "plans" were to be enacted and to be effective, they will not come into force until 2014 at the very earliest.

These "plans" are therefore of no help or hope to the millions of people in Europe who are now unemployed, and to the millions of people who have seen their taxes squandered by EU politicians and Eurocrats who are frozen with fear and indecision like rabbits in the headlights of the oncoming financial juggernaut.

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The Eurozone Clusterfuck

Another day in the painfully slow demise of the Eurozone, and another round of depressing economic news.

Whilst the headlines boldly claim that the Eurozone has avoided recession by achieving zero growth (as opposed to a contraction), they ignore the fact that the Greek economy contracted by 6.2% in the first quarter of 2012 (according to the Hellenic Statistical Authority).

Five years of austerity have led to a 17% contraction of the Greek economy.

The "powerhouse" of the Eurozone is the German economy which managed to grow by 0.5%, thus pulling the rest of the Eurozone up by its boot straps. However, this merely highlights the sharp economic divide between members of the Eurozone. This economic divide is not sustainable in the long run, and something has to give.

Although Greece will repay fully a Euro450M bond that matures today (after failing to reach a deal with holdout investors), the Greek people and politicians are in no mood to continue with the terms of the bailout as they now stand.

Either the Eurozone renegotiates the bailout (which Germany will not do), or Greece will leave the Eurozone.

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The End Game For Greece

Markets are falling and Greek debt yields are rising as a result of the failure of Greece to form a government. and the increasingly hostile attitude to Greece continuing to remain in the Euro from other Eurozone nations.

To add fuel to the fire Greek government spokesman, Pantelis Kapsis, has told the media that no decision has yet been made on repaying May 15 bond. This implied threat of default is Greece's attempt to raise the stakes in their game of poker with the Eurozone.

Finance ministers from the 17 Eurozone countries will meet this afternoon at 4pm GMT for talks that, one senior EU official told the Wall Street Journal, would be "very political".

It is clear that Greece will leave the Euro, it is not clear when this will happen. However, as and when Greece leaves, it will timed to "surprise" the markets and the population of Greece so that the necessary controls (eg prevention of mass capital flight) are in place.

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Greece To Get Money If It Leaves Eurozone

Spiegel Online notes that as Greece will still be a member of the EU, even if it leaves the Eurozone it will still receive aid from the EU.

I wonder if the article has been written with the intention of tempting the Greeks to leave the Eurozone?

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Greece Out of Cash In Six Weeks

Theodoros Pangalos, the Greek Deputy Prime Minister, has issued his fellow countrymen a stark warning that unless they get real, the country will not receive any more money from the Eurozone and that it will run out of cash in six weeks.

Sadly, a prophet is rarely heeded in his own country!

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Ladbrokes Suspends Bets On Greek Exit

Ladbrokes, the UK betting group, has this morning suspended betting on Greece exiting the Euro by the end of the year.

A Ladbrokes spokesman told the Guardian that they took the decision after a steady stream of bets from punters, looking to profit from a Grexit. Ladbrokes had been offering 4-6 yesterday, but cut it to 1-3 this morning. He said:

"While we're not sure what is going on in Greece, it is safer for us to suspend betting rather than keep cutting the odds."

Ladbrokes will pay up on bets already placed, if there is an official government statement announcing the intention this year to leave the Euro.

Rather ominously for Greece, the Olympic flame was blown out this morning just after it had been lit at Olympia!

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Troika Cancels Greek Inspection

The Troika has cancelled its Greek inspection visit planned for mid May.

It has not made any new appointments, and is awaiting political developments in Greece (ie the next election which will determine whether Greece leaves or stays in the Euro).

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The Solution To All of Europe's Problems - Baroness Ashton

Baroness Ashton, the High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the Commission, is quoted today ("Europe Day"):

“The coming year will be crucial for Europe's recovery – and for Europe's future. Not only the steps we take internally in the European Union on the economy and with Croatia joining in July but also how we engage globally.

Everywhere I go, I hear that others from outside Europe want to work with a Europe that is active and committed, so that is what I intend to do next”.

Problems solved!

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Advice To The EU

You can always renegotiate anything, defaulting is a form of "renegotiation"!

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Greece and France Reject Austerity

Greece and France have rejected austerity.

Unfortunately, they are still broke and the markets will now reject them!

Shares in Europe's banks are now falling, as it is clear that the Eurozone is going to become ungovernable in its present form.

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Useless Gobshites - The EC

Here are threes sets of figures:

- Total cuts in public spending in Greece: -20% (as share of GDP)
- Total cuts in government spending in Latvia: -22%
- Proposed increase in the EC’s 2013 budget: 6.8%

Notice something odd?

Yes, that's right, the body that is imposing austerity packages on EU countries is asking for an increase in the budget of the European Commission of 6.8%!

The EC has lost touch with reality, and is quite clearly a threat to stability and well being of Europe itself.

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Shackled To Debt

Britain (like every other significant national economy) is shackled to debt.

The UK public sector net debt has risen to £1.022 Trillion, that is the equivalent to 66% of GDP and the highest since records began.

Some are questioning how this can happen, given that the politicians have launched an austerity programme designed to cut back on on debt.

The answer is simple.

The "planned" cuts and austerity drive will never cut the actual level of debt, at best the cuts will reduce the rate of increase of debt.

We are destined to be shackled to debt for the rest of our lives!

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Dutch Government Resigns

In a display of irony, probably lost on them, the Dutch government (which in the past has berated other nations for failing to implement austerity measures) has resigned this morning.

For why?

Talks about implementing austerity measures broke down.

Not so easy is it, when you have to implement cuts in your own country?

The Netherlands now faces a general election, which of course will further destabilise the EU's attempts to pull itself out of its self created financial crisis.

Unfortunately, for the citizens of the EU, the financial structure of the EU (ie the Eurozone) is not "democracy friendly". One or the other has to give way, either financial dictatorship is imposed in order to try to resolve the crisis or the current structure (ie the Eurozone) will fail as democracy once again reasserts itself.

The latter option is infinitely preferable, as the former will lead to civil and social chaos.

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Greece Stares Into The Abyss

As the Greek election on the 6th of May approaches, the voters of Greece have been afforded an opportunity to see their future and stare into the abyss (courtesy of the IMF).

Whoever is elected, on the assumption that Greece remains within the Eurozone, the soul destroying austerity that Greece is experiencing is set to be ratcheted up:

- There will be more cuts in social benefits and healthcare.

- There will be cuts in the public sector.

- Wages and pensions will be reduced by 15%.

According to The Slog, the EU are even trying to influence the result of the elections by placing their preferred candidate in pole position to become Prime Minister.

Greece is staring into the abyss, if it chooses to remain in the Eurozone it will be pushed into the abyss. The choice that the Greek people need to make is whether they wish to be pushed into the abyss, or leave the Eurozone of their own accord.

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Utter Madness - EU's Demands of Greece

In a leaked document due to be published tomorrow, the EU will tell Greece to reduce "nominal unit labour costs in the business economy by 15% in 2012-2014".

Applying severe austerity measures to an economy that is already imploding is utter madness.

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Bank of England Disconnected From Reality

The Bank of England, in its latest Quarterly Bulletin, has demonstrated that it is somewhat disconnected from reality and displays a mack of understanding of human nature.

In the bulletin, the Bank warns that “saving appears to be too low”:

“If current households choose not to pass on those gains to later generations, they may be able to spend more and save less. Future generations, however, will need to save more for their retirement or work longer.”

That is all very well, maybe. However the Bank appears to have forgotten that UK interest rates (0.5%) are at the lowest they have been for years.

Add to that the fact that we are being told that we will have to endure years of austerity and, like it or not, people's reaction will be very human; namely to enjoy the good times (ie spend) whilst they still can.

Economic cycles and people's reactions to them are driven by emotions not logic.

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Barroso Speaks

Jose Barroso (President of The European Commission) has addressed the European Semester (no, I had never heard of it either), and stated:

"I insist we have to be clear about the goal, the goal is growth."

Would he care to explain to the people of Greece how their country will grow over the next few years, on the basis of the austerity programme that has been forced down their throats by the Troika? 

He went on to say:

"national budgetary decisions are the responsibility of national parliaments and will remain so.."

Not in Greece they're not!

"..growth-boosting reforms are still lagging behind. I mean this in areas such as tax reform, pension reform, labour market reform and opening up the services and retail sectors. 

Of course the picture is mixed across the Union, but these are the areas the Commission and Council will focus on in the Country-Specific Recommendations. 
 

I know these reforms can be difficult and sensitive."

Quite!

By the way, the title of his speech was "Unity in difference, strength in convergence"; clearly derived from Orwell's "1984" "Freedom is Slavery, War is Peace" etc!

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The "Bloodless" Greek Coup

@RobNisbetSky has just tweeted the following:

"Source in EU Greece Task Force: growing concerns the 'prior actions' Athens has to enact to trigger bailout may be 'impossible' to meet."

Aside from the fact that people are now waking up to the fact that the austerity measures and financial targets being imposed on the Greek people are all but impossible to meet, it is also now dawning on people that, in all but name only, the Eurozone has enacted a (as yet bloodless) coup on the Greek people.

Greece has now been placed on "Special Measures" by the Eurozone and, for the next two years, irrespective of the wishes of the Greek people has now ceased to govern itself. Some Greek people now even have to pay for the privilege of working.

No one (aside from maybe those policy wonks who dwell in the bunkers of the Eurozone) seriously thinks that this stands a cat's chance in hell of working.

Why therefore go to all this trouble?

Simple, the decision has already been made to expel Greece from the Eurozone. However, those who have made the decision want Greece to pull the trigger!

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Boom! - Greek Bailout Consigned To The Flames

It seems that, in the interests of their Eurozone overlords, the Greek government is going to postpone the April elections.

Apparently implementing the austerity measures required by the Eurozone is taking up so much time, that the "annoying" and time consuming matter of "democracy" has to be placed on the backburner.

Let me be perfectly clear, irrespective of whether the austerity programme had a cat's chance in hell of succeeding (which it didn't), by stifling the democratic process the unelected technocrat Prime Minister has now guaranteed that the social unrest caused by this foolish decision will consign the bailout and Greece to the flames.

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