Everyone Praising The Greek Bailout, however...

Greece

Yesterday, the Greeks and Europeans decided how to handle Greece's financial crisis with a 14 billion euros bailout package, which becomes due on March 20th, 2012. Everyone is happy right now... but keep your ear to the ground.

For more detailed info, read the links below:

ABC News Eurozone ministers agree to Greece bailout deal

Reuters Greek austerity and reform measures

Bloomberg Draghi Maintains His Silence on ECB’s Role in Greek Bailout

FT Alphaville Get Greece (out)

FT Alphaville Eurogroup maths

Stay tuned...
 

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Last Chance To Swap Those Drachmas!

drachma
By Paul Tugwell & Tom Stoukas

The imminent bailout of Greece, which is meant to keep the country in the euro zone, coincides with another historic date in the saga of Greek currency. On March 1 the Bank of Greece will stop exchanging drachma notes for euros.

The Bank of Greece, which has been responsible for collecting drachma notes and coins over the past 10 years -- coins had to be exchanged back in 2004 -- hasn’t been storing them for a just-in-case scenario. Rather, the central bank’s Printing Works Dept. cuts them into small pieces and has them compressed into recyclable blocks. It’s at least conceivable that some of the posters held up by angry Greeks protesting their government’s austerity plans started out as pieces of drachmas.

The March 1 deadline hasn’t exactly riveted the Greeks’ attention. “I wasn’t even aware of the deadline and don’t remember the date being widely publicized,” says Litsa Zafolia, 51, who closed her pet shop near Athens when sales plummeted once the crisis hit. Zafolia has held onto 2,000 drachmas -- worth about $7.73 -- for sentimental reasons. She has no plans to exchange them.

The modern drachma was Greece’s currency from 1833 to Feb. 28, 2002, when it stopped being legal tender. According to the Bank of Greece’s National Cash Changeover Plan, 700 million drachma notes had to be withdrawn from circulation and exchanged at the rate of 340.75 drachmas per euro. The Bank of Greece estimates drachma notes worth €200 million ($261.3 million) are still out there. Most are presumed lost or destroyed.

“Small numbers of people come to change modest amounts of drachmas on a daily basis,” says a teller, who asked not to be named, at the Bank of Greece’s central Athens office, an imposing neoclassical building that resembles New York’s Grand Central Terminal. No one was lining up with drachmas at the time.

Greeks were quick to embrace the euro when the currency became available in early 2002. “Entering the euro was the cherry on the cake of European Union membership,” says Andreas Maniatis, 56, an unemployed builder who changed all his drachmas early on. Today he sees the perils of staying in the euro and switching to a new drachma as pretty much equal. “The choice between new austerity measures with the euro and a default with the drachma is the same as choosing to be killed at five minutes to midnight or at midnight,” says Maniatis.

In a poll conducted for Greece’s Skai TV and Kathimerini newspaper in early February, 70 percent of those queried said a return to the drachma would make Greece’s situation worse, while 61 percent said they have a positive view of the euro.

If for some reason the current bailout arrangement collapses and Greece exits the euro, a new drachma will be a “real hell,” George Provopoulos, the current governor of the Bank of Greece, said in a Dec. 31 interview with Kathimerini.

The new currency would swiftly depreciate as much as 70 percent against the euro, Provopoulos told the newspaper. For a transitional period, before new drachmas could be printed and put into circulation, Greece would even have to resort to barter -- a kilo of olive oil, say, for three kilos of flour. That wasn’t the plan when Greece gave up the drachma a decade ago.

The bottom line: Although the Greeks have had years to swap their drachma notes, some €200 million worth of drachmas are still at large. [Bloomberg]

 

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Anti-Austerity Riots Spread Across Athens

Athens Police

ATHENS, Greece (AP) — Rioting spread across central Athens and buildings went up in flames amid mass protests, as lawmakers prepared to vote for a crucial debt deal needed to prevent bankruptcy.

Clashes erupted across the city center after more than 100,000 protesters marched to parliament to rally against drastic austerity cuts that will force firing in the civil service and slash the minimum wage.

Thick clouds of smoke and tear gas filled the air around parliament, as hundreds of rioters staged running battles with riot police and at least five buildings were in flames late Sunday.

Protesters and police fought running battles in central Athens Sunday, as Greek lawmakers debated legislation that would introduce severe austerity measures to stave off bankruptcy.

The clashes broke out around 6 p.m. local time (1600 GMT) as tens of thousands of people, responding to calls from unions to protest the measures, streamed into Syntagma Square facing Parliament.

Peaceful protesters fled to adjacent streets as a group of around 100 anarchists threw bottles, rocks, pieces of marble and firebombs at police, who responded with tear gas and stun grenades.

Police say an officer was injured by a flare shot at him from a gun. He was taken to hospital.

Among those affected by the tear gas were well-known composer Mikis Theodorakis, 86, and veteran leftist politician Manolis Glezos, 89. The two have been actively campaigning against Greece accepting a €130 billion ($171.46 billion) bailout from the European Union and the International Monetary Fund that would help Greece avoid bankruptcy as early as next month, when a €14.5 billion bond matures.

The legislation will also approve a bond-swapping deal with private creditors that will allow Greece to shave off at least €100 billion ($131 billion) of its €360 billion debt.

An ambulance picked up two injured people from the square. At least two more injuries have been reported, including a photographer who was hit by both a firebomb and a flare.

By 7 p.m. local time, clashes had spread beyond the square to other streets. A Starbucks near the Athens University main building was on fire.


The debate started shortly after 3:30 p.m. local time (1330 GMT), and will take about ten hours, finishing around midnight. At the start of the meeting, opponents of the legislation adopted a tactic of frequent and loud interruptions and objections but had calmed down by mid-evening.

Tens of thousands of protesters gathered in the square outside Parliament as the debate began, with more arriving constantly.

protest signs
 
Communist-affiliated unions held a separate meeting at the same time and started marching to Parliament before halting their march as the clashes broke out.

Police fear if the communists and anarchists meet, further violence would erupt and are trying to keep the two apart. Authorities have deployed some 6,000 policemen in the city center.

Pro-Communist unionists had earlier driven through Athens' neighborhoods, calling for people to participate in the demonstration. Protesters are expected to remain outside the building throughout the vote.

The two parties backing the coalition government have 236 deputies in the 300-member Parliament, but at least 13 conservative and seven Socialist lawmakers have declared they will vote against the legislation, defying their leaders' threats of sanctions. Early Sunday, a conservative lawmaker resigned, repeating the actions of three Socialists earlier this week.

Debt-stricken Greece does not have the money to cover a €14.5 billion ($19.12 billion) bond repayment on March 20, and must reach a vital debt-relief deal with private bond investors before then. Greece's woes have threatened its future in the 17-country zone that uses the euro currency.

The Europeans are waiting to see Greece finally act on their commitments.

 

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Soros Warns Euro Zone Faces A Lost Decade

George Soros

Billionaire investor George Soros has predicted a lost decade for indebted countries in the euro zone, warning that weak growth and lingering political tension could shatter Europe's economic union even if Greece agreed to austerity measures.

"It might actually be longer than a decade because Japan had a similar situation with the real estate boom and the banking crisis has had now 25 years of no growth," Mr. Soros told CNN.

"That will create tensions within the European Union, which could destroy the European Union. And that's a real danger."

The interim government of Greek Prime Minister Lucas Papademos approved budget cuts needed to secure a second package of aid, preparing the way for a ratification vote in parliament last night on a 130 billion euro ($160 billion) bailout deal to stave off bankruptcy.

The Greek vote will be a major factor affecting sentiment on the ASX this week. Greece's woes would hit investors in Australia and Asia today , said the chief market analyst at City Index, Peter Esho.

"It will cause jitters when our market opens and [jitters] in Asia. You've got weak offshore leads, more social and political headwinds coming out of Greece, and I think we'll probably open half to 1 per cent lower," he said.

The impact of the Greek vote would depend on its effect on the euro against the US dollar, which was a key measure of market confidence. The euro-US dollar exchange rate closed at 1.3201 on Friday.
 

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Major Reversal: ECB May Help Ease Greek Debt

Papademos and Draghi
Lucas Papademos, Prime Minister of the Hellenic Republic, and Mario Draghi, President of the ECB

 BERLIN, Germany — With Greece on the cusp of a deal to secure a bailout, the European Central Bank is reportedly prepared to play a crucial role in reducing the country’s crippling debt burden. The ECB's move is a significant reversal, given that officials had rejected any such assistance in the past.

The news comes as the coalition parties in Athens finally prepare to discuss the draft plan for tough reforms, following days of delays.

The three parties were handed the 50-page text on Wednesday morning after Prime Minister Lucas Papademos and officials from the troika of international lenders, the ECB, the European Union and the International Monetary Fund, agreed on the final details late Tuesday night.

Papademos, the technocrat ushered in to help rescue Greece’s economy, needs to get the green light from the party leaders for the reform package before he can access the new 130 billion euro ($172 billion) rescue package to avoid bankruptcy.

Read full article at GlobalPost.
 

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