Discontent in Spain and Greece is rising.
Greece’s two largest labor unions went on strike today, disrupting flight and train services and forcing hospitals to depend on emergency staff.
This is the first general strike in Greece since the coalition government came to power.
Protestors gathering around the Greek Parliament in Athens, throwing Molotov cocktails at the riot police but have been pushed out of the main square now, according to BBC.
Meanwhile, Spain which saw massive anti-austerity protests yesterday, also saw a smaller number of demonstrators take to the streets today. But the demonstrations are expected to gather steam and some reports say 1,300 police officers have been deployed to keep clashes in check.
Spain is also grappling with the threat of a Catalan secession, a crucial economic region of the country. And pressure is building on Mariano Rajoy to request a sovereign bailout, though he has said he will only do so if the country’s borrowing costs stay high over a long period of time.
Markets are selling off across Europe. Spain is down 3 percent, and yields on the Spanish 10-year surged this morning.
We will be updating this feature through the day.
here was a time about a year ago, before the second Greek bailout was formalized and the haircut on its domestic-law private sector bonds (first 50%, ultimately 80%, soon to be 100%) was yet to be documented, when it was in Greece’s interest to misrepresent its economy as being worse than it was in reality. Things got so bad that the former head of the Greek Statistics Bureau Elstat, also a former IMF employee, faced life in prison if convicted of doing precisely this.
A year later, the tables have turned, now that Germany is virtually convinced that Europe can pull a Lehman and let Greece leave the Eurozone, and is merely looking for a pretext to sever all ties with the country, whose only benefit for Europe is to be a seller of islands at Blue Aegean water Special prices to assorted Goldman bankers (at least until it renationalizes them back in a few short years). So a year later we are back to a more normal data fudging dynamic, one in which Greece, whose July unemployment soared by one whole percentage point, will do everything in its power to underrepresent its soaring budget deficit.
Case in point, on Friday the Finance Ministry proudly announced its budget deficit for the first eight months was “just” €12.5 billion, versus a target of €15.2 billion, leading some to wonder how it was possible that a country that has suffered terminal economic collapse, and in which the tax collectors have now joined everyone in striking and thus not collecting any tax revenue, could have a better than expected budget deficit. Turns out the answer was quite simple. According to Spiegel, Greece was lying about everything all along, and instead of a €12.5 billion deficit, the real revenue shortfall is nearly double this, or €20 billion, a number which will hardly incentivize anyone in Germany to give Greece the benefit of another delay, let along a third bailout as is now speculated.
To quote Greg House: “Everybody lies”
The gap in the Greek national budget is greater than previously expected. According to a preliminary Der Spiegel finding, the troika of European Commission, European Central Bank and International Monetary Fund reported that the government of Prime Minister Antonis Samaras is missing currently around 20 billion euros – nearly twice as much as last admitted. Only if the funding gap is closed, the next EU tranche will be transferred to Athens.
Standard & Poor’s Rating Services on Tuesday pared down its economic forecast for the euro zone in 2012 and 2013 in response to indicators that “paint a bleak picture” for the region. “The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010,” according to Jean-Michel Six, the rating agency’s chief economist for Europe, the Middle East and Africa. “But prospects continue to vary from country to country.” S&P said it now expects a drop of 0.8% in euro-zone GDP in 2012 and flat growth in 2013, compared to its July projection of a 0.7% GDP dip in 2012 and 0.3% growth in 2013.
“European leaders have not been able to meet their responsibilities,” French Prime Minister Jean-Marc Ayrault said about Germany and some other countries that are reluctant to pile more taxpayer money on Greece, whose economy is grinding to a halt, and whose government, deprived of the flow of bailout funds and cut off from the financial markets, can no longer fulfill its promises.
And Greeks are leery of new “structural reforms” currently fought over by the coalition government. They oppose more cuts in salaries, pensions, and health care. On Wednesday, they will attempt to bring the economy to a halt with a general strike and demonstrations in Athens and Thessaloniki. Meanwhile, Germany and other countries are wondering how Greece can possibly “reform” if the government can’t agree on the reforms to inflict on its people, and if the people aren’t willing to suffer them.
To his French compatriots, Ayrault defended the Fiscal Union treaty, which, after having been silenced to death, has come under blistering attack from the far right and the far left ahead of the parliamentary debate. They’re clamoring for a referendum, something the government wants to avoid at all costs—the people might well kill it, as they’d killed the European Constitution in the referendum of 2005 [read.... A French Rebellion Against Unelected Bureaucrats: “European Coup D’Etat And Rape Of Democracy”].
“This treaty doesn’t damage the budgetary sovereignty of parliament,” he said. “There is no transfer of sovereignty.” THE issue with that treaty. Even the German Constitutional Court acknowledged that it transferred sovereignty to the European Union. “There must be much more,” Ayrault told his listeners. “The reorientation of Europe” would continue, he said. “Europe is a combat.”