Eurocrats' Immovable Rigor Over Debt Restructuring
By Staff News & Analysis - April 25, 2011

A delegation of leading European and international monetary officials are planning a crisis summit in Athens in May amid growing fears that Greece may default on its sovereign debt. European officials are determined to avoid the need for Greece to change the terms of its debt repayments. – UK Telegraph

Dominant Social Theme: Those who lead Europe are determined not to let this crisis get the best of them. The Greeks must suffer so the banks shall not.

Free-Market Analysis: It would be funny if it weren't actually happening. Senior officials, reports the Telegraph, from both the IMF and the European Central Bank plan a two-day "lightning visit" to Greece in early May. The purpose of the visit is to ensure that Greece will further pound on the necks of its citizens by meeting "goals" to pare the government deficit by US$50 billion.

One wonders exactly what a lightening visit of these worthies will look like. They are, surely – most of them – unathletic, and thus the lightening part of the description must apply to something other than movement. Will they gulp down food in fast food restaurants? Will they stay in rundown motels off the beaten track to gain mobility? Will they avoid alcohol so as not to impair their ability for quick thinking?

One also wonders about the attention being paid to poor Greece, which cannot manage her finances. The EU legislative establishment meanwhile stands unaudited for something like a decade now. The auditors simply will not sign off on the books, so great is the suspicion of corruption and fraud. We have not read anything about the EU central bank and the IMF descending for a "lightening visit" on Brussels, except maybe for cocktails.

Actually what the phrase "lightening visit" conjures up for us is a vision of these worthies jumping out of planes in their bespoke suits like a bunch of paratroopers. The execs hit the hills and valleys of fair Greece and roll, then rise shrugging off their rigging and rush to meet the fray. Any talk of debt restructuring or bank haircuts is to be confronted with maximum resolve and rigorous aggressiveness.

The article itself tells us that Greek Prime Minister George Papandreou would take part in such a paratrooper attack. He too is of this sort that practices immovable rigor in the face of the crisis. He "strongly denied rumors that Greece may be forced to restructure its debt imminently." Finance minister George Papaconstantinou said that any restructuring of some US$700 billion in national debt is "out of the question." More immovable rigor from a government that is capable only of extracting from its own citizens sums of money that ought to be collected from Greek and European elites that countenanced the EU undertaking in the first place. Here's some more from the article:

However, Greek news channels have continued to broadcast the rumours. The biggest network, Mega TV, on Saturday reported a government official saying that "in the worst of cases, a rearrangement rather than a restructuring will take place in the future, featuring an extension of the repayment period for the loan, as has been granted for other countries."

The influential newspaper To Vima reported that, in addition to the lengthening of deadlines for repayment instalments, Greece might seek a 30pc reduction in the debt itself. But it said such a decision might take "up to six months". European officials are determined to avoid the need for Greece to change the terms of its debt repayments. On Saturday Jurgen Stark, an executive board member of the ECB, warned that a restructuring of debt in any of the troubled eurozone countries could trigger a banking crisis even worse than that of 2008.

"A restructuring would be short-sighted and bring considerable drawbacks," he told ZDF, the German broadcaster. "In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy." Fears among the international community have been met with increasing anger in Greece. On Friday, Mr. Papandreou lashed out at the credit rating agencies. In a piece posted on a Greek government website, the prime minister said the agencies were "seeking to shape our destiny and determine the future of our children."

The Greek government has claimed that it will address the crisis by restructuring "the country" not the debt and to this end Greece announced late last week that it will cut about US$100 billion by selling assets such as "palaces, marinas and beaches." It was the lack of details that likely led to the rumors of a restructuring as well. But if Greece does go through with these sales, unions and others opposed to Greek austerity will likely continue and expand their protests.

On Sunday, the ECB warned that any Greek restructuring could create a credit crisis similar to the one that took place when Lehman Brothers declared it was insolvent, which froze credit around the world. Juergen Stark, a member of the ECB executive board, said in an interview with German media that a "restructuring would be short sighted and bring considerable drawbacks … In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy."

Greece's debt load is perhaps one-and-a-half times its annual output and knowledgeable observers have questioned whether it is mathematically possible for Greece to pay its debts without some sort of restructuring. Such restructuring of sovereign debt used to be a routine matter in the world of high finance. Institutions, mostly, took a hit and people got on with it. Not anymore.

Today, even the tiniest deviation from a regime of austerity and rigor will cause a worldwide financial collapse, we are told. And Greece is only one of three insolvent European countries – Portugal and Ireland being the others. We don't believe the happy talk about Spain either. As has been pointed out in these pages, Spanish banks are likely carrying (at least) tens of billions in real estate loans that are not being marked to their value, which is virtually nil. Spain seems to us essentially bankrupt no matter what the ridiculous "stress tests" show.

We wonder how long the EU leadership can carry on like this. We pointed out recently that the Anglo-American power elite, having lost the advantage of secrecy as regards its plans to build a one-world-order has fallen back on implementing its designs simply by force. Its fear-based promotions are not having the intended effect and thus it seeks to offer the impression that its strategies are unstoppable.

But this has its drawbacks. When one wishes to impress upon the people the inevitability of one's designs, then not even one failure can be countenanced, nor one question can be raised. This is an almost impossible burden because the promotion retains no elasticity and sooner or later there shall be some sort of breach.

The stance the EU is now adopting with its constant emergency agitation seems to us to be counterproductive. If the EU survives, then EU leaders look as if they were too pessimistic. If the crisis triggers a much larger one, then they run the risk of looking as if they have lost control. Why, we ask, are those running the EU program, purposefully placing themselves in this trap?

After Thoughts

Either they are panicking or they are in some sense inviting the crisis. We have mentioned this before. Are they (and the powers-that-be generally) planning on some sort of controlled worldwide chaos to usher in a global currency and global governance? Is the Sovereign Debt Crisis itself something of a charade? These are risky games indeed. Tug on any one thread now (as Eurocrats themselves maintain!) and the larger design may begin to unravel. OK, then … Is Greece that thread?

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