“It’s not because of need. It’s to be on the safe side.”

TO BE NOTED: From Bloomberg:

"Greece May Sell 8 Billion Euros of Bonds as ‘Cushion’ (Update1)

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By Maria Petrakis and Andrew Davis

April 28 (Bloomberg) -- Greece, the second-most indebted European Union nation, may increase bond sales this year to protect against a possible collapse in investor demand on global capital markets.

The government might sell an extra 8 billion euros ($10.4 billion) of debt, bringing the total issued this year to 50 billion euros, Economy and Finance Minister Ioannis Papathanasiou said today in an interview in Athens.

It’s a “cushion” against any deterioration in debt markets, he said. “It’s not because of need. It’s to be on the safe side.”

Greece raised 7.5 billion euros at a sale of three-year bonds yesterday, all but completing the 43.7 billion euros of debt it planned to sell this year. Greece, Spain, Portugal and Ireland had their credit ratings cut this year as the global crisis fueled concern that Europe’s most indebted nations would have trouble borrowing as credit markets seized up.

The additional sales would be of bonds maturing in three, five and 10 years, although no decision has been made, Papathanasiou said.

Greece’s ratio of debt to gross domestic product will rise to 96.3 percent this year, according to a government forecast. That’s second only to Italy among the EU nations.

The difference in yield, or spread, between 10-year Greek notes and German bunds was 217 basis points as of 1:55 p.m. in London, down from 300 basis points on March 12. The average in the past 10 years is 55 basis points.

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net"

We need to spend more time looking at how an unlikely set of countries have coped relatively well

TO BE NOTED: From A Fistful Of Euros:

"The Helvetic Tiger by P O Neill

There’s a country in Europe with a large financial sector, big exposure to foreign trade, a floating exchange rate, and politics complicated by 4 communities within its governing structure. But enough about the United Kingdom. The latest statistical release from Eurostat covering GDP up to Q4 2008 is fascinating, not least because they also include the EFTA non-EU members, meaning Iceland, Switzerland, and Norway. A few things stand out.

First, if you were looking for a country that should have been hammered by the financial crisis, it would be one fitting the profile of our opening sentence but with the additional disadvantages of being outside the EU umbrella and being the whipping boy for the G20 complaints about tax and regulatory havens. Step forward Switzerland, which despite that baggage saw Q4 GDP just 0.3 percentage points down from Q3 or 0.1 percentage points down compared to Q4 2007. Given how disastrous Q4 was on average, that would be a decent performance even before taking account of Switzerland’s high vulnerabilty due to the previously mentioned factors.

Second: anyone want to guess which country among the EU + EFTA collection (with seasonally adjusted data) was the worst performing in Q4 last year compared to Q3? That would be Ireland. Even on an annual basis, only a couple of the Baltics turn in a worse performance, and they didn’t begin from as seemingly secure position as Ireland did. And the Irish crisis is at its core a fiscal crisis, which has still not been convincingly addressed. Just as well those G20 enhancements to the IMF lending capacity could cover a rich European country with cap in hand.

Finally, one other country deserves mention for keeping the show on the road in the face of predictions of gloom: Greece. Analysts look at the public debt numbers and think it can’t dodge a crisis. But it did dodge a recession in 2008, despite political chaos. Maybe there’s a Hellenic Tiger as well.

Message: politicians are in the business of pretending that the dire circumstances are due to events beyond their control. But even in a global crisis, there is significant country variation in impact. We need to spend more time looking at how an unlikely set of countries have coped relatively well."

Protests against governments and banks have increased in some European countries as the global economy has deteriorated.

Proof of what I've been warning about with social dislocations and disruptions. From Reuters:

"Jan 22 (Reuters) - Protests against governments and banks have increased in some European countries as the global economy has deteriorated.

Here are details of some of the protests around Europe:

* ICELAND:

-- Police used teargas against anti-government protesters when a demonstration outside parliament turned violent on Thursday.

-- The parliament building has become the focus of anger against Prime Minister Geir Haarde's coalition government's handling of the financial crisis. Demonstrators have called for the prime minister and other senior officials to resign and his limousine was pelted with eggs by demonstrators on Wednesday.

* BULGARIA:

-- Hundreds of Bulgarians demanded economic and social reforms in the face of a global slowdown on Wednesday in a second week of anti-government protests.

-- Students, teachers, green activists, doctors and public servants took part in the rally in front of parliament in Sofia, calling on the Socialist-led government to take action or step down. Many shouted "Mafia" and "Resign".

-- Last week hundreds of protesters clashed with police, smashed windows and damaged cars in Sofia when a rally against corruption and slow reforms( NB ) in the face of the economic crisis turned into a riot.

* GREECE:

-- High youth unemployment( NB ) was a main driver for unrest in Greece, initially sparked by the police shooting of a youth in an Athens suburb. General unemployment runs just above the EU average at 7.4 percent but the figure is 21.2 percent for the 15-24 age group and 10.5 percent for those aged 25-34. The protest forced a government reshuffle.

* LATVIA:

-- Last week, a 10,000-strong protest in Latvia descended into a riot, some protesters trying to storm parliament before going on the rampage. Government steps to cut wages( NB ), as part of an austerity plan( NB ) to win international aid, have angered people.

* LITHUANIA:

-- Police fired teargas last week to disperse demonstrators who pelted parliament with stones in protest at government cuts in social spending( NB ) to offset an economic slowdown. Police said 80 people were detained and 20 injured during the violence.

-- Prime Minister Andrius Kubilius, who was only sworn in in December, said the violence would not stop an austerity plan( NB ) launched after a slide in output and revenues."

These governments are not facing protesters who want less government. Dream on. To the extent that governments seem incompetent, indifferent, and corrupt, there are very real chances of major social disruptions and dislocations. Anybody not taking this problem seriously is making a major mistake.

"The social upheaval we saw in December is going to be nothing next to the explosion we are going to see in the coming months."

From the Guardian, more news about social dislocation and disruption:

"Greeks fear meltdown and unrest in EU's weakest economy

• Helena Smith in Athens
• guardian.co.uk, Monday 19 January 2009 21.22 GMT
• Article history

Mannequins burn during riots in Thessaloniki Photograph: Grigoris Siamidis/Reuters

For the movers and shakers of Greek shipping, it is a sight that a few months ago would have been unthinkable: idle tankers and cargo vessels lined up like ghost ships in Salamis Bay.

Nearly 2,500 years after the Greeks fought the Persians in the straits, the bay has become symbolic of another battle that is brewing on Europe's south-eastern front. The build-up of decommissioned ships, like the empty tourist shops and ancient sites devoid of happy holidaymakers, is symptomatic of the economic crisis that is enveloping Greece, the EU's weakest economy.

"The recession," declared today's left-leaning Eleftherotypia in a banner front-page headline, "is at our door."

Shipping and tourism – at 25% the biggest single contributors to the country's gross domestic product – are not the only sectors bracing themselves for a fall in foreign demand.

After years of enjoying high growth rates – at 4%, almost double the eurozone average – Greeks have been told to ready themselves for fiscal hardship. On almost every front they have been bombarded by bad news: that unemployment, currently at 7.4%, will worsen in the coming year; that economic growth will fall to near zero; that further austerity measures, in the form of taxes and government cutbacks, are almost certainly on the way.

Last week, in a move that dealt another psychological blow( THAT'S IT ), the country became the first western European economy to have its credit-rating downgraded, highlighting fears over its huge public-sector debt, the worst in the 16-member eurozone, and making the prospect of further borrowing to finance it ever more costly.

Announcing the decision, the credit rating agency Standard & Poor's said the ongoing financial crisis had exacerbated "an underlying loss of competitiveness" in the Greek economy.

Today, in a report cataloguing Greece's economic woes, the European commission said the country's exports, not least to the recession-hit neighbouring Balkans, will also decline dramatically in the coming months. The Athens stock exchange, already at a five-year low, fell a further 2%.

The outlook could not be further from the economic renaissance that followed the 2004 Athens Olympics. With the exception of the Hungarians, Greeks are now the most pessimistic people in Europe, according to EU polls.

"A financial tsunami is on its way and Greece is less prepared than it should be to deal with it," said the political scientist Dimitris Keridis.

"Successive governments did not use the good times to put the country's economic house in order and now the bad times are with us."

Reining in a debt forecast to increase in 2009 to more than 91.4% of GDP is, economists agree, the single biggest priority for an economy racked by structural problems and thirsting for reform. But with their wafer-thin majority, the ruling conservatives have little room for manoeuvre. Trailing the opposition socialists( I'M SURE THEY'LL FOLLOW VON MISES ) by a steady 5 percentage points has made the task in hand even harder.

Unpopular reforms, unprecedented youth unemployment and disaffection over the economy caused riots in December that caused about €1bn (£906m) of damage in Athens alone. Now, with unemployment rising and union unrest gathering pace, there are fears that Greece will soon erupt again.

"Every day shops are closing, people are being laid off, and factories are ­shutting down," said Stathis Anestis, spokesman at the Greek TUC, which represents 1.5 million workers. "And with the global economic crisis only just beginning to be felt here, there is worse to come. The social upheaval we saw in December is going to be nothing next to the explosion we are going to see in the coming months."

That's my fear as well.

"The worst riots since the fall of Communism have swept the Baltics and the south Balkans."

Ambrose Evans-Pritchard on the Telegraph:

"Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch.

Dublin has nationalised Anglo Irish Bank with its half-built folly on North Wall Quay and €73bn (£65bn) of liabilities, moving a step nearer the line where markets probe the solvency of the Irish state.

A great ring of EU states stretching from Eastern Europe down across Mare Nostrum to the Celtic fringe are either in a 1930s depression already or soon will be. Greece's social fabric is unravelling before the pain begins, which bodes ill.

Each is a victim of ill-judged economic policies foisted upon them by elites in thrall to Europe's monetary project – either in EMU or preparing to join – and each is trapped.

As UKIP leader Nigel Farage put it in a rare voice of dissent at the euro's 10th birthday triumph in Strasbourg, EMU-land has become a Völker-Kerker – a "prison of nations", to borrow from the Austro-Hungarian Empire.

This week, Riga's cobbled streets became a war zone. Protesters armed with blocks of ice smashed up Latvia's finance ministry. Hundreds tried to force their way into the legislature, enraged by austerity cuts.

"Trust in the state's authority and officials has fallen catastrophically," said President Valdis Zatlers,
who called for the dissolution of parliament.

In Lithuania, riot police fired rubber-bullets on a trade union march. Dogs chased stragglers into the Vilnia river. A demonstration outside Bulgaria's parliament in Sofia turned violent on Wednesday.

These three states are all members of the Exchange Rate Mechanism (ERM2), the euro's pre-detention cell. They must join. It is written into their EU contracts.

The result of subjecting ex-Soviet catch-up economies to the monetary regime of the leaden West has been massive overheating. Latvia's current account deficit hit 26pc of GDP. Riga property prices surpassed Berlin.

The inevitable bust is proving epic. Latvia's property group Balsts says Riga flat prices have fallen 56pc since mid-2007. The economy contracted 18pc annualised over the last six months.

Leaked documents reveal – despite a blizzard of lies by EU and Latvian officials – that the International Monetary Fund called for devaluation as part of a €7.5bn joint rescue for Latvia. Such adjustments are crucial in IMF deals. They allow countries to claw their way back to health without suffering perma-slump.

This was blocked by Brussels – purportedly because mortgage debt in euros and Swiss francs precluded that option. IMF documents dispute this. A society is being sacrificed on the altar of the EMU project.

Latvians have company. Dublin expects Ireland's economy to contract 4pc this year. The deficit will reach 12pc of GDP by 2010 on current policies. "This is not sustainable," said the treasury. Hence the draconian wage deflation now threatened by the Taoiseach.

The Celtic Tiger has faced the test bravely. No government in Europe has been so honest. It is a tragedy that sterling's crash should have compounded their woes at this moment. To cap it all, Dell is decamping to Poland with 4pc of GDP. Irish wages crept too high during
the heady years when Euroland interest rates of 2pc so beguiled the nation.

Spain lost a million jobs in 2008. Madrid is bracing for 16pc unemployment by year's end.

Private economists fear 25pc before it is over. Spain's wage inflation has priced the workforce out of Europe's markets. EMU logic is wage deflation for year after year. With Spain's high debt levels, this is impossible.

Either Mr Zapatero stops the madness, or Spanish democracy will stop him. The left wing of his PSOE party is already peeling off, just as the French left is peeling off to fight "l'euro dictature capitaliste".

Italy's treasury awaits each bond auction with dread, wondering if can offload €200bn of debt this year. Spreads reached a fresh post-EMU high of 149 last week. The debt compound noose is tightening around Rome's throat. Italian journalists have begun to talk of Europe's "Tequila Crisis" – a new twist.

They mean that capital flight from Club Med could set off an unstoppable process.

Mexico's Tequila drama in 1994 was triggered by a combination of the Chiapas uprising, a current account haemorrhage, and bond jitters. The dollar-peso peg snapped when elites began moving money to US banks. The game was up within days.

Fixed exchange systems – and EMU is just a glorified version – rupture suddenly. Things can seem eerily calm for a long time. Politicians swear by the parity. Remember John Major's "soft-option" defiance days before the ERM blew apart in 1992? Or Philip Snowden's defence of sterling before a Royal Navy mutiny forced Britain off the Gold Standard in 1931.

Don't expect tremors before an earthquake – and there is no fault line of greater historic violence than the crunching plates where Latin Europe meets Teutonia.

Greece no longer dares sell long bonds to fund its debt. It sold €2.5bn last week at short rates, mostly 3-months and 6-months. This is a dangerous game. It stores up "roll-over risk" for later in the year. Hedge funds are circling.

Traders suspect that investors are dumping their Club Med and Irish debt immediately on the European Central Bank in "repo" actions.

In other words, the ECB is already providing a stealth bail-out for Europe's governments – though secrecy veils all.

An EU debt union is being created, in breach of EU law. Liabilities are being shifted quietly on to German taxpayers. What happens when Germany's hard-working citizens find out?"

I don't know if he correct. What interests me is the social disruption and dislocation being seen in the wake of this Calling Run ( Debt-Deflation Spiral, Deleveraging ). This is the main reason it is silly to allow the run to go on until it stops of its own will. By that time, the least of our problems will be economic. People who see free market ideology as the ideology that will be chosen at the end of this run are sadly mistaken. It is much more likely to be deemed the cause.