Analysis: German chancellor steps up pressure on Greece

[Ghost Dog]

Peter Schwarz, WSWS, 28 April 2010

The German government is linking the provision of funds for Greece to entirely new conditions, thereby delaying financial aid.

Following Athens’ request for loans of 45 billion euros from the International Monetary Fund and the Eurozone countries—a bailout that had previously been agreed upon in principle—Chancellor Angela Merkel has made her consent dependent on Greece presenting a "three-year, sustainable and credible recovery programme". In practice, this means that the government of Prime Minister Georgis Papandreou must add a third round of austerity measures to the two draconian packages already adopted.

...

Germany has largely isolated itself in the European Union with its implacable attitude. In particular, the highly indebted countries of southern Europe, but also France, are accusing the German government of stoking a wave of speculation that has already driven up interest rates on Greek government bonds to record levels.

Even some German commentators are warning that Germany is undermining its own position, since it is one of the principle beneficiaries of the Eurozone area, which absorbs about 70 percent of German exports. Bankruptcy for Greece could trigger a chain reaction that would mean the end of the euro.

...

Merkel's Greek policy faces criticism from two sides. Her coalition partners—the Christian Democratic Union's sister party, the Christian Social Union (CSU), and the Free Democratic Party (FDP)—accuse her of being too lenient towards the Greek government. On the other hand, sections of the Social Democratic Party and Merkel’s own Christian Democratic Union (CDU) accuse her of not acting quickly enough to support Greece.

In reality, the chancellor is following a clear line. Her main objective is to shift the full burden of the crisis onto the Greek population and force the Greek authorities to take whatever measures are necessary to carry this through. If the German government had immediately pledged support, writes the Süddeutsche Zeitung, "the pressure on the Greek government would have disappeared at once. Prime Minister George Papandreou would no longer have been able to bring a radical austerity programme before parliament as is now foreseen".

At the same time, Merkel has signalled to the banks that they need not worry about their money. Pro-government sources confirm that the chancellor never seriously considered Greek national bankruptcy. Internally, she made it clear from the beginning that the country could not be allowed to fail, and that ultimately support would be forthcoming. However, her intention was to drive up the price of a rescue package.

Merkel's priority is not Greece, but Germany and Europe as a whole. Greece serves as a test case. It is a proving ground to see how the working class can be made to pay for the huge deficits in the budgets of all countries arising from the international financial crisis and the rescue packages to save the banks.

Dramatic cuts in wages, pensions and public spending such as those currently being imposed by Papandreou on the Greek population are also planned for Ireland, Portugal, Spain, Italy, Britain, France and Germany itself. Greece is being closely monitored to see how far Papandreou can go without provoking a popular revolt, and to what extent the unions and pseudo-left organizations such as the petty-bourgeois SYRIZA are able to keep the social opposition under control.

It is in this context that the anti-Greek hysteria being fanned by the German media should be seen. It serves a particular purpose: to prevent any solidarity between the German and Greek working classes.

...

It is the gutter press belonging to the Springer-Verlag group that is playing the leading role in the anti-Greek smear campaign and the drive to stir up backward prejudices. For weeks, the tabloid Bild newspaper has told its readers that the "Greek system" consists of "corruption and nepotism", and conducted a witch-hunt against the "bankrupt Greeks", whose "luxury pensions" must be paid by Germans. Bild readers are not told about the low incomes and pensions in Greece, nor the fact that the cost of living has risen to German levels since the introduction of the euro.

...

The object of this propaganda is to cover up the fact that Greek society—like German—is divided into classes, and that millions of Greeks live in abject poverty, while a small elite has enriched itself thanks to its relations with the European Union.

/More... http://www.wsws.org/articles/2010/apr2010/pers-a28.shtml

(Emphasis added).

[Ghost Dog]

1. The Guardian has a 'live blog' on Greek-related market action today:

http://www.guardian.co.uk/business/blog/2010/apr/28/greece-financial-crisis

And see also: http://ftalphaville.ft.com/blog/2010/04/28/214481/now-thats-contagion/


Here's a sample from the comments:

... what a coincidence.. as soon as the Eurozone countries confirm their committment in supporting Greece's bail-out, the American "rating agencies" downgrade Greece's debt to junk... I wonder if there is a link there somewhere..

Am I the only one that suspects that Greece's debt crisis is blown out of all proportion and is in fact the result of these "rating agencies" self-fulfilling prophesies (i.e.manipulations)?

Aren't these the very same American "rating agencies" that are responsible for the global economic crisis in the first place with their pre-2007 glowing ratings on toxic debts?

And aren't these "rating agencies" and their linked currency markets that stand to lose the most if the dollar loses its status as a reserve currency? Their worst nightmare would be If the Euro is seen by China et al as more reliable and they decide to dump their dollars because of their fear at the US's huge deficit. Hmm?

Simple, isn't it?.. Greece's debt crisis is a fig leaf for something much larger!

/... Comment at: http://www.guardian.co.uk/business/blog/2010/apr/28/greece-financial-crisis

[Ghost Dog]

2. Selling Greece to Disney Solves Europe’s Woes

By Alice Schroeder - Apr 27, 2010

The following is this columnist’s look into the future of Europe’s debt crisis. A news story on Jan. 5, 2011, may look something like this:

Morgan Stanley topped 2010 global debt-and-equity league tables and broke banking records by representing Walt Disney Co. in its $120 billion acquisition of Greece.

Explaining why Morgan Stanley heavily discounted its fee to win the prestigious assignment, Chief Executive Officer James Gorman said underwriting the deal that brought Greece’s 179 years of independence to an end showed the world his own firm had recovered from the financial crisis.

“When you come that close to a near-death experience, our only focus is to make sure our own company survives,” Gorman said. “How 3,000 years of somebody else’s history is managed is not my problem as long as our clients are well served.”

As one of the terms, Greek Prime Minister George Papandreou took a new role greeting visitors at the new EuroGreece Park located at the Acropolis. To acquire such cultural treasures for Disney, Morgan Stanley arranged the sale, which included $60 billion of common stock and $60 billion of assumed debt.

Goldman Sachs Group Inc. was replaced by UBS AG as adviser to the European Union as part of Goldman’s consent agreement with the Securities and Exchange Commission, in which Goldman neither admitted nor denied civil-fraud allegations in its dealings with investors.

Goldman Stake

Goldman Sachs’s Private Equity Group took a 15 percent stake in Greece alongside Disney. One wing of the European Monetary Union, led by German Chancellor Angela Merkel, argued that Disney and Goldman underpaid compared with Greece’s $333 billion gross domestic product. Others point out that the former sovereign is worthless, because its obligations are growing faster than its citizens’ ability to ever repay them.

In its fairness opinion, UBS said synergies between Greece’s untapped intangible assets and the execution skills of the world’s largest media and entertainment company could close Greece’s 13.6 percent budget gap. No other offers for Greece were received except a proposed merger with the Republic of Albania whose terms included no cash to repay the European Union.

Disney’s decision to buy Greece has been credited to Steve Jobs, CEO of Apple Inc. and Disney’s largest shareholder. In 2009, Jobs told Disney to “dream bigger,” setting into motion a deal that is generating a new series of Disney hit movies and product spin-offs, and transforming the theme-park industry.

Theme Parks

Already under construction are Space Mountain Olympus, the Pirates of the Aegean water theme park covering hundreds of nautical miles, the Little Mermaid Harpoon thrill ride, and “Trojan,” a multimedia adventure that the company reassured shareholders yesterday will not be adult-themed.

Disney CEO Bob Iger has said his favorite idea to improve Greece’s margins is golf-themed cruises aboard three ships -- Aphrodite, Artemis and Athena -- which are scheduled for delivery in 2013 and will stop at many of the 1,400 private islands that Disney acquired in the deal. Experiences like these are expected to substantially increase the number of tourists beyond the 16 million who now visit Greece each year and plug a $45 billion annual revenue hole by wringing euros out of remote sea-locked acreage that had been thought to have no value.

Greek Mythology

Disney also is proceeding with its more controversial plans. “Our own brand, like Greece’s, is so powerful because of our heritage,” says Iger. “They have Aristotle, we have Mickey Mouse. But you’ve got to innovate.”

...

According to Disney spokeswoman Zenia Mucha, the company had already tested the waters successfully for a racier version of Disney with its ABC Family television network. ABC Family’s hit campus satire about sororities and fraternities, “Greek,” has now been renewed for a fifth season. Disney sees potential for cross-sponsorship arrangements from advertisers such as Nike Inc. and Apollo Investment Corp.

The deal, which some say has the potential to outdo the East India Co.’s exploitation of India, also brought Disney a collection of iconic antiquities. Management of these works by the Odyssey Division will enable the company to display them without altering explicit elements.

/More... http://preview.bloomberg.com/news/2010-04-28/selling-greece-to-disney-solves-europe-s-woes-alice-schroeder.html

[ozymandius]

3. Merkel is getting pilloried in the press over her dithering.

Her dithering buys the elites time to hide their money from Greek authorities. Taxes will go up, without a doubt, for the entire Greek populace. But capital outflows among those with capital are flooding to havens where they are beyond the reach of aggressive tax collection. So who's left to pay the bill? Those without means either to hide their money or those who live on day-to-day sustenance wages: the working and middle classes.