Tampa Bankruptcy Blog » Austerity Measures

Near Bankrupt EU Countries in Crisis

dmishesq — Wed, 01 Sep 2010 00:00:39 +0000

The Head of the European Commission, Jose Manuel Barrosso is not optimistic about the future of Spain, Portugal and Greece. In view of these countries’ enormous debt problems, Barrosso warned that unless stern measures are taken to address the problem, the repercussions may be apocalyptic. The countries might slide back to dictatorship rule and democracy will be no more. That was what Barrosso, a former Prime Minister of Portugal, revealed at an extraordinary briefing with the Trade Union Chiefs (TUC).

In the meantime, European Union (EU) chiefs have begun talks aimed at arranging for the bailout of Spain which is anticipated to run into hundreds of billions of pounds. Greece has already accepted a bailout package amounting to £650 billion. John Monks, the head of the European TUC, expressed his personal shock at Barrosso’s prediction. According to Monks, Barrosso sees no other alternative except for these countries to embrace austerity measures, however painful they might be.

If Spain, Portugal and Greece fail to adopt austerity measures, then there is a very real possibility of a takeover by the militaries which might then usher in a dictatorship. Bearing in mind the recent riots and popular uprisings in Athens and Malaga and elsewhere, a military coup is not too far-fetched a notion in these three countries. They do have a history of military uprisings and themselves only became democracies in the 1970’s.

Greece has already had its share of street protests as interest rates and taxes soared and public spending was drastically cut. Similarly, Portugal and Spain have announced austerity measures to avoid defaulting on their national debts. Likewise, other European countries that have had similar incidents of riots and protests include Hungary, Italy and Romania where public sector employees’ salaries are to be cut by 25%.

Mr Barroso’s warning exposes the concern of the EU that that the economic crisis could also lead to the collapse of the beleaguered euro and the unraveling of the EU itself.

On the other hand, Mr. Monks feels that the austerity measures themselves could push the EU back to the 1930s during the time of the Great Depression. He revealed that union chiefs throughout the EU are preparing for a coordinated ‘Day of Action’ to protest the cuts on September 29.

Meanwhile, EU leaders are meeting to discuss a rescue package for Spain. It is expected to come up to at least £100 billion to start with, although this figure could very well balloon as the economic crisis deepens.

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Bailout Only Hope for Greece to Avoid Bankruptcy

dmishesq — Tue, 27 Jul 2010 17:55:40 +0000

In what seems like the only way out of a catch 22 situation, Greece has to borrow money from the International Monetary Fund (IMF) and its fellow EU countries to avoid national bankruptcy. The country is two weeks away from defaulting on €8.5 billion worth of bonds maturing May 19 for which it does not have the money to pay.

During a heated debate in parliament, Greek Prime Minister George Papandreou said the government has to avail itself to the €110 billion three-year package comprising of loans from other eurozone countries and the IMF. But the package comes at a price. The government must agree to severe austerity measures over the three year period. These measures include slashing salaries, pensions and increasing taxes. The government was trying to rush through legislation in parliament to authorize the austerity measures.

The loan package is also aimed at preventing the debt problem from spilling over to other European countries with vulnerable economies such as Portugal and Spain. Portugal and Spain has had their debt ratings downgraded which contributed to the depreciation of the value of the Euro from as high as $1.51 to below $1.28.

The austerity measures have sparked outrage among the Greeks, with approximately 100,000 people spilling into the streets last Wednesday, torching buildings, destroying public property, smashing windows and fighting with police. Three bank employees – a man and two women, one of whom was pregnant – died when they were trapped inside their building set ablaze by rioters. Another four people were rescued by fire fighters using a crane from the balcony of the bank. The deaths were the first protest-linked ones in more than 20 years and have shocked the nation in which protests are common but rarely result in fatalities. A makeshift shrine with flowers and candles was set up in a charred window of the Marfin Bank, the scene of the deaths.

41 policemen and 15 civilians were injured in the riots, while 25 people were arrested. When the journalist union canceled their participation in the protests, newspapers were rushed through the press on Wednesday just in time to report on the riots and deaths. But despite the fatalities and general carnage, unions and far left groups were planning for more protests on Thursday.

The bank workers’ union called for a strike Thursday to protest the deaths of their members and at the same time laid the blame for the violence on the government’s austerity measures. However, most banks in central Athens remained open.

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Bailout Only Hope for Greece to Avoid Bankruptcy

dmishesq — Mon, 24 May 2010 16:25:50 +0000