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Generational Dynamics Web Log for 28-May-2011
28-May-11 News -- G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline

Web Log - May, 2011

28-May-11 News -- G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline

Canadian PM Harper causes a controversy at the G8 meeting

G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline

At a two-day meeting in Deauville, France, G-8 leaders pledged $20 billion in aid to Egypt and Tunisia over the next three years, according to Spiegel. The $20 billion will be provided by the World Bank, the International Monetary Fund (IMF), and the European Bank for Reconstruction and Development (EBRD).

G-8 Leaders (EU Observer)

G-8 Leaders (EU Observer)

The IMF has warned that countries with pro-democracy uprisings in the Mideast and northern Africa will need more than $160 billion in international aid over the next three years.

In addition, to the $20 billion from the G-8 countries, there would be $10 billion from Gulf Arab states and $10 billion in bilateral aid to Tunisia and Egypt, according to the Guardian.

Jalloul Ayed, Tunisia's finance minister, is very satisfied with the results. "We are truly very satisfied with the very strong, clear and precise statements proffered by all of the G8 nations, and the financial institutions. It's very clear that everybody wants to help us."

I think Ayed shouldn't get his hopes too high. The "wealthy" G-8 countries are the United States, Canada, Germany, France, Great Britain, Italy, Japan and Russia. They and other countries have some variation of one of these summit meetings every couple of months, and there are always lots of promises. But once the meeting ends, the pledges are all but forgotten.

No agreement on how to meet Greece's June 29 deadline

Greece's debt burden (Spiegel)

Greece's debt burden (Spiegel)

We're now going to turn to the G-8's (non-) actions on Greece. But as we do so, remember that almost everything that any politician has said in the past year about Greece's debt problem has been a total lie. Also, recall that Eurogroup chairman Jean-Claude Juncker recently was quoted as saying, "When it becomes serious, you have to lie," as we reported recently.

Well, things are VERY serious right now, so we have to assume that politicians are going to be lying like mad.

I was amused on Thursday to hear a sound byte on TV from Greece's Socialist party Prime Minister George Papandreou saying something like the following at a press conference: "Please, just leave us alone to work. We're perfectly capable of getting ourselves out of this situation. Just leave us alone to work." I was scratching my head wondering whether by "leave us alone," he meant, "don't give us any more bailout money." But no, I'm sure what he meant was, "stop asking us embarrassing questions that we have no answer for, and just give us the money already."

Well, there are big problems looming. Greece is scheduled to receive 12 billion euros on June 29 as the next tranche in last year's EU bailout commitment, and that money will be needed immediately for Greece to make it's next payment on its bonds, according to the BBC.

Now, everybody knows that this money will just go down the drain, and Greece will be no better off when the next bond payment is due. The IMF's share of the 12 billion euros is 3.3 billion euros, and the IMF is committed to not paying its share unless an audit proves that Greece will be solvent by 2012, which it will not be.

So in an effort to apply pressure to Greece, Jean-Claude Juncker has said that the IMF was assuming that if it decided not to make the 3.3 billion euro payment, then the EU would step in and make it instead. But Juncker added that countries such as Germany, Finland and the Netherlands would oppose that, and such a payment would have to be approved unanimously by all eurozone countries.

Therefore, Juncker concluded, the Greeks had better put in much harsher austerity measures. However, Papandreou's Conservative party opposition is refusing to go along with harsher austerity measures, saying that they would "flatten the Greek economy and destroy Greek society."

And besides, the argument goes, why bother to suffer if we're just going to default a little later anyway?

It's widely believed that a Greek debt default would have worldwide consequences. If Greece defaulted, then there would be a domino effect on Ireland, Portugal, Spain, Italy and Belgium, and one or more of them would probably default as well, putting pressure on the entire euro currency.

Now that the G-8 has failed to come up with anything, and with the June 29 deadline looming, analysts that I heard were predicting either of two possibilities:

The IMF audit of Greece will fudge the numbers, so that the IMF can still provide its share of the next bailout tranche. This will kick the can down the road, but it's worth noting that Greece's bond yields (interest rates) keep going up each time one of these delaying actions is implemented, because investors don't have any reason to believe that Greece won't default anyway.

Everyone will keep denying that Greece is going to default, but then a secret meeting will be held and a default will be announced, probably late on a Sunday.

The second possibility is somewhat disturbing, because it could happen at any time. Tomorrow even. In the meantime, officials will continue to say that nothing will happen, until it happens.

And so, another G-8 meeting has passed. The leaders have made some promises that probably won't be fulfilled, and they've pretended that the really serious problems don't exist. That's emblematic of our times.

Canadian PM Harper causes a controversy at the G8 meeting

The G-8 meeting issued a resolution on the Mideast peace process that followed along the lines of President Barack Obama's speech of two weeks ago. However, because of strong insistence by Canada's Prime Minister Stephen Harper, statements about returning to 1967 borders were omitted from the resolution. Montreal Gazette

(Comments: For reader comments, questions and discussion, see the 28-May-11 News -- G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-May-2011) Permanent Link
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Generational Dynamics Web Log for 28-May-2011 28-May-11 News -- G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline

G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline

No agreement on how to meet Greece's June 29 deadline

Canadian PM Harper causes a controversy at the G8 meeting

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Generational Dynamics Web Log for 28-May-2011
28-May-11 News -- G8 promises aid to Tunisia, Egypt, but fails on Greece's June 29 deadline