Greece in meltdown: Government on edge of collapse amid fears of coup as Europe teeters on the brink of financial disaster

Soon to be a melts down in the USA Who will We the People go after? Obama? Congress and the Senate? I am just knitting away like Madame Defarge in the Tale of Two Cities.

Greece in meltdown: Government on edge of collapse amid fears of coup as Europe teeters on the brink of financial disaster

• Government teeters on the brink of collapse
• Generals face sack as coup rumours spread
• Markets plunge as fears for the Euro grow

By James Chapman
Last updated at 1:13 AM on 2nd November 2011



Europe was teetering on the edge of disaster last night as fears grew that the Greek government is about to collapse.
Markets nosedived around the world, with billions wiped off the value of Britain’s leading firms, as Athens announced extraordinary plans to sack its military leaders amid rampant speculation that it was trying to head off a coup d’etat.
‘It’s all over. The government is about to collapse,’ said one Greek official. Greece’s former deputy finance minister Petros Doukas agreed: ‘The **** has hit the fan.’

Protesters in the Greek city of Thessaloniki carrying banners written in German, 'One people, one Reich, one Euro', paraphrasing a Nazi slogan and 'No to a new (German) occupation. A Greek 'wanted' poster bearing the photos of PM George Papandreou and finance minister Evangelos Venizelos says 'Wanted by the Greek people'

Economists warned that if Greece rejects the debt deal hammered out only last week, which would entail years of austerity, the entire future of the single currency is in peril.
They predicted that Italy, Spain and Portugal are likely to be plunged into a profound economic crisis because of their failure to get to grips with their towering debts.

 

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• RIGHTMINDS: Corrupt nation holding a gun to the EU's head, says MATTHEW LYNN

Greek officials are due to meet for crisis talks today with France and Germany in Cannes, ahead of a G20 summit on which the European economy now appears to hinge.
As prime minister George Papandreou fought to save his own skin, he horrified other European leaders by proposing a referendum on the debt deal.

Greece's Prime Minister George Papandreou took European leaders and many in his own parliament by surprise with his announcement of a referendum

This would be an effective vote on whether or not Greece should remain in the straitjacket of the single currency and accept years of spending cuts and tax rises, or simply refuse to pay what it owes and crash out of the euro.
Last night the referendum appeared dead in the water as his colleagues moved against the Greek leader, threatening a snap election that he looks certain to lose.
But the opposition is, if anything, more hostile to the bailout and austerity package than Mr Papandreou, and although there would be no referendum it would demand an even bigger write-down of the nation’s debts than the 50 per cent agreed with the EU and International Monetary Fund.
The sense of crisis in Athens – ruled by a military junta as recently as 1974 – was compounded by an unexpected announcement that Mr Papandreou intends to dismiss the chief of the defence staff and the heads of the army, navy and air force.
That raised speculation about the possibility of a military coup in Greece, an outcome said to have been deemed possible in a secret assessment by the CIA.
Greek-Cypriot Nobel economics laureate Professor Christopher Pissarides, of the London School of Economics, said: ‘Before 1974, when politicians were arguing and fighting, the military came in and said, “Come on now, let’s stop, there’s military rule until you sort it out”.
‘Since 1974, of course, democracy has worked, but it’s worrying when you have news about armed officers being replaced right in the middle of an economic crisis.’

Agreement: Germany's Chancellor Merkel and French President Nicolas Sarkozy have called a crisis meeting to push ahead with bailout plans after Greece announced it will hold a referendum on the deal

The Foreign Office in London played down the prospect of a military takeover, saying officials in Athens were insisting that the Government had planned for some time to clear out its top brass.
But one British diplomatic source said: ‘Clearly with everyone talking about the country being in turmoil, the timing is odd.’
The most likely scenario is that the government will press ahead with a vote of confidence on Friday, which it looks likely to lose. An interim government will then be appointed before a snap election.
Last night a Greek government spokesman said Mr Papandreou had told the Cabinet he would hold a referendum seeking approval of the bailout deal come what may, and was determined to win Friday’s vote of confidence.
French President Nicolas Sarkozy said the proposal for a referendum had ‘surprised all of Europe’ and the hard-fought European bailout plan for Greece was the ‘only way possible’ to resolve that nation’s debt crisis.

 

Anger: The austerity measures in Greece have sparked prolonged and violent protests but the people of the country will now decide how to move forward

WHY RUNNING THE COUNTRY HAS ALWAYS BEEN A FAMILY AFFAIR

American-born Georgios Papandreou helped cement the top political post in Greece into a dynasty as he is the third member of his family to lead the country in the last 65 years, after his father and grandfather.
Mr Papandreou, pictured above left with his father Andreas, has been leader of the Panhellenic Socialist Movement (PASOK) party since February 2004 and became the 182nd prime minister of Greece in October 2009.
His grandfather George Papandreou Sr had three terms, between 1944 and 1945, in 1963, and then from 1964 to 1965.
While the current PM's father Andreas Papandreou served two terms, from 1981 to 1989, and then from 1993 to 1996.
In two separate polls, conducted in 2007 and 2010, Mr Papandreou, who was known to the public simply as 'Andreas', was voted as the best prime minister of Greece since democracy re-emerged in 1974. It is unlikely in light of recent events that his son will challenge him for this crown.
Mr Papandreou was elected in a landslide victory where the country's conservatives suffered one of their worst ever general election results.
On the back of a huge swell of public support and an emphatic majority he promised to reinvigorate Greece's stuttering economy by pumping in 3billion euros.
However it then came out that the country was in much more debt than first thought so he began to cut spending, bump-up taxes and slash public sector jobs, leading to national strikes.

Greece is effectively bankrupt and cannot pay off its debts, even with the tough austerity measures that have been forced upon it.
After fierce resistance, private banks and other investors agreed at a crunch summit in Brussels last week to write off 50 per cent of what its government owes.
The agreement was aimed at cutting Greek debt from 160 per cent of its earnings to 120 per cent by 2020. Without action, it would have ballooned to 180 per cent.
But the Greek people are furious at being asked to endure years of spending cuts and tax rises. There are increasing calls for the country to leave the euro, refuse to pay its way and reinstate the drachma.
In the Commons, Chancellor George Osborne said there was ‘no doubt’ that Greece’s decision to announce a referendum, slated to take place in January, had added to ‘instability and uncertainty’ in the eurozone.
He added: ‘Now ultimately it’s up to the Greek people and the Greek political system to decide how they make their decisions, but I would say it is extremely important for the eurozone to implement the package that they agreed last week, that is what I said was crucial at the time, that’s what they all said was crucial at the time and I think we need to get on with it sooner rather than later.’
Labour peer Lord Soley said: ‘When the history of this period is written it may well be that the Greek decision will be seen as the economic equivalent of the assassination of Archduke Ferdinand at Sarajevo in 1914. It will trigger events way beyond the borders of Greece or even Europe.’
Stock markets around the world crumbled yesterday as the eurozone lurched towards financial catastrophe. The FTSE 100 index fell more than two per cent in London – down 122.65 to 5421.57 – wiping £32billion off the value of Britain’s blue chip firms.
But there were far more punishing losses on the Continent, with shares in Italy and Greece down nearly seven per cent on a day of carnage on the financial markets. The Paris stock market lost 5.38 per cent, Frankfurt tumbled five per cent and the euro fell around 1.5 per cent against the U.S. dollar.
Shares in French banks were the worst hit on fears over their exposure to Greek debt. If Athens defaults, lenders in France look set to bear the greatest losses. One, Societe Generale, fell more than 16 per cent.
British banks did not escape the bloodbath, with Barclays losing 9.5 per cent of its value and state-controlled Royal Bank of Scotland down eight per cent.
Borrowing costs in Italy soared again yesterday as the crisis threatened to spread from Athens to Rome.
Lord Adair Turner, head of the UK’s Financial Services Authority, warned that Italy’s towering debts of 120 per cent of GDP present a much bigger threat to Britain’s banks than Greece.

WHY THE GREEKS WOULD SAY 'NO' TO EUROZONE DEAL

• Income tax threshold would be lowered from €12,000 (£10,300) to €5,000 (£4,300)
• Retirement age would be raised from 61 to 65
• VAT would rise from 19 to 23 per cent
• Higher property taxes
• Monthly pensions above €1,000 (£860) would be cut by 20 per cent
• Excise on fuel, cigarettes and alcohol would rise by a third
• To qualify for a full pension people would be required to complete 40 years work
• Retirees aged under 55 would lose 40 per cent of their pensions over €1,000 (£860)
• Public sector wages would be cut by 20 per cent
• Employees of state-owned enterprises would have their wages cut by 30 per cent
• A cap would be introduced on wages and bonuses
• 30,000 civil servants would be suspended on partial pay
• All temporary contracts for public sector workers would be terminated.
• Just one in 10 civil servants retiring this year would be replaced
• New levies on household incomes of between one and five per cent

Enlarge  

Surprise, surprise: Papandreou delivers his announcement to the members of ruling PASOK party's Parliamentary group at the Greek Parliament in Athens

The Mail's Q&A on the Greek crisis

By TIM SHIPMAN

What’s behind the current crisis?

The government of Greek Prime Minister George Papandreou could be on the brink of collapse after calling for a referendum over whether to support a deal thrashed out in Brussels last week to save the euro.  
That would see a 50 per cent write-off of Greek debts and a further £100billion to help the country stay afloat. Papandreou did not even inform Finance Minister Evangelos Venizelos he was going to announce the referendum. Mr Venizelos was yesterday rushed to a clinic with stomach problems after the shock.

Why don’t the Greeks like the deal?

The country has been asked to make billions in cuts. That will lead to serious cuts in public services, higher taxes, a raised pension age and declining real wages for years to come.

A referendum sounds like a good idea. What’s the problem?

Members of the ruling coalition in Greece are concerned that it would amount to an in-out referendum on Greece’s membership of the single currency.

Riot police engulfed in flames during violent clashes in Athens, Greece, on 23 February this year

What happens if they leave the euro?

Economists fear that would lead Greece to default on all its debts, bankrupting European banks owed money by Greece and tip the whole of the EU into a deep recession. British banks are heavily exposed to French and German banks, which could go under if Greece defaults.

Will the government collapse?

Papandreou’s majority was reduced to just two yesterday when members of his ruling coalition defected amid fresh calls for ‘a politically legitimate’ administration. Emergency talks were being held last night.

What happens next?

Papandreou’s critics want him to quit so they can form a government of national unity. That would almost certainly mean plans for a referendum will be scrapped. The new government would be expected to approve the plans or play hardball with Brussels, demanding an even bigger write-off of the nation’s debts.

Could there be a  military coup?

The military ran the country as recently as 1974. Yesterday the government stoked fears of a military takeover by sacking military chiefs. British diplomats said the changes had been planned for some time but were surprised at the inflammatory timing. They did not expect a coup – not least because a military takeover could lead Greece to be ejected from the EU. Other Greeks would like to see the return of King Constantine II, who lives in London and is very close to the British Royal Family.

If Greece pulls out of the euro, what will that mean for the single currency?

Economists think it could kill the euro. After driving out Greece, the markets would be expected to turn on Portugal, Italy, Spain and even France, driving up the price of their debt until they could no longer pay their bills. That could bankrupt their banks and leave governments powerless to help. A worldwide economic meltdown would follow.

Read more:
http://www.dailymail.co.uk/news/article-2055872/Greece-referendum-Crisis-deepens-Greek-National-Defence-chiefs-sacked.html#ixzz1cVvyYJLa

Wall Street stocks plunge as world markets tumble after Greek PM calls for bailout vote and European leaders plan emergency talks

• Greece's George Papandreou in shock referendum call over bailout plan
• Deal is to write off 50% of Greek debt and impose harsh austerity measures
• Dow Jones closes down 300 points, while S&P and Nasdaq both fall 3%
• European and Asian markets also tumble on bad news from Greece
• Merkel and Sarkozy call crisis meeting to push forward with plans
• Meanwhile Greece sacks all its defence chiefs for no clear reason

By Mark Duell
Last updated at 8:52 PM on 1st November 2011

 Wall Street markets suffered huge falls today as fears grow that Europe's plan to save the euro will unravel before it can even kick in.
Greek Premier George Papandreou said he will put Greece's bailout through a referendum, throwing the long-awaited deal into disarray.
Financial markets around the world tumbled in reaction to the shock announcement today and U.S. stocks fell by up to three per cent.

Worrying times: Traders work on the floor of the New York Stock Exchange before the closing bell on Tuesday

Down: James Maguire, left, and Christopher Culhane, right, work on the floor of the New York Stock Exchange

The Dow Jones closed down 295 points, or 2.5 per cent, at 11,660; the S&P 500 was down 35 points, or 2.8 per cent, at 1,218; and the Nasdaq was down 77 points, or 2.9 per cent, at 2,607.
Angela Merkel and Nicolas Sarkozy called a crisis meeting and agreed the Greek decision has made it more necessary than ever to push forward with plans thrashed out during last week's EU summit.
The German and French leaders will meet with the Greek government, the IMF and their European partners tomorrow in Cannes, ahead of a G20 summit, to push forward support for their view.


Read more: http://www.dailymail.co.uk/news/article-2056123/Greece-referendum-Wall-Street-stocks-plunge-Greek-PM-calls-bailout-vote.html#ixzz1cVvKmqgH

Dow Drops on Planned Greek Rescue Vote

Tuesday, 01 Nov 2011 09:37 AM

Stocks tumbled Tuesday after investors were blindsided by a surprise call for a Greek referendum on an EU bailout plan, casting doubt on the sustainability of the recent market rally.

The S&P 500 has slid more than 5 percent so far this week in moves reminiscent of the stomach-churning market swings seen over the past two months and after investors thought the worst of the euro zone debt crisis was over.

The speedy pullback comes after stocks rebounded to post their best month in 20 years in October. The gains were fueled by hope for an eventual deal to rescue Greece, finally agreed upon at last week's European Union summit.

"The fact that we gave it back as quick as we did in two days is very concerning," said Ari Wald, an analyst at Brown Brothers Harriman.

"It looks very much as though it was a lot of short-covering, a lot of bears found themselves on the wrong side of the trade," he said of the October rally.

Analysts said if Greek voters reject the unpopular bailout in a vote proposed by Greek Premier George Papandreou, it would likely result in a "hard default" by Greece, causing bigger losses for banks and raising the threat of systemic risk.

The news slammed European stocks, particularly the region's banks , which slumped 6 percent. U.S. banks were also hit hard. Morgan Stanley, which investors worry has heavy exposure to Europe, fell 8 percent to $16.23.

Indexes swung sharply as successive European lawmakers lined up behind the bailout package but returned to close near session lows after a Greek government spokesman said the prime minister told his cabinet the referendum would go ahead.

The Dow Jones industrial average fell 297.05 points, or 2.48 percent, at 11,657.96. The Standard & Poor's 500 Index lost 35.02 points, or 2.79 percent, at 1,218.28. The Nasdaq Composite Index dropped 77.45 points, or 2.89 percent, at 2,606.96.

The selloff came on sharp spike in volume with 10.3 billion shares traded on the NYSE, the Amex, and the Nasdaq, 22 percent above its 20-day moving average, while the CBOE volatility index jumped 16 percent to 34.77, its highest since around mid-October.

Nearly six stocks fell on the NYSE for every one that rose.

Adding to the gloom, factory activity in Asia's big export economies slowed to the weakest rate in nearly three years in October, while UK manufacturing suffered a sharp decline, reigniting fears of a global slowdown.

The S&P 500 traded below its 14-day moving average for the first time since Oct. 7, pointing to a possible shift in short-term momentum. The benchmark also broke through support at 1,220.

Wald said the S&P 500's 50-day moving average was now key support on the downside.

"You have got to cut it short at that 50-day moving average," he said. "If we can't hold the 50-day, which is around 1,190, it wouldn't be a very good technical picture."

Economic data showed the pace of growth in the U.S. manufacturing sector slowed in October, though improvement in new orders suggested resiliency in the sector.

"If we can keep Europe out of the headlines and Washington out of the headlines and just focus on the economic data and the corporate data we'd be in great shape," said John Canally, investment strategist and economist for LPL Financial in Boston.

In a move that put further pressure on commodity prices, Japan vowed to step into foreign exchange markets again. The government sold a record $98.7 billion on Monday in yen to curb its strength, which is hurting Japan's export-based economy.

The U.S. dollar index rose 1.5 percent. U.S. oil futures settled 1.07 percent down at $92.19, and copper prices fell 3 percent. Many commodities are priced in the greenback, making a spike in dollar prices more expensive for traders in other currencies and saps demand.

Read more: Dow Drops on Planned Greek Rescue Vote
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