Will China Make the Yuan a Gold-Backed Currency?

Source: Global Research
http://www.globalresearch.ca/index.php?context=va&aid=30978

If China Backs Its Currency with Gold, It Could Have Profound Effects for Investors … and Consumers. - Larry Edelson – writes today:

I know for a fact that Beijing wants its yuan to eventually become a gold-backed currency, much like the Swiss franc was originally. Backing the yuan with some gold will certainly help it become a major international currency.

Edelson is a financial adviser who travels frequently to Asia, a former high-volume gold trader who is interviewed a lot in the mainstream financial media.

I have no idea whether Edelson is right or not. But he’s not the first to make the claim.

Doug Casey says that if one country – such as China – switches to a gold-backed currency, the dollar will be toast:

All it will take for the world to realize that U.S. dollars are nothing more than hot potatoes is for one country (Doug postulated that maybe China would be first) to introduce a gold-backed currency. If China introduced a gold-backed yuan, for example, who on earth would want anything to do with U.S. dollars?

Similarly, Safe Haven points out:

Suppose a large exporter, such as China, which undervalues its currency and runs a large trade surplus as a result, takes a huge radical step and goes all the way to a 100%-reserve gold currency. The ultimate hard currency. If this succeeds, China is the new England – the financial capital of the world, forever. Everyone else’s money? In a word: pesos. Hard currency is Chinese currency. China’s natural supremacy over the barbarian kingdoms of the West is restored.

Goldcore argues:

China is clearly trying to position the yuan or renminbi as the alternative global reserve currency. The Chinese likely realize that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tones.

World Bank President Robert Zoellick recently mooted the possibility of a return to some form of gold standard. It seems extremely likely that senior and influential Chinese policy makers, bankers and government officials may be having similar thoughts.

Simit Patel writes:

China’s central bank continues to aggressively accumulate gold. Is this a setup for making the renminbi a gold-backed currency? Many have speculated that this is the game plan. Certainly a currency that is gold-backed will have appeal as a reserve currency capable of storing wealth; indeed, the reason why the US was able to position itself as a reserve currency is largely because it was once pegged to gold.

MaxKeiser says:

China is clearly trying to position the yuan or renminbi as the alternative global reserve currency. The Chinese likely realize that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tones. China is the sixth largest holder of gold reserves in the world today and officially has reserves of 1054.1 tones which is less than half those of even Euro debtor nations France and Italy who are believed to have 2,435.4 and 2,451.8 tones respectively.

[This] game theory article is great because it points out that China does not need to amass a gold stock similar to the US, it can simply go to a gold standard now and effect a simultaneous devaluation against the dollar (as game theory dictates that the US and all other CB’s would be forced to follow China’s lead, or risk losing all their capital as investors buy the only gold backed currency in the world).

And Wikileaks noted several reasons for China’s stocking up on gold. ZeroHedge summarizes:

As the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar’s reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24-karat pool. The only thing that matters from China’s perspective is that “suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.” Now, what would happen if mutual and pension funds finally comprehend they are massively under invested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold…

From Wikileaks:

3. CHINA’S GOLD RESERVES

“China increases its gold reserves in order to kill two birds with one stone”

“The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): “According to China’s National Foreign Exchanges Administration China ‘s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB”.

S&P downgrades Greece's sovereign credit rating to selective default

Source: Press TV
http://www.presstv.ir/detail/229011.html

Standard & Poor's Ratings Services has downgraded Greece’s sovereign credit rating to 'selective default' in response to the country’s decision to involve the private sector in its comprehensive debt restructuring.

Greece’s move “constitutes the launch of what we consider to be a distressed debt restructuring,” the US ratings agency said on Monday.

Greece has become the first eurozone member in its 13-year history to be officially rated in default, down from its previous rating of ‘CC’.

However, S&P said that once the debt swap is concluded, it will likely raise Greece's sovereign credit rating to the 'CCC' category.

Greece has negotiated the biggest debt restructuring in history as it seeks to reduce national debt to 120 percent of gross domestic product by 2020, from 160 percent last year, and to meet the terms of a 130-billion-euro ($170 billion) international bailout.

The private sector involvement entails a “debt swap” which aims to slice 100 billion euros off more than 200 billion euros of privately held debt if all investors participate.

The Greek government said the move was expected and would not hurt the banking industry.

"This rating does not have any impact on the Greek banking system since any likely effect on liquidity has already been dealt with by the Bank of Greece," the Greek Finance Ministry said in a statement issued on Monday.

Greece has the highest debt burden in proportion to the size of its economy in the 17-nation eurozone. Despite austerity measures and the bailout funds, the country has been in recession since 2009.

German parliament approves second Greek bailout

German Chancellor Angela Merkel (C) casts her ballot during a session at the Bundestag in Berlin on February 27, 2012

Source: Press TV
http://www.presstv.ir/detail/228993.html

The German parliament has overwhelmingly approved the second bailout package for Greece to help the heavily indebted country stabilize and avert bankruptcy.

On Monday, German MPs voted 496 to 90, with five abstentions, to approve the 130-billion-euro (174.4-billion-dollar) rescue package.

Just before the vote, Chancellor Angela Merkel addressed the Bundestag, or lower house of parliament, warning the lawmakers of the consequences of not coming to Greece's aid.

"The risks of turning away from Greece now are incalculable," Merkel told the 591 MPs of the Bundestag.

"No one can assess what consequences would arise for the German economy, on Italy, Spain, the eurozone as a whole and finally for the whole world,” she added.

The parliament was certain to back the motion after two opposition parties -- the Social Democrats (SPD) and Greens -- said they would support the plan.

Despite the motion's approval, German skepticism about Greece remains.

"The Bundestag will in the foreseeable future be dealing with a third (rescue) package for Greece," said SPD member Peer Steinbrueck, a former finance minister, adding that only strong economic growth would stabilize Greece.

German Interior Minister Hans-Peter Friedrich has openly called for Greece to leave the eurozone, saying it would have a better chance to make its economy competitive if it was outside the monetary union.

According to an opinion poll released on Sunday, 62 percent of Germans opposed the new rescue package for Greece.

The poll was conducted by the Emnid institute for the newspaper Bild am Sonntag.

Eurozone ministers agree on 2nd bailout package for Greece

Eurozone finance ministers talk while attending a Eurogroup meeting at the European Union council headquarters, Brussels, February 20, 2012

Source: Press TV
http://www.presstv.ir/detail/227785.html

Eurozone finance ministers have agreed to provide Greece with a new bailout package to help the heavily indebted country stabilize its debt-to-GDP ratio and avert looming bankruptcy.

The long-awaited package worth 130 billion euros was sealed in Brussels on Tuesday morning after more than 12 hours of intensive negotiations.

The rescue loan is meant to bring down Greece’s debt to 120.5 percent of its gross domestic product (GDP) by 2020.

Eurozone officials had on Monday expressed concerns over how Athens could manage to reduce its debt, while imposing harsher austerity measures.

The deal, however, was vital for Greece’s coalition government to pay off a 14.5-billion-euro bond redemption payment on March 20. Athens risked going bankrupt without the rescue package as it did not have the necessary funds to make the payment.

Greece had earlier in the month approved the austerity cuts demanded by the troika of the European Union, the European Central Bank and the International Monetary Fund, which was required in order to unlock the new bailout package.

The cuts include a 22-percent reduction in the minimum wage, 150,000 civil service layoffs, and a 15-percent cut in supplementary pensions.

The announcement of the austerity measures caused days of violent demonstrations in Athens that led to tens of people being injured, more than 100 shops being looted and a number of buildings being set on fire.

Greece also implemented harsh austerity measures in return for a first 110-billion-euro bailout package received in 2010. Greeks have been turning up on the streets for anti-government demonstrations on numerous occasions since the austerity cuts were first implemented in early 2011.

The country has been in recession since 2009, despite the austerity cuts and the bailout funds, which are meant to stimulate growth for its troubled economy.

Greece’s debt stood at 161.7 percent of the GDP in 2011, which is the highest debt ratio in the eurozone. Moreover, the country witnessed its economy contracting by 7.0 percent in the fourth quarter of 2011. Unemployment currently stands at 20.9 percent in the European state. The Standard & Poor's credit rating agency rates Greece at CC, which is almost comparable to a default.

Eurozone states must go back to national currencies: analyst

Source: Press TV
http://www.presstv.ir/detail/226277.html

European states “dump the euro system” and go back to sovereign national currency to resolve the financial crisis that has for months engulfed the eurozone, a prominent analyst tells Press TV.

“The only way out is to, for these countries to dump the euro, go back to their national currency as they had before and then adopt a two-tier credit system of productive credit for real production and a Glass Steagall standard as it was in the United States,” Edward Spannaus, editor of the Executive Intelligence Review said in an exclusive interview with Press TV on Saturday.

His remarks coincide with violent clashes and demonstrations in Greece where thousands of people have taken to the streets of Athens to protest against further austerity measures in return for a new EU bailout package for the debt-stricken country.

Hundreds of thousands of people in Portugal have also staged demonstrations in the capital city of Lisbon against the government's economic policies.

Commenting on daily protests against deep spending cuts and austerity measures across Europe, Spannaus reiterated that the “people will be destroyed” if their governments accept austerity measures.

“The bailouts are not for the countries. They are not for the people. They are for the banks, so if they continue on this course these countries and their population will be destroyed,” he added.

This is while the EU and the International Monetary Fund (IMF) say adopting austerity measures is essential to save eurozone countries from a debt default.

In order to qualify for the new bailout, eurozone finance ministers say Greece must pass the new package in parliament, and impose additional spending cuts of 325 million euros this year.

Austerity cuts have been the cause of several anti-government demonstrations in Greece since early 2011. Many of the rallies have at times turned violent, leaving scores of protesters injured.

The Greek public debt currently stands at around EUR 350 billion, more than 160 percent of its gross domestic product.

Despite the austerity cuts and the bailout funds, which have been aimed at stimulating growth for the troubled economy of Greece, the country has been in recession since 2009.

Greek parliament is to vote on new austerity measures

Riot police deploys during a 48-hour general strike in front of the Parliament in Athens on February 10, 2012.

Source: Press TV
http://www.presstv.ir/detail/226293.html

The Greek parliament is set to decide in a matter of hours whether to impose another round of austerity measures on the nation in efforts to win a new EU bailout package.

The Greek Prime Minister Lucas Papademos Cabinet approved the draft bill early on Saturday despite massive public protests and resistance by some cabinet members.

Papademos promised “to do everything necessary” to ensure parliament passes the new controversial austerity measures on Sunday.

"The Greek parliament is asked to take a historic responsibility, examine and authorize the new economic program of Greece, the pre-condition for financing the country over the coming years," he said.

The Greek premier warned of "economic and social catastrophe" if the Parliament does not pass the austerity measures.

The two parties in the ruling coalition, the conservatives and the socialists of PASOK back the measures, but two socialist junior ministers and four members of the far-right LAOS Party quit the cabinet in protest.

Following the resignation of the ministers, Papademos vowed to replace any cabinet ministers that oppose his policies.

Police scuffled with thousands of demonstrators that showed up at Syntagma Square in Athens on Saturday to protest the unpopular austerity measures demanded by the eurozone and International Monetary Fund (IMF) in return for a second bailout package worth 130 billion euros to help the country avoid bankruptcy.

Austerity cuts have been the cause of several anti-government demonstrations in Greece since early 2011. Many of the rallies have at times turned violent, leaving scores of protesters injured.

The Greek public debt currently stands at around EUR 350 billion, more than 160 percent of its gross domestic product.

Despite the austerity cuts and the bailout funds, which have been aimed at stimulating growth for the troubled Greek economy, the country has been in recession since 2009.

Greece bailout talks impasse continues

Greek Finance Minister Evangelos Venizelos speaks to reporters in Athens after a telephone conference with eurozone ministers on February 4, 2012.

Source: Press TV
http://www.presstv.ir/detail/224900.html

Greece has once again failed to reach an agreement with its creditors on major sticking points to receive a multi-billion-dollar bailout package.

On Saturday, Greek Finance Minister Evangelos Venizelos announced that the country's negotiations with the European Union, the European Central Bank, and the International Monetary Fund (IMF) were still at an impasse.

Venizelos said the negotiations with the EU and the IMF were "on a knife edge" but insisted that a deal had to be sealed by Sunday night.

Earlier on Saturday, Venizelos stated that debt inspectors' demands for additional austerity measures were preventing a breakthrough in the talks.

Greece has to make a bond repayment of 14.4 billion euros (about $19 billion) by March 20. Athens cannot afford to make the payment, and the country will go bankrupt without more financial assistance.

Athens is under pressure to cover part of its debt as a precondition for it to receive a new aid package from EU member states and the IMF worth 130 billion euros (about $171 billion).

Meanwhile, the chief executive officer of Germany's biggest lender, Deutsche Bank, said he plans to visit Athens and observed that Europe faced a "make or break" moment on Greece.

On Saturday, Josef Ackermann stated that private investors had been "extremely generous" to Greece by offering "a loss of over 70 percent" on their bond portfolios.

"I can only ask other constituencies to do the same," he added, referring to governments and EU institutions, such as the European Central Bank, that also hold billions of euros in Greek debt.

Ackermann expressed optimism that Europe was emerging from the economic crisis but insisted that the Greek problem must be fixed.

"If we see Greece collapsing, I think we are opening a Pandora's box," he noted.

Greece strives to avoid messy default

Greek Finance Minister Evangelos Venizelos (L) and Greek Prime Minister Lucas Papademos arrive for a joint press conference following a European Union summit at the EU headquarters on January 30, 2012 in Brussels.

Source: Press TV
http://www.presstv.ir/detail/224391.html

The Greek government is frantically looking for the support of all its political leaders in order to implement more stringent austerity measures needed to avoid a disastrous default.

On Wednesday, the government spokesman said Prime Minister Lucas Papademos would meet the conservative, socialist and far-right leaders in a few days to ask them to back his government so it can clinch a deal with international creditors.

"The meeting of the political leaders is crucial," Pantelis Kapsis stated.

The International Monetary Fund (IMF) has warned that the austerity measures are necessary to secure the new bailout package that Athens needs to escape the default.

Later in the day, Athens and IMF officials said negotiations for landmark debt deals would be concluded within days.

Greece is in talks with private creditors to have them take losses on their bondholdings and with its international bailout rescuers to secure new loans.

A deal with private sector creditors to cut Greece's debts by 100 billion euros has almost been concluded, and the government is now racing to complete talks on the 130-billion-euro ($170.18 billion) bailout by the end of the week.

To achieve the bailout package, Athens must first convince the European Union and the IMF that the government will implement long-delayed reforms and make further spending cuts.

Greece's current debts stand at 340 billion euros ($440 billion) -- a sum, which equals around 31,000-euro debt per person in the country of 11 million people. The country has the highest debt burden in proportion to the size of its economy in the entire 17-nation eurozone.

Investors fear a default could mess with the international financial equation and send the global economy into recession.

Greece, creditors fail to broker deal

Greek Prime Minister Lucas Papademos (file photo)

Source: Press TV
http://www.presstv.ir/detail/222269.html

Greece and private bond holders have failed to reach an agreement over a deal that prevents the country from defaulting but lose investors up to 70 percent of the loans they have given to Athens.

Greece's Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met with representatives from banks and financial institutions on Friday, but failed to reach an agreement necessary for the country to avoid bankruptcy.

Athens seeks to strike a deal to cut around 100 billion euros from its debt, which would put the affiliated bankers at a 50 percent loss.

The agreement includes swapping voluntary bond redemptions, equaling EUR 14.5 billion (USD 18.5 billion), which are due in late March.

The deal is needed for the country to unlock a bailout package worth approximately 130 billion euros.

Talks have been planned to resume for a fourth day on Saturday.

Greece's debt stands at EUR 340 billion (USD 440 billion), a sum, which equals around EUR 31,000 debt per person in the country of 11 million people.

The country has the highest debt burden in proportion to the size of its economy in the entire 17-nation eurozone.

Greece, creditors talk to avoid default

Greek Prime Minister Lucas Papademos (file photo). The premier joined the Wednesday talks with the international creditors in an attempt to avoid a default by the country.

Source: Press TV
http://www.presstv.ir/detail/221822.html

Greece and its international creditors have started a new round of talks to avoid a default by the country, with both sides under increasing pressure to work out their differences.

The two sides said little on Wednesday after an over-two-hour-long meeting except that they would meet again on Thursday. Greece has to strike a deal within days to avoid defaulting on the debt when bond redemptions, equaling EUR 14.5 billion (USD 18.5 billion), are due in late March.

Greece's debt stands at EUR 340 billion (USD 440 billion) -- a sum, which equals around EUR 31,000 debt per person in the country of 11 million people. The country has the highest debt burden in proportion to the size of its economy in the entire 17-nation eurozone.

Investors fear a default could mess with the international financial equation and send the global economy into recession.

Greek officials and international bankers have expressed optimism that a deal could be reached in the coming days, despite the fact that talks broke down last week over the issue of the interest rate Greece will offer on new bonds and a plan to enforce investor losses.

An agreement with banks and other institutional investors would open the door to a funding deal from the International Monetary Fund and European lenders and help stabilize the markets within the eurozone.

"They are working hard to breach differences and they will continue tomorrow," said a source close to the talks.

Greece's Prime Minister Lucas Papademos, the country's Finance Minister Evangelos Venizelos, and Charles Dallara, the head of Washington's International Institute of Finance, who is also representing private money lenders at the talks, discussed both the issues.

Italian prime minister steps down

Former Italian Prime Minister Silvio Berlusconi

Source: Press TV
http://www.presstv.ir/detail/209754.html

Italian Prime Minister Silvio Berlusconi has resigned after 17 years of domination in Italy's political scene, as thousands of people gathered in center of the capital to celebrate his departure.

Berlusconi handed his resignation to Italian President Giorgio Napolitano on Saturday night after Italy's lower house of parliament approved a package of austerity measures demanded by the European Union, Reuters reported.

Former European Commissioner Mario Monti is expected to replace Berlusconi.

Berlusconi, 75, has been under immense pressure to step down over a series of scandals as well as for mishandling the country's economy.

Berlusconi's popularity rating recently slipped to a record low of 22 percent as his government was unable to address the financial crisis that has engulfed the eurozone. He also faced legal battles over bribery, tax fraud and abuse of power.

Italy's debt is 120 percent of its gross domestic product. In August the country passed a 60-billion-euro austerity package to balance the budget by 2013.

There is growing fear among the EU leaders that Italy might be drawn into the crisis that has already claimed Greece, Ireland and Portugal.

Crisis in Italy spurs fears of euro zone break-up

A demonstrator waves a flag in front of the Colosseum during a demonstration in Rome, September 6, 2011.

Credit: REUTERS/Remo Casilli

Source: Reuters

http://www.reuters.com/article/2011/11/10/us-eurozone-idUSTRE7A831520111110

(Reuters) - Political and economic crisis in Italy spurred fears of a split in the euro zone with borrowing costs for Europe's third biggest economy near unsustainable levels and the bloc unable to afford a bailout.

The escalating crisis prompted European Commission President Jose Manuel Barroso to issue a stern warning of the dangers of splitting the zone. EU sources told Reuters French and German officials had held discussions on just such a move.

"There cannot be peace and prosperity in the North or in the West of Europe, if there is no peace and prosperity in the South or in the East," Barroso said.

German Chancellor Angela Merkel weighed in with a call to arms. She said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait. "That will mean more Europe, not less Europe," she told a conference in Berlin.

She called for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stays more loosely connected -- a signal that some members may have to quit the euro.

"It is time for a breakthrough to a new Europe," Merkel said. "A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can't survive."

The European Central Bank, the only effective bulwark against market attacks, intervened to buy Italian bonds in large amounts but remained reluctant to go further and Italy's 10-year bond yields shot above 7 percent, a level widely deemed unsustainable, as investor confidence evaporated.

"Financial assistance is not in the cards," one euro zone official said, adding that the bloc was not even considering extending a precautionary credit line to Rome.

POLICY VACUUM

Italy replaced Greece at the center of the crisis as Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government threatened prolonged instability.

Having lost his majority in a parliamentary vote, Berlusconi confirmed he would resign after implementing economic reforms demanded by the European Union, and said Italy must then hold an election in which he would not stand.

He opposed any form of transitional or unity government, which the opposition and many in the markets favor, and said polls were not likely until February, leaving a three-month policy vacuum in which markets could create havoc.

Italian President Giorgio Napolitano said there was no doubt about the resignation of Berlusconi once economic reforms were implemented by parliament within days.

"Therefore, within a short time either a new government will be formed ... or parliament will be dissolved to immediately begin an electoral campaign," Napolitano said.

Even with the exit of a man who came to symbolize scandal and empty promises, it will not be easy for Italy to convince markets it can cut its huge debt, liberalize the labor market, attack tax evasion and boost productivity.

Worries that the debt crisis could be infiltrating the core of the euro zone were reflected in the spread of 10-year French government bonds over their German equivalent blowing out to a euro era high around 140 basis points.

FRUSTRATION

Policymakers outside the euro area kept up pressure for more decisive action to stop the crisis spreading.

Christine Lagarde, head of the International Monetary Fund, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade."

"If we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand."

Berlusconi has reluctantly conceded that the IMF can oversee Italian reform efforts.

Euro zone finance ministers agreed on Monday on a road map for leveraging the 17-nation currency bloc's 440-billion-euro ($600 billion) rescue fund to shield larger economies like Italy and Spain from a possible Greek default.

But there are doubts about the efficacy of those complex plans, and with Italy's debt totaling around 1.9 trillion euros even a larger bailout fund could struggle to cope.

Lagarde said she was hopeful the technical details on boosting the European Financial Stability Fund (EFSF) to around 1 trillion euros would be ready by December.

Many outside Europe are calling on the ECB to take a more active role as other major central banks do in acting as lender of last resort. German opposition to that remains implacable, seeing it as a threat to the central bank's independence.

"The ECB will be drawn like everyone else by the weight of gravity (to act)," one euro zone official said.

"CORE" ZONE DISCUSSED

EU sources told Reuters German and French officials had discussed plans for a radical overhaul of the European Union that would involve establishing a more integrated and potentially smaller euro zone.

The discussions among policymakers in Paris, Berlin and Brussels raise the possibility of one or more countries leaving the zone, while the core pushes to deeper economic integration.

In a speech in Berlin, Barroso said Germany's gross domestic product could contract by 3 percent if the 17-member zone shrank and its economy would shed a million jobs.

"What is more, it would jeopardize the future prosperity of the next generation," he said.

Barroso said any push toward deeper integration should not come at the price of new divisions among EU member states.

GREEK DRAMA

In Greece, a deal on forming a national unity government collapsed as the country headed toward an economic abyss and revived early on Thursday the chances of former European Central Bank vice president Lucas Papademos heading the coalition.

Papademos made his demands for both major parties to back the bailout package, which includes austerity measures that are likely to prove highly unpopular, amid warnings that Europe is running out of patience with Greece and may cut a financial lifeline that the party leaders seem to take for granted.

On a day that was bizarre and chaotic even by Greek political standards, Prime Minister George Papandreou wished his successor well and headed off to meet the president -- only for it to emerge that there was no successor due to feuding in the political parties.

Papademos, whose candidacy had seemed doomed, insisted that both the socialist and conservative parties sign written undertakings to support Greece's 130-billion-euro bailout, as demanded by the European Union, a government source said.

The outgoing prime minister had agreed to the terms laid down by Papademos, who as Bank of Greece governor oversaw the country's adoption of the euro in 2002, the source said.

(Additional reporting by Dina Kyriakidou and Lefteris Papadimas in Athens, Emelia Sithole-Matarise, Kirsten Donovan and William James in London; Writing by Mike Peacock; Editing by Janet McBride and Andrew Roche)

Deal on Greek premier collapses, Papademos re-emerges

Greece's Prime Minister George Papandreou holds an emergency cabinet meeting at the parliament in Athens November 8, 2011.

Credit: Reuters/www.papandreou.gr/Handout

Source: Reuters
http://www.reuters.com/article/2011/11/09/us-greece-idUSL6E7M601O20111109

(Reuters) - A deal on forming a Greek national unity government collapsed as the country headed toward an economic abyss and revived early Thursday the chances of former European Central Bank vice president Lucas Papademos heading the coalition.

Prime Minister George Papandreou said he was handing over to a coalition that does not exist and then failed to install an old-style politician and personal ally as premier.

On a day that was bizarre and chaotic even by Greek political standards, Papandreou wished his successor well and headed off to meet the president -- only for it to emerge that there was no successor due to feuding in the political parties.

Papademos, whose candidacy had seemed doomed, insisted that both the socialist and conservative parties sign written undertakings to support Greece's 130 billion euro ($176 billion) bailout, as demanded by the European Union, a government source said.

The outgoing prime minister had agreed to the terms laid down by Papademos, who as Bank of Greece governor oversaw the country's adoption of the euro in 2002, the source added.

Papademos made his demands for both major parties to back the bailout package, which includes austerity measures that are likely to prove highly unpopular, amid warnings that Europe is running out of patience with Greece and may cut a financial lifeline that the party leaders seem to take for granted.

Stefanos Manos, a former finance minister, said the behavior of Papandreou and conservative leader Antonis Samaras was undermining Greece's future in the euro and risking a possible return to the national currency.

"The Europeans are sick of us. Papandreou and Samaras don't realize they will stop giving us money and we will return to the drachma," said Manos. "They are going to destroy us. These problems demand decision-making. They can't decide on anything and they are fighting like cat and dog."

Greeks and the nation's international lenders have watched in growing horror for three days as party leaders feuded over a shrinking list of credible candidates to lead the national unity coalition after Papandreou's government imploded.

Greece will run out of money next month unless the new government agrees emergency funding with the European Union and International Monetary Fund, Greece's last remaining lenders.

LAST MINUTE SNAGS

Earlier, party sources said senior members of the socialist and conservative camps had settled on the speaker of parliament, veteran socialist Filippos Petsalnikos, as the new prime minister -- barring last-minute snags.

Papandreou then gave an emotional television address, supposed to be his last to the nation as premier, saying this deal had saved country's membership of the euro zone.

"I am proud that, despite the difficulties, we avoided bankruptcy and ensured the country stayed on its feet," he said. "I want to wish the new prime minister success, I will support the new effort with all my strength.

"Today, despite our differences -- political and social differences do exist -- we have put aside our fruitless conflict and disagreement," Papandreou said.

Papandreou and Samaras then began talks with President Karolos Papoulias on the new coalition. However, before leaders of smaller parties could join them to seal the coalition, the meeting was abruptly halted.

But snags had indeed emerged, with large sections of Papandreou's PASOK party and the conservative New Democracy refusing to back Petsalnikos.

Party sources said some lawmakers saw him as a pawn of Papandreou. "We wanted a strong a man who could handle all the economic issues," a socialist lawmaker said. "This candidacy is so close to Papandreou's policies, it does not signal the change the Greek people wanted."

The president's office said a meeting of party leaders would be held at 0800 GMT Thursday, although in the current chaotic atmosphere political talks are often delayed or fail to happen at all.

One of the few things that the parties agreed was that early elections be held on February 19. However, the government sources said that Papademos had also stipulated that the coalition's life could extend beyond that date if necessary.

The next government has much to do. As well as winning parliamentary approval for the bailout, it has to pass the 2012 budget and secure the latest 8 billion euro installment of Greece's original rescue that was pulled together last year, to avoid bankruptcy when big debt repayments come due in December.

For its part, the European Union needs to put out the fire in Greece to prove to international financial markets that it can tackle another blaze in Italy, a far bigger economy also in economic and political crisis.

Some lawmakers backed a return to the earlier plan, which had appeared stalled, of recruiting Papademos to give the new government the credibility that politicians lost long ago.

"The only solution is Papademos. If he accepts by tomorrow morning we will be able to form a strong government that will pull the country out of the crisis," socialist lawmaker Spyros Vougias told Reuters.

Papandreou discussed a Papademos candidacy late Wednesday with Samaras, and urged the conservative leader to contact the former ECB policymaker, a government official said.

GREEKS WANT EUROS - IN CASH

Bank of Greece governor George Provopoulos made a rare intervention in Greek politics Wednesday.

"The uncertainty is hurting the economy and the banking system," Provopoulos told Reuters. "There must be a strong government that will work hard to ensure the country's future in the euro zone."

Greeks have pulled their savings from banks over the past week because of the deepening political crisis and fear of an exit from the euro, banking sources said. [nL6E7M94KI]

They withdrew as much as 5 billion euros -- nearly 3 percent of total deposits -- after Papandreou's shock call last week for a referendum on the euro zone bailout, said one banker, who declined to be named.

"Many people withdrew their money from banks Thursday and Friday and money couriers had a hard time supplying banks with cash to satisfy the emergency demand," said another banking source, who also requested anonymity.

Papandreou provoked uproar with the plan, due to the likelihood voters would have rejected the package, pushing Greece into bankruptcy and casting doubt on its future in the euro. Under intense pressure from home and abroad, he backed down but was forced to make way for the unity coalition.

Many wealthy Greeks moved their money into foreign banks last year as the crisis deepened. Now other people are demanding sometimes large amounts in euro banknotes, fearing that any bank savings might be converted into devalued new drachma if Greece is forced to revert to its national currency.

"We got to the point where customers ordered amounts of up to 600,000 to 700,000 euros in cash to take home -- unbelievable," the first banker said.


(Additional reporting by Harry Papachristou, Lefteris Papdimas, George Georgiopoulos; and Angeliki Koutantou; Writing by David Stamp; Editing by Jon Hemming)

Greek PM wins vote of confidence

Greek Prime Minister George Papandreou

Source: Press TV
http://www.presstv.ir/detail/208440.html

Greek Prime Minister George Papandreou has won a vote of confidence after he promised to hold power-sharing talks.

On Friday, before the vote of confidence, Papandreou gave an address to parliament for more than half an hour, saying that “immediate elections will be catastrophic,” but he would be prepared to negotiate a power-sharing settlement, the state-run BBC reported.

Papandreou said the economic bailout deal for Greece currently on offer by the European Union had to be accepted, and it would be “historically irresponsible” to lose it, though he is “past caring about his power and post.”

“I have been in contact with the (Greek) president and I will visit him tomorrow (Saturday) to inform him of my intentions and that I am moving forward with all the parties for a broader coalition government, and to agree on common goals, a timeframe and people, to agree on its composition and even the head of this coalition,” he stated.

“I therefore ask for a vote of confidence in order to ensure the security of this nation.”

Papandreou shocked his European Union partners last week when he called for a referendum on an EU deal to bail out debt-ridden Greece, but the finance minister confirmed on Friday that a referendum was not going to be held.

World markets were thrown into turmoil after the Greek prime minister's proposal for a referendum.

Germany had said that “a referendum would essentially be a vote on whether Greece wanted to be part of the EU” and that “the stability of the eurozone was more important than Greek membership.”

Eurozone leaders are worried that failure to solve the Greek debt crisis would raise the risk of serious financial instability spreading to other vulnerable economies, particularly Italy.

Since last year, the EU and the International Monetary Fund have provided Greece with two rescue packages worth over $380 billion (283 billion euros) in return for tough austerity measures adopted by Athens.

Greek PM rules out early election

Greek Prime Minister George Papandreou

Source: Press TV
http://www.presstv.ir/detail/195025.html

Greek Prime Minister George Papandreou has ruled out the possibility of an early election amid growing pressure on the government over its handling of the debt and financial crisis.

"We are a democratically elected government and we will certainly honor to the fullest the mandate given to us by the Greek citizens. The citizens want changes, not elections," George Papandreou said in an interview, AFP reported.

Papandreou also ruled out any scenarios of dropping the euro as the country's currency and turning back to the drachma.

"Not only is there not an issue of the country exiting the euro, on the contrary, through this adventure [which] we entered first because of the previous government, the euro will [also] strengthen," he added.

However, Greek opposition group New Democracy was critical of the comments, calling it “childish”.

"Such childish fireworks cannot hide the nakedness of the government whose own deputies ... call for elections. Precisely because they, as well, see the deadlock to which the country was led by Mr. Papandreou,” New Democracy spokesman Yiannis Mihelakis said.

Meanwhile, the European Union and the International Monetary Fund (IMF) began auditing Greece's finances last week to determine if it should receive the sixth tranche of funds under its EU bailout package.

Since last year, the EU and the IMF have granted Greece two rescue packages worth over EUR 269 billion (over USD 380 billion) in return for tough austerity measures.

The measures, which included the cutting of public sector salaries and pensions, increasing taxes and overhauling the pension system, sparked nationwide protests in Greece.

Europe has been vexed by a financial crisis as the 17-nation eurozone has been plunging into the abyss brought on by fissures between strong economies such as Germany, and weaker ones such as Greece, Ireland and Portugal, which risk being engulfed by unprecedented levels of government debt.

EU, IMF audits Greece finances

Greece Finance Minister Evangelos Venizelos

Source: Press TV
http://www.presstv.ir/detail/194565.html

The EU and the International Monetary Fund (IMF) have begun auditing Greece's finances to determine if it should receive the sixth tranche of funds under its EU bailout package.

Greek Finance Minister Evangelos Venizelos will hold talks with EU, IMF and European Central Bank officials mostly to explain the failure of Greece to sell off state assets meant to bring in a revenue of EUR 50 billion by 2015.

Since last year, the EU and the IMF have granted Greece two rescue packages worth over EUR 269 billion (over 380 billion dollars), in return for tough austerity measures.

The measures, which included the cutting of public sector salaries and pensions, increasing taxes and overhauling the pension system, sparked nationwide protests in Greece.

The protests turned violent at times, leaving scores of protesters and security forces injured.

The bailout funds will be given to Greece in installments following regular audits. About EUR 65 billion has already been disbursed.

Europe has been vexed by financial crisis as the 17-nation euro zone has been plunging into the abyss brought on by fissures between strong economies such as Germany, and weaker ones such as Greece, Ireland and Portugal, which risk being engulfed by unprecedented levels of government debt.

So far, Greece, Ireland and Portugal have received bailout packages from the European Union.

Greece jobless rate continues to rise

Unemployment rate in Greece has hit 16.6 percent

Source: Press TV
http://www.presstv.ir/detail/193479.html

The unemployment rate in debt ridden Greece has continued to rise, having peaked at 16.6 percent in May, as the government austerity measures continue burdening the Greek.

The Greek unemployment rate was up 4.6 percent in April compared to the same period a year earlier, the Greek statistical service ELSTAT reported on Thursday

The jobless rate continues its upward path as the country struggles with a severe debt crisis.

The unemployment rate for May has been the highest the Greek statistics agency has recorded since it first began officially releasing these figures in 2004.

Young people aged 15 to 24 have been badly hit with an unemployment rate of 40.1 percent, which, for the same age group, stood at 32.5 percent the year before.

This comes as the introduction of a second bailout plan has only resulted in harsher austerity measures by the government, which aims to decrease the 2011 budget deficit by EUR 6.5 billion.

The measures, which included the cutting of public sector salaries and pensions, increasing taxes and overhauling the pension system, sparked nationwide protests in Greece.

The protests turned violent at times, leaving scores of protesters and security forces injured.

Greece received a EUR 110 billion EU-IMF bailout loan last year, as it faced a massive debt crisis but did not manage to resolve its financial problems. Greece has a debt of over EUR 300 billion.

Analysts at the Bank of Greece, the country's central bank, predicted that the Greek economy will shrink by 4 percent for the fiscal year 2011.

'Greece close to missing deficit targets'

Greek Finance Minister Giorgos Papakonstantinou

Source: Press TV
http://www.presstv.ir/detail/192415.html

Greece is nearing failure to reduce this year's deficit in exchange for the two gigantic bailouts it has received, despite agreement with the European Union and the International Monetary Fund (IMF).

The Greek deficit has risen to 14.69 euros mainly because of the county's health and social fund debt, marking the depth of Greece's economic turmoil, AFP quoted Greek Finance Minister Giorgos Papakonstantinou as saying on Thursday.

Since last year, the EU and the IMF have granted Greece two rescue packages worth over 269 billion euros (over 380 billion dollars), in return for tough austerity measures and de-regulations within different labor sectors.

Greece agreed with creditors on a public deficit of 16.68 billion euros (about 23. 5 billion dollars) by the end of 2011, or 7.4 percent of output.

Total costs in Greece were nearly 65 billion euros in the first half of the year compared to 54.8 billion euros a month earlier, while state revenue increased from 42.2 billion to 50.3 billion euros.

Due to the “worse-than-expected recession,” Greece has already missed its goals to bring its deficit down to even near-desirable levels, Greek officials say.

Now it has come to local councils, hospitals, social security funds, and other organizations providing public service to suffer from the tough measures of the Greek government's spending cuts policy, in addition to the implementation of higher taxes and sell-offs, the austerity plan that aims at cutting over 28 billion euros (40 billion dollars).

Moody's credit rating agency has "downgraded Greece's local and foreign currency bond ratings to 'Ca' from 'Caa1' and has assigned a developing outlook to the ratings," the agency said in a statement on 25 July.

"The announced EU program along with the Institute of International Finance's statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," according to the statement.

Concerns are mounting in Europe over the possibility of a Greek-style financial crisis as angry protestors in Greece have many times taken to the streets in huge numbers, mainly claiming that the government's austerity measures affect the country's lower-income families the worst.

Thousand of Spaniards March to Madrid

Spanish protesters gather in Madrid on Sunday, July 24, 2011

Source: Press TV
http://www.presstv.ir/detail/190588.html

Thousands of Spaniards have gathered in Madrid after spending a month marching from across the country to the capital in protest at the government's handling of the economic crisis.

The movement started in May, as the government's austerity measures came into effect to tackle budget deficits.

The demonstration, also known as the May 15th revolution, was organized on social networks.

Young demonstrators began camping at Sol, one of Madrid's busiest squares on May 15, in a protest that lasted three weeks. At the same time, similar actions were initiated across Spain and Europe.

The marchers set off from Barcelona and Bilbao in the north, Valencia in the east and Cadiz in the southwest on June 25. They were joined by other people angered by Spain's troubled economy, Associated Press reported.

Several dozen demonstrators stopped outside Prime Minister Jose Luis Rodriguez Zapatero's official residence just north of Madrid.

Unemployment has risen to 20% in Spain, reaching the highest in the 17 nation Eurozone, and many fear the number will hike in the future,

The Eurozone plunged into a financial crisis in early 2010, as the specter of insolvency threatened heavily debt-ridden countries such as Greece, Portugal, Italy, Ireland and Spain.

Eurozone approves new Greek bailout

Greece's Prime Minister George Papandreou (L), European Council President Herman Van Rompuy (C) and European Commission President Jose Manuel Barroso (R) shake hands after a joint news conference at the end of a summit in Brussels July 21, 2011.

Source: Press TV
http://www.presstv.ir/detail/190176.html

Leaders of the 17-member eurozone, alongside the private sector, have agreed on a new bailout package worth about 159 billion euros for Greece to stop debt contagion across Europe.

The leaders decided on the new rescue package -- which reduces the country's debt by one-forth -- in an emergency summit in Brussels on Thursday.

According to a statement released after the summit, Greece will receive a bailout package of 109 billion euros from the eurozone countries and the International Monetary Fund (IMF), in addition to 49.6 billion euros the debt-laden country expects to receive from the private sector, AFP reported.

Fearing that the economic crisis in Greece might affect other member countries, eurozone leaders agreed that the country needed an "exceptional and unique" solution and, as such, voluntary private sector involvement would be allowed in the eurozone area, but this will be fully “limited to Greece.”

Greece was accepted into the Economic and Monetary Union of the European Union by the European Council on 19 June 2000, based on a number of criteria using 1999 as the reference year. By the end of 2009, the Greek economy faced the highest budget deficit and government debt to GDP ratios in the EU, which together with rising debt levels led to rising borrowing costs, resulting in a severe economic crisis.