US austerity? US 'fiscal cliff' would trigger cuts of up to 5.1% GDP

 

US debt clock (Alex Wong/Getty Images/AFP)

Source: Russia Today

http://rt.com/business/news/usa-debt-ceiling-opinion-798/

As US public debt is about to rise over the limit of $16.39 trillion, analysts warn of the drastic damage it could create. Should the debt limit remain unchanged, the US economy will have to suffer austerity measures worth around $804.5 billion.

The debt held by the public skyrocketed to about 102% of the US GDP in 3Q 2012. The ratio was higher only once in the US economic history – in 1945 when it reached 113% of GDP.Meanwhile, a new so-called “debt ceiling”, that was last raised by Congress in January 2012 to $16.394trln, seems to be not high enough, as the figures show that the room for further borrowing is becoming increasingly narrower.

Earlier this week the US Treasury said the country was set to hit the debt limit by the end of the year. Meanwhile the Treasury has continued to unveil borrowing plans that include massive bond issues, which will inevitably drive the US economy deeper into debt.

If the US Congress does not raise the debt ceiling in the next few months, it would result in an “onset of austerity measures worth 5.1% of American GDP,” or $804.5bn, Margaret Bogenrief from ACM Partners told Business RT.

“The world currently sits on the precipice of a debt cliff – the rate of debt growth for the United States is, economically, unsustainable and must be curbed within the next 5 years,” added Bogenrief. A combination of increased taxes and limited spending would pave the way out of the debt hole for the US, the ACM Partners expert added.

While the need to curb the extravagance of the US – a nation of debt lovers – is clear, a collision of the economic and political reasoning is now one of the main stumbling blocks, according to Bogenrief. Economically, continued growth of US debt will keep on weighing down and destabilizing the American economy. But politically, lower Government spending and higher taxes would not be popular among US citizens.

Also, there’s “a collision between what Americans say they want versus what they prefer in reality – it’s easy to say we need to cut spending and raise taxes – as long as we cut spending allocated to other people while raising other people’s taxes,” Bogenrief concluded.

While allowing a broader opportunity for increased consumption, excessive borrowing can pose a real economic threat long term, Max Wolff, a NYC-based economist, added to Business RT.

“Consistent US debt growth is a short term boom to the US and global economies. It allows greater growth and demand now in exchange for increased financial fragility and lowered growth and demand in the future. This is the essenece of debt. Debt moves purchasing power through time. It is sustainable when it pays for greater growth in incomes in the future. If this fails, it is very dangerous,” the economist explained.

“Some amount of borrowing is necessary for any industrialized economy. For the past four years, however, the United States has averaged $1trln +in annual deficits – the growth in debt is unprecedented in American history, unsustainable, and has no easy answer in sight,” Bogenrief concluded.

 

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Greek police, firefighters, coast guards, medics protest against cuts

 

Greek police officers, firefighters, and coast guards protest outside parliament during an anti-austerity demonstration in central Athens on November 1, 2012.

Source: Press TV

http://www.presstv.ir/detail/2012/11/01/269989/1000s-of-greeks-hold-demo-against-cuts/

Thousands of Greek police officers, coast guards, firefighters, and medical professionals have held demonstrations to protest against the government’s austerity measures.

The protesters took to the streets in the capital Athens on Thursday, Reuters reported.

Thousands of police officers and coast guards from various Greek regions marched to parliament to protest against salary cuts expected to be included in a new austerity bill.

Next week, Greek Finance Minister Yannis Stournaras is likely to send the parliament a bill of labor reforms, which includes the officers' salary cuts.

In protest to the cuts, the police officers and the coast guards also handed out bowls of bean soup to the needy.

"[We say] 'No' to modern slavery. Our rage is overflowing. They lied to us again; those pre-election promises became dust after the elections, and will lead us to new medieval times," said Dimitris Sarantakis, the president of the Panhellenic Coast Guard Officers' Federation.

"Even if these measures pass the way they have arranged them, we will overturn them because we have not only reached our limits, we have now surpassed our limits," said Dimitris Vogiatzis, the president of the Police Officers' Federation.

A large number of Greek firefighters chanting anti-austerity slogans also marched on the parliament.

Earlier in the day, public hospital staff including doctors, nurses and ambulance drivers, walked off the job and staged a demonstration outside Greek Health Ministry headquarters. They said austerity cuts have weakened citizens' health and made their jobs more difficult.

They carried banners reading, "Austerity measures are bad for your health" and "Free public health care for all".

Greece has been at the epicenter of the eurozone debt crisis and is experiencing its fifth year of recession, while harsh austerity measures have left about half a million people without jobs.

One in every five Greek workers is currently unemployed, banks are in a shaky position, and pensions and salaries have been slashed by up to 40 percent.

Greek youths have also been badly affected, and more than half of them are unemployed.

The long-drawn-out eurozone debt crisis, which began in Greece in late 2009 and reached Italy, Spain, and France in 2011, is viewed as a threat not only to Europe but also to many of the world’s other developed economies.

Also on Thursday, a Greek court ruled that some of the spending cuts needed to secure more bailout funds for the near-bankrupt country are unconstitutional.

The Court of Auditors, which examines Greek laws before they are presented to parliament, said planned austerity measures such as raising the age of retirement to 67 and reducing pensions by 5 to 10 percent, could be against the constitution.

The court said the pension cuts for a fifth time since May 2010 violated many constitutional provisions, including the principles of individual dignity and equality before the law.

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Greek journalist arrested over exposing politicians' alleged tax evasion

 

The president of Greece's Association of Judges and Public Prosecutors Vassiliki Thanou-Christophilou (R) attends a meeting of Greek judges at the supreme courthouse in Athens (AFP Photo / Aris Messinis)

Source: Russia Today

http://rt.com/news/greece-officials-swiss-accounts-journalist-warrant-407/

Greek police have arrested one of the country’s top journalists, after his publication Hot Doc released the so-called 'Lagarde list,' containing the names of some 2,000 Greeks with funds hidden in Swiss bank accounts.

The police arrested Kostas Vaxevanis, the owner and editor of Hot Doc, during a live radio interview on Sunday. “They're entering my house with the prosecutor right now. They are arresting me. Spread the word,” Vaxevanis tweeted.

He is due to appear in court on Monday to answer charges of privacy violations from publishing the list of names, which dates to 2007. “Instead of arresting the tax evaders and the ministers who had the list in their hands, they are trying to arrest the truth and free journalism,” Vaxevanis said in an interview.

The speaker of the Greek Parliament, several Finance Ministry employees and a number of business leaders all reportedly had Swiss HSBC bank accounts.

The Hot Doc article revealed that data matched that of Christine Lagarde, the former French finance minister who in 2010 provided her Greek counterpart a list of names of those alleged to have large sums of money stashed away in Swiss banks.

Citing privacy concerns for individuals on the list, Hot Doc said it had redacted exact bank balance figures, but added that some accounts contained as much as 500 million euros.

The Greek government took no action at the emergence of the first 'Lagarde list.' Tax evasion has become a hotly contested issue, as the country’s parliament is expected to vote on a new 13.5 billion euro austerity package that most Greeks oppose.

On Friday, the office of former Prime Minister George Papandreou denied accusations that he knew about the list, after a member of the opposition Syriza party asserted that Papandreou had helped arrange a meeting with the chief of the Geneva HSBC branch when he was in power.

Last week, former Finance Minister George Papaconstantinou said that he had asked the country’s financial crimes unit to investigate about 20 Greeks suspected of maintaining large holdings in Geneva, after French authorities forwarded him the list in 2010. He also claimed that the Finance Ministry’s legal adviser had told him that using the list as evidence was problematic, since an HSBC employee had illegally leaked it.

International lenders have long insisted that Greece investigate those suspected of tax evasion before the country be deemed eligible for further bailouts.

The Hot Doc report did not make specific accusations of money laundering. The publication pointed out that it was legal to own a Swiss bank account, but implied that the Greek government has done little to investigate the matter.

Giorgos Voulgarakis, the speaker of parliament from Mr. Samaras’s center-right New Democracy Party, was quick to deny the accusations and responded by accusing Hot Doc of slander. According to the magazine, Voulgarakis’ HSBC deposits dating back to 2003 are not on the speaker’s tax declarations.

A massive social media campaign is now underway asking that all charges against Vaxevanis for his role in the 'Lagarde list' leak be dropped.

­‘Tax immunity for Greece’s rich’

­The leading investigative reporter in Greece had been arrested for “effectively serving the public interest,” Yanis Varoufakis, professor of Economics at the University of Athens, told RT.

He says Greek politicians are not keen to expose corruption as the country’s political and business elite have historically been intertwined.

“Let’s not beat about the bush. The great problem with tax evasion in Greece…it is one of the reasons that Greece is being portrayed internationally as a corrupt country, and Greeks on the streets who pay their taxes, work very hard and are suffering are incensed at how they are portrayed internationally,” Varoufakis said.

“The fact is that for the last 30-40 years, the rich in Greece has enjoyed a kind of tax immunity. They’re not really tax evaders, they’re immune from tax because of the cozy relationship that they have with politicians who legislate in a way that makes that tax immunity,” he continued.

He argues that this conflict of interest has made Greek politicians more interested in covering up tax evasion than exposing it.

“Look, for three years now during this crisis while austerity is being imposed, the vast majority of workers have no alternative but to pay their taxes. Politicians of the major parties are pointing moralizing fingers at the weak members of Greek society saying ‘oh, you have not been paying your taxes, you’re a tax evader, this is why we are in such a terrible state.’ So now that the truth is coming about their tax evasion, the fact that tax evasion is played very skillfully by the rich, as it has been done for 30-40 years, now their particularly keen to be idle in the face of such a list.”

Watch the full interview with Yanis Varoufakis on RT

Video coming soon!

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Troika proposes 150 new reforms for devastated Greece - report

 

Demonstrators shout slogans during a demonstration against the government’s austerity measures in central Athens. (AFP Photo / Aris Messinis)

Source: Russia Today

http://rt.com/news/troika-greece-new-reforms-435/

While Greece claims the deal on its new rescue package is nearly final, the troika will reportedly require the country to implement 150 new reforms within two years.

­The reform proposals by the European Commission, the European Central Bank and the International Monetary Fund – which comprise the so-called “troika” – include loosening of hiring-and-firing laws, changing minimum wage rules and abolishing professional privileges, Germany’s Spiegel reports.

To control the implementation of the reforms, the troika proposes keeping bailout tranches in a special frozen account, releasing them only after the reforms are introduced.

The report also suggested that the troika proposed a debt restructuring, meaning that creditors would write off some of their Greek debt holdings, along with a two-year delay for budgetary consolidation.

German Finance Minister Wolfgang Schaeuble sharply criticized the idea, saying "that is a discussion which has little to do with the reality in the member states of the eurozone.”

He suggested, however, that Greece buy back some of its debt at discounted prices, Spiegel reported.

Private investors agreed to write off almost all of their Greek debt as part of a second bailout package, put together earlier this year.

Meanwhile, so-called "official sector" bondholders, including other eurozone countries, are still clinging to their share of Greek bonds.

The European Central Bank made it clear it would not write off its share of Greek debt, as this would mean financing Greece – which is forbidden, the report says.

Athens is looking forward to a €31.2 billion tranche from its current bailout package. Otherwise, the country may go bust as early as the end of November, according to Prime Minister Antonis Samaras.

Last week Finance Minister Yannis Stournaras asserted that almost all the conditions of the new deal had been agreed upon, saying the parties were still to discuss labor reforms and measures to reform products and services markets.

Earlier he had agreed to cut €6.5 billion in wages, pensions and benefits and to save €1.5 billion from reforms to the public sector. Some reports also said the pension age would be raised by two years, bringing it to 67, a move that would save Greece another $1 billion.

 

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'Democracy kidnapped!' Spanish protesters surround Congress in Madrid



Source Video: Russia Today

http://www.youtube.com/watch?v=0OXXe9B9THo

Spain's "indignant" protesters take part in a demonstration to decry an economic crisis they say has "kidnapped" democracy, on September 25, 2012 in Madrid. (AFP Photo / Dominique Faget)

Source: Russia Today

http://rt.com/news/spain-protests-parliament-crisis-942/

Thousands of activists have begun to congregate in Madrid’s Plaza de Neptune, 100 meters from the Congress building, to protest Spanish austerity measures. The demonstrators pledged to march around the building, and called for new elections.

Watch the protests LIVE

Demonstrators waved banners with the slogan ‘No’ written on them, in reference to the austerity policies of the Spanish government, but so far the protest has been peaceful.

Protesters said that today is a key day to level criticism against politicians and the Spanish government. The city stationed armored police vehicles bumper-to-bumper around the parliament building, and announced that around 1,300 police would be deployed to counter the protesters.

The organizers of the protest dubbed their movement ‘Surround Congress,’ and expressed hopes that thousands would turn out. The protestors called themselves ‘indignants’ and claimed that their democracy had been ‘kidnapped,’ calling for new elections and rallies against the austerity measures enacted by Mariano Rajoy’s government.

Some 200 demonstrators gathered near the city’s main railway station chanting “Rescue democracy,” and “This is not a crisis, it’s a swindle.”

Carmen Rivero – a 40-year old photographer who travelled overnight by bus from the southern city of Granada – said, “We think this is an illegal government. We want the parliament to be dissolved, a referendum and a constituent assembly so that the people can have a say in everything.”

Another 100 protesters were scattered across the city’s main square, the Plaza de Espana.

“This is not a real democracy. This is a democracy kidnapped by the parties in collaboration with the economic powers and the people have no say in it,” said Romula Barnares, a 40-year-old artist wearing sunglasses with a dollar sign on one lens and a euro sign on another.

But Miguel-anxo Murado, a journalist and writer, told RT that he thought their demands are too vague and that they would not be successful, “it seems that they are back with the same very vague and ambitious platform and in-fact they have been over shadowed by a different constitutional challenge, which is for the independence movement in Catalonia, which is more likely to change the constitution, although in a different way, so I’m afraid they will probably not have a huge success today.”

Spain is in the middle of its second recession in two years, and faces a 25 percent unemployment rate.

Madrid introduced the controversial austerity measures in a gesture meant to show that it intends to fix its debt and budgetary shortfalls. The European Central Bank granted Spain a 100 billion euro rescue loan for its banks, but the country has not decided whether to seek another bailout.

Europe’s financial leaders are pleading for Spain to reduce volatility in its markets by deciding whether or not to request the second loan.

During a September 15 protest, waves of some 50,000 anti-austerity demonstrators converged in downtown Madrid, blowing whistles and hoisting banners that read, “They are destroying the country, we must stop them.” Representatives from over 230 civic and professional organizations also turned out amid cries of “lies,” and “enough.”

 

People gather at the Plaza Espana square before taking part in a demonstration organized by "indignant" protesters to decry an economic crisis they say has "kidnapped" democracy, on September 25, 2012 in Madrid. (AFP Photo / Dominique Faget

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