Another day of posturing in Europe.
Greece is in depression and insolvent.
As long as the bailouts are loans used to pay interest on other loans the debt grows exponentially. It is not payable now and will be less so in the future.
The ECB by treaty cannot inflate the currency.
The well understood economic mechanism makes inflation almost impossible under these conditions.
The trauma of Bruning is buried in histories the Powerful of Europe will not read. http://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning
Mussolini was displayed on a meat hook.
http://www.bloomberg.com/news/2012-08-08/greece-s-power-generator-tests-euro-fitness-amid-blackout-threat.html
"In the mountains of northern Greece lies an $800 million power plant whose future may help determine whether the country can salvage its euro status.
The facility near Florina, a town known as “Where Greece Begins,” is the most modern of four production units that state-controlled Public Power Corp. SA (PPC) is scheduled to sell to competitors to meet four-year-old European Union demands that the country deregulate its energy market. The most powerful Greek union is now threatening nationwide blackouts at the height of the summer tourist season to derail the plan.
“We will make saving PPC a cause for all Greeks,” Nikos Fotopoulos, head of the 18,000-strong GENOP union, said last month in his Athens office adorned with photos of communist revolutionaries including Vladimir Lenin and Leon Trotsky. “We fight our battles with faith and passion, and we fight them hard. A serious state must control businesses of strategic importance.”
While on the surface PPC is another tale of Greek conflict during the worst economic crisis of modern times, it encapsulates how Greece has found itself at the sharp end of Europe’s struggle to keep the euro intact and what the country still faces to defend its place in the currency.
Founded in 1950 to distribute domestically generated electricity to Greek citizens, PPC is a microcosm of political protection, vested interests and reliance on foreign financing that have defined the economy for decades.
Resisting Change
It is the country’s biggest employer and its eight plants fired by the soft, brownish-black coal called lignite meet half of Greece’s power demand. PPC is fighting to keep its monopoly on the fuel, which is so vital to the company it’s in the process of moving a whole village to mine more of it.“PPC has a very strong union that so far has hindered changes,” said Stefanos Manos, a former New Democracy industry minister who stood in the last election for his own party. “The government needs a clear strategy of what it wants to achieve in the energy sector in general and with the company in particular. I have yet to see evidence of that.”
Since forming a government after the June 17 election, the second in six weeks, Prime Minister Antonis Samaras and his ministers have been in talks with the EU, European Central Bank and International Monetary Fund to keep aid flowing during the fifth year of recession. They are working on identifying 11.5 billion euros ($14.2 billion) of further budget cuts and are 3.5 billion euros to 4 billion euros short of the target, Finance Minister Yannis Stournaras said this week.
Selling Assets
Samaras, 61, has vowed to make the sale of state-owned assets a priority and last month appointed former PPC Chief Executive Officer Takis Athanasopoulos as chairman of the organization managing the privatization program.Athanasopoulos, 68, a U.S.-trained business manager and university professor, battled Fotopoulos, 48, at PPC during his tenure over issues ranging from job cuts to teaming the company with partners such as Germany’s RWE AG. (RWE) PPC employs 20,000 people, compared with about 38,000 in the mid-1990s, and is now restricted to one new hire for every 10 departures.
“We are determined, as a government of three parties, to press on with structural changes, with state-asset sales,” Samaras told reporters on July 26. His New Democracy party has formed a coalition with Democratic Left and Pasok, the socialist group traditionally backed by the unions.
Reform Credentials
PPC is a test of Samaras’s ability to prove to the euro area and IMF that Greece is meeting their demands to open markets to competition, scale back the state and cut red tape.The asset-sale program also may involve lowering the state’s stake in PPC to a minority from the current holding of 51 percent. The company’s shares collapsed by 61 percent in the past year and its net debt at the end of the first quarter stood at 4.85 billion euros.
Greece first has to resolve a dispute with the EU over PPC that predates the debt crisis.
The fight centers on Greece’s failure to heed EU competition rules and affects the Melitis electricity plant near Florina in the northern Greek region of Macedonia, a focal point of the 1946-1949 civil war in which communist forces were defeated. Melitis, with a Russian-built generator and emissions- control technology from German units of France’s Alstom SA (ALO), is PPC’s state-of-the-art prized asset.
Lignite Mines
EU regulators ordered Greece in March 2008 to loosen PPC’s stranglehold on lignite, saying competitors face unfair market barriers. The EU said Greece violates European law by giving PPC “quasi-exclusive” access to the coal.PPC depends on lignite, among the most polluting fuels, to help compensate for losses in its natural-gas business. The Athens-based company said its cost of production is about half as much in lignite as in cleaner gas. Greece is the third- largest lignite producer in the EU after Germany and Poland, according to the European Association for Coal and Lignite.
“We don’t consider giving existing lignite units to private groups an investment in, and contribution to, the country,” Fotopoulos, the union leader, said in a July 26 interview. “The only winners from giving ready-made lignite factories to private groups are the private groups.”
Political Change
The previous New Democracy government proposed to meet the EU’s 2008 deregulation order by expanding mining capacity.Seeking to give competitors to PPC access to 40 percent of exploitable Greek lignite reserves, the government decided to invite bids for exploitation rights at four deposits, including one called Vevi from which the nearby Melitis plant is counting on getting supplies.
Greek elections in October 2009 produced a Pasok government that pulled the plug on that plan, which EU regulators had approved two months earlier.
The Pasok government of former Prime Minister George Papandreou, pledging to promote cleaner energy, ended up preparing to sell four existing PPC power units, including Melitis, and to limit new exploitation rights to the nearby Vevi deposit, which had been mined until about 10 years ago.
The Pasok plan remains on the table as the new Samaras administration evaluates options. The other three units on the sale list include two at the Amindeo power station southeast of Melitis and one in Megalopolis in southern Greece.
“The government is committed to proceeding with the privatization of PPC in an organized fashion,” Assimakis Papageorgiou, Greece’s deputy energy minister, said in an Aug. 1 e-mail. He declined to elaborate on the plans, saying they are still being developed.
Ticking Clock
Time is pressing not just for the government, which is scrambling to meet an Aug. 20 deadline to repay 3.1 billion euros of debt held by the ECB, but also for Melitis. It has been forced to take stopgap steps, including importing coal, after losing supplies from two nearby lignite mines.One mine, Achlada, which furnished more than half of Melitis’s lignite in 2011, shut down temporarily earlier this year as Greece’s economic slump deepened. The other, Klidi, closed four years ago after a hillside collapsed.
The 330-megawatt unit at Melitis, whose technology limits discharges of pollutants such as sulfur dioxide, nitrogen oxides and dust particles, is getting some of its lignite from as far away as Turkey and Bulgaria, according to Constantinos Tzeprailidis, operation department manager at the plant.
Natural Wealth
“It’s a little difficult,” Tzeprailidis said in a July 28 interview in his office that looks onto countryside where sheep graze and wheat, corn and sunflowers grow. “It’s a shame to have national wealth that’s not exploited.”About 75 kilometers (47 miles) south of Melitis, amid the lignite mines that make up Greece’s energy heartland in the Kozani area, PPC’s hunger for the fuel is more conspicuous.
The landscape is marked by active open-pit mines that supply larger, older, PPC power stations nearby.
These include Agios Dimitrios, the company’s largest lignite-fired station that alone meets about 20 percent of Greece’s electricity consumption, and Ptolemaida, the oldest station where power generation began in 1959.
“We work 24 hours a day, 365 days a year,” Olga Kouridou, director of mining for PPC in the region, said on July 27 as she approached a 50-meter precipice in the area’s largest mine.
A German bucket-wheel excavator, the size of a multi-story building, churned the earth and dozens of dump trucks roared down the makeshift dirt roads. “We don’t stop at all. We have enormous activity,” she said.
Moving Earth
Residents of the nearby village of Mavropigi can attest to that. The village, whose name in Greek means “black source,” is due to be moved within months to make way for an expansion of mining by PPC. Mavropigi will be the sixth village in the Kozani area to be relocated since the 1970s because of mining.Dimitris Emmanouil, a retired construction worker who was born in Mavropigi in 1941 and got married there, said he and other residents hear the ground moving at night as a result of the digging for lignite.
“It’s dangerous now because the soil is slipping,” he said on July 27 while seated at a table in a closed-down café in Mavropigi, where earthquake-like faults in the ground are visible. “There’s no other choice. The village has to go.”
PPC needs the lignite under Mavropigi and surrounding fields for a planned 1.4 billion-euro unit at the Ptolemaida plant, according to Ioannis Kopanakis, an Athens-based general manager for generation at PPC. The company is asking German development bank KfW to arrange a 700 million-euro loan and intends to fund the rest itself, he said.
“The matter has gone to the highest decision-making levels in Germany,” Kopanakis said in a July 30 interview. “We expect progress in these issues in the near future.”
This is the kind of project that PPC representatives say highlights the company’s importance to Greece, boosting investment, jobs and technological expertise.
“It’s the last producer on this scale that is left in Greece,” said Kouridou, the mining director in the Kozani region. “We need to keep that. If this stops, the whole area will lose out, but so will Greece.”"
Zero Hedge is not an adult site.
http://www.zerohedge.com/contributed/2012-08-08/greece-prints-euros-stay-afloat-ecb-approves-bundesbank-nods-no-one-wants-get
Wolf Richter www.testosteronepit.com
A lot of politicians in Germany, but also in other countries, issue zingers about a Greek exit from the Eurozone and the end of their patience. But those with decision-making power play for time. They want someone else to do the job. Suddenly Greece is out of money again. It would default on everything, from bonds held by central banks to internal obligations. On August 20. The day a €3.2 billion bond that had landed on the balance sheet of the European Central Bank would mature. Europe would be on vacation. It would be mayhem. And somebody would get blamed.
So who the heck had turned off the dang spigot? At first, it was the Troika—the austerity and bailout gang from the ECB, the EU, and the IMF. It was supposed to send Greece €31.2 billion in June. But during the election chaos, Greek politicians threatened to abandon structural reforms, reverse austerity measures already implemented, rehire laid-off workers....
The Troika got cold feet. Instead of sending the payment, it promised to send its inspectors. It would drag its feet and write reports. It would take till September—knowing that Greece wouldn’t make it past August 20. Then it let the firebrand politicians stew in their own juices.
It’s easy to blame the Troika, and it can take the heat. History searches for the person who is responsible. But the Troika doesn’t have one. It was designed that way: a combo of multi-layered, undemocratic structures. And the Troika inspectors, though despised in Greece, are career technocrats, not decision makers.
So Chancellor Angela Merkel became a substitute. Greek tabloids treated her like a Nazi heir, with Hitler mustache and all. But she’s not the decision maker in the Troika, though she is a contributor. And she—though still unwilling to water down the bailout memorandum—consistently stated that Greece should remain in the Eurozone. She doesn’t want to be blamed.
In early July, the inspectors returned to Athens to chat with the new coalition government and check on progress in implementing the agreed-upon structural reforms. Soon it seeped out that their report would paint an “awful picture” [read.... Greece Flails About, Merkel Draws A Line, German Industry & Voters Back Her: It’s Almost Over For Greece].
In late July, the inspectors returned to Athens yet again and left on Sunday. After another visit at the end of August, they’ll release their final report in September. A big faceless document on which people of different nationalities labored for months; a lot of politicians can hide behind it. Even Merkel. And the Bundestag, which gets to have a say each time the EFSF disburses bailout funds.
Alas, August 20 is the out-of-money date. September is irrelevant. Because someone else turned off the spigot. Um, the ECB. Two weeks ago, it stopped accepting Greek government bonds as collateral for its repurchase operations, thus cutting Greek banks off their lifeline. Greece asked for a bridge loan to get through the summer, which the ECB rejected. Greece asked for a delay in repaying the €3.2 billion bond maturing on August 20, which the ECB also rejected though the bond was decomposing on its balance sheet. It would kick Greece into default. And the ECB would be blamed.
But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.
Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.
If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.
“We don’t have any time to lose,” said Eurogroup President Jean-Claude Juncker. The euro must be saved “by all available means.” And clearly, his strategy is being implemented by hook or crook. Then he gave a stunning interview. At first, he was just jabbering about Greece, whose exit wouldn’t happen “before the end of autumn.” But suddenly the floodgates opened, and deeply chilling existential pessimism not only about the euro but about the future of the continent poured out."
King’s counsel
08 Aug 2012
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| 6 Comments Debt crisis: as it happened - August 8, 2012
08 Aug 2012
| 643 Comments Euro founder admits some nations may be forced to leave
08 Aug 2012
| 89 Comments Bank of England sharply cuts growth forecast
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France is headed back into recession for the second time in three years, its central bank has warned in a fresh blow to the recovery prospects of the stricken eurozone.08 Aug 2012
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| 261 Comments Juncker: Greek exit from euro is 'manageable’
Jean-Claude Juncker, leader of the eurozone finance ministers' group, says the world could cope with Greece leaving the eurozone - but that it still holds dangers.07 Aug 2012
| 156 CommentsWolf Richter Is commenting on this.
Debt crisis: As it happened - August 7, 2012
Jean-Claude Juncker says a Greek exit would be 'manageable' but not 'desirable', warning that it would carry enormous risks for the country's people.- 8 Aug 2012: On Thursday, from 11.30am until 12.30pm, our panel of experts will be taking your questions on the financial crisis
21 comments - 7 Aug 2012: Jan-Werner Mueller: It is hard to see how proposals for European democracy could avoid being either just cosmetic or contradictory
130 comments
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The poorhouse and the workhouse are gone. The flophouse is almost gone.
The single room occupancy hotel is gone.
Slums are just not permitted.
Regulatory functions have been sold to congress as entitlements.
Line camps are back. The oil business uses them.
They are not managed in the traditional fashion.
Very soon.
.
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