Negotiators in Brussels agreed on Wednesday to a large expansion of the bailout fund which eurozone member nations have set up in response to the sovereign debt troubles at the epicenter of the European portion of the global financial crisis.
The BBC provides background and news on the Eurozone crisis:
If economies are not growing, tax receipts fall, making it harder for governments to pay off their debts. So far Greece, Portugal and the Irish Republic have received international help to deal with their crippling debt problems. In July, eurozone leaders agreed a second bailout deal for Greece, and also agreed more powers for the European Financial Stability Fund to help countries struggling with indebtedness. This allowed the fund to buy government debt (bonds), offer credit to nations in difficulty and created a special facility for recapitalising banks.
Wednesday’s development greatly increased the size of the EFSF bailout fund, from 440bn euros to 1tn euros. This money comes from the richer countries, such as France and Germany, by way of taxpayer funds or inflation from the countries’ central banks printing money. As a condition of their help, the donor nations insist on budget reforms in the countries who receive funds. In Greece, this has resulted in austerity measures such as wage and pension cuts that have sparked sometimes violent protests.
With the complexity of today’s globally intertwined financial markets, the biggest fear of authorities is contagion, whereby a faltering bank or government causes a cascade of failures of other banks or governments who hold debt or other interests in the troubled entity. In the United States, the taxpayer-funded TARP program and trillions of dollars in near-zero-interest loans made by the Federal Reserve have been used to prevent contagion.
This most recent eurozone deal has resulted in some losses and concessions from the banks and countries which hold troubled assets. Banks and creditor nations have agreed to swap old bonds the Greek government has little hope of repaying for replacement bonds that pay less interest. In addition, banks will be forced to raise additional capital to reduce their risk of failure in the event of a future contagion.
Like many of the deals reached in recent years around the world, these agreements represent enormous sums of money, yet few people understand where it’s coming from or going to, and most decisions are made behind closed doors by negotiators from banks, central banks, and the national treasuries. Protesters from the streets of Greece to the encampment of Occupy Boston are demanding greater transparency in such deals, and greater consideration of how people will be affected, rather than worrying only about saving banks which have chosen to make risky loans.
5 Responses to “Eurozone Bailout Fund Increased”
It’s far worse than that, my friend. The Eurocrats — the bankers and political leaders — are attempting to make the people of Europe, particularly the German People, pay the Eurocrats’ debts, now that they have made off with all the revenue. The same exact thing as happened on Wall Street in 2008. Occupy Berlin, if we want to stop the Global Financial Elite from screwing the 99% yet again.
Tell us more about how European debt effects the 99% of the US
OK. This is what happened in Europe. The European banks loaned tons of money to countries that were likely to default. The Eurobanks did this — like the U.S. banks did with subprime mortgages — because financial institutions, primarily French and German banks, gave them insurance on the default through derivatives. The derivative insurers, in turn, used counterparties and credit default swaps to insure their own risk. These counterparties include the same Wall Street banks that brought down the U.S. financial system. So, if a country like Greece defaults on its debts to the German or French banks, the derivative insurer has to pay the counterparties. This is exactly the same scenario as the U.S. in 2008 when AIG owed billions to Goldman Sachs and the other Wall Street banks once the defaults occurred in the home mortgage market. It was that fact that caused the U.S. government to bail out AIG with U.S. taxpayer money, not specifically to save AIG but to protect the Wall Street banks that AIG owed money to.
Europe is now at the point where the debtors (countries like Greece) are defaulting, triggering the same paroxysm of cross-cutting obligations leading, ultimately to the Wall Street banks again. And once again, the Global Financial Elite are searching desperately for a way to get the European taxpayers’ money, which really means the German People as Germany is the only Eurozone country with money right now. Tim Geithner is directly involved in the talks and his goal is to protect the Wall Street banks again. They are trying to figure out a way to steal the German People’s money to pay the Wall Street banks. However, they are having trouble because Germany is resisting. So the Global Financial Elite is considering using the IMF and the World Bank, which are essentially American entities funded largely by American taxpayer money.
The Global Financial Elite is desperate to find money to pay off the Wall Street banks. If they can’t the money from the German People they will come back to the American People one way or another.
Hope that helps.
And If I amy ask you a question: Why isn’t Occupy Boston marching on John Kerry’s house on Beacon Hill? Kerry is the chair of the Catfood2 Commission which is in the process of devising a scheme to take away the social safety net that protects the 99%. Kerry and the Democrats on the panel just released a proposal to do exactly that.
Here is a report on Democracy Now, which describes how the Eurozone bailout is NOT a bailout of Greece, and certainly not a bailout of the Greek people. It’s a bailout of the French, German, and U.S. banks who own the Greek debt.
http://www.democracynow.org/2011/11/3/wall_street_v_greece_g20_opens