Tag Archives: PIGS

Portugal Union Leader Wants Debt Renegotiation

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Yes, as previously discussed, the obvious political move is to demand the same discounts as Greece.

Especially with the pending Greek ‘restructure’ and ECB check writing to support the banking system seemingly making the euro stronger and not causing inflation.

And the ‘sustainability maths’ is just about the same for all of them as well, particularly given the current slowdown.

Once the markets realize the politics are moving in that direction, all euro member nation bonds again become suspect and the crisis enters the next stage, resulting in the ECB pretty much funding everything, one way or another.

It’s just a question of how it all gets from here to there.

Portugal Union Leader Wants Debt Renegotiation

By Axel Bugge and Daniel Alvarenga

Feb 7 (Reuters) — Portugal must renegotiate its debts rather than impose harsh austerity measures to overcome its economic crisis, the head of the country’s largest trade union said on Wednesday, threatening to step up strikes if the government pushed on with cuts.

Armenio Carlos, head of the CGTP union, told Reuters Portuguese workers would take a stand against attacks on labor rights, which he said were part of the government’s sweeping economic reforms promised under a 78 billion euro ($103.29 billion) bailout.

“What we defend is the renegotiation of debts, in terms of deadlines, in terms of interest and in terms of the amount,” Carlos said in an interview, adding that the country’s bailout had made it impossible to meet its obligations.

Portugal’s debt currently equals about 105 percent of gross domestic product.

“We are being confronted with a neo-liberal attack on workers’ rights,” he added, saying the government’s recent labor reform, making it easier to hire and fire, could spark a growing wave of protests.

The union leader, a former electrician and an ex-Communist lawmaker who took over as head of the CGTP a week ago, warned that with the austerity policies demanded by the bailout, Portugal was heading down the same road to ruin as Greece.

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more on ECB funding dependence in the eurozone

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Yet another substantiation of just how much the entire system is (necessarily) dependent on ECB funding/backstopping.

The ECB’s Secret Bailout Strategy

By: Hans-Werner Sinn

Excerpt:
The amount of the ECB’s “replacement lending” is shown by the so-called Target2 account, which measures the deficit or surplus of a country’s financial transactions with other countries. As the account includes international payments for both trade in goods and financial claims, a deficit in a country’s Target account indicates foreign borrowing via the ECB, whereas a surplus denotes foreign lending via the ECB.

The balance is not reported on the ECB’s balance sheet, since it is zero in the aggregate, but it does show up on the respective balance sheets of the national central banks as interest-bearing claims against, and liabilities to, the ECB system. Until mid-2007, the Target accounts were close to zero, but since then, they have grown by about €100 billion per year.

For example, the Bundesbank’s Target claims ballooned from €5 billion in 2006 to €323 billion by March 2011. The counterpart to these claims were the PIGS’ liabilities, which had grown to about €340 billion by the end of last year. Interestingly, the PIGS’ cumulative current-account deficits from 2008 through 2010 were of roughly the same order of magnitude – €365 billion, to be precise.

Had the ECB failed to finance these deficits, the PIGS would have had a hard time finding the money to pay for their net imports. If they succeeded at all, high interest rates would have induced them to tighten their belts, and their current-account deficits, which in the case of Greece and Portugal exceeded 10% of GDP, would have diminished.

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