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THE EUROPEAN CRISIS AND THE SALVATION OF EURO.
Will the USA profiteer on the financial collapse of the EU?

THE EUROPEAN CRISIS AND THE SALVATION OF EURO. Will the USA profiteer on the financial collapse of the EU?

According to Soros, Germany is to save Greece on the account of its own economy and the wealth of its citizens, which is fraught with tremendous political and economic risks for Germany. That’s an equivocal situation indeed that makes us thinking that European crisis benefits the USA. Mind that if the ratings of European banks are collapsed and the major European states are bled by the donor transfusion of their money in favor of weaker countries, then the investors’ preferences (along with their money) will flow to better place, i. e. the USA.

Salvation of the EU through pumping the Greek economy up with money rather looked like a well-staged play. International and European financial institutions keep pretending that they still have a choice, whether to aid Greece or not, while Greece keeps attempting to convince its vis-а-vis that it will do everything the EU demands. Everyone is fully aware, though, that due to quite a number of reasons Greece is unable to fulfill the EU and the IMF requirements within the granted tight schedule and without changing its living standards drastically. Otherwise, this will mean death of the EU as a political alignment and blow against the European currency — perhaps, a deadly one too.

The game’s still on, though. Skeptics and pessimists were right — on 7 Oct the trinity of international lenders of Greece (the European Union, the International Monetary Fund and the European Central Bank) refused to allot Athens yet another €8 billion tranche (the sixth in a row). This money is considered to be essential for postponing Greek default, treasury of which has money for two more weeks. Greek authorities have predictably claimed that the most part of what "trinity" demands of them is impossible: for example, fire more than a third of statesmen by the end of the year, reduce spending furthermore and quickly privatized the state sector (40% of the entire economy). On top of it "the trinity" required to hold the Greek budget deficit below 7.6%. Yet, by the day of negotiations it had already reached 8.5%. Greek Ministry of Finance decided to finish its saviors off and stated that it may go as high as up to 9%. Greek Representative at the IMF Panagiotis Roumeliotis fueled the pessimistic sentiments too, saying that the €8 billion that are at stake won’t be enough anymore. After all, forecasts of Greek government stipulate the GDP fall of 5.5% in 2011 and 2.5% in 2012, which doesn’t match the previous calculations and is to require additional funding.

Despite such drastic discrepancy among the wishful thinking and severe reality, "the trinity" is destined to negotiate with Greece furthermore for the sake of saving the EU. As long as every stage of inevitable and fruitless negotiations waste the precious time, voices of those, calling for radical solution of the Greek issue, are heard more and more often. They include the issuance of state bonds with a hundred-year-long liability term to begin with and end up with selling the numerous Greek islands. At that, potential buyers emerged the very moment the offer was voiced. Both Middle-Eastern and American players are interested in the Greek islands — or rather their oil-bearing shelves to be precise. Turkey will be the first to welcome this option, as long as the entire history of Turkish-Greek conflict is built around the islands and the pivotal shelf. The recent "gas" conflict around Cyprus, when Turkey sent its geologists drilling the wells under the convoy of Turkish fleet, makes an example of that.

Having been gripped in a vice of severe "Zeitnot", Greece is going to develop the open-sea oil fields the next year. This spring Greek government adopted the amendments for the hydrocarbon production and development legislation. They allowed foreign companies to participate in the development of Greek oil fields. Athens announced the near creation of a special governmental body that will see into the matter of urgent licensing of natural resources’ prospecting and production. "We expect a state income of $710 billion throughout 15 years (life and operation cycle of a deposit)" — Yannis Maniatis, Deputy Minister on the Environment and Energy, stated. French Total may come up as the most probable contractor for development of Greek deposits.
One doesn’t have to be exceptionally gifted in accounting to doubt the assurances that $7-10 billion, stretched for 15 years, will be a great deal of help in order to solve Greek financial troubles — its debt just grows quicker than that. At that, there’s hardly more than few months to come with an efficient way out of the situation. It’s only natural that the ideas of selling Greek territories per se, without bounds to its oil potential (requiring extra time and money) emerged these days.

According to the estimates of American sources, selling a quarter of Greek islands will bring €128 billion at the very least. At that, Greek national debt makes up more than €350 billion. Theoretically, Greece may relive itself from this burden only having sold 75% of its territory. But of course this option is unacceptable — Greek representatives and the regional governor of South Aegean Islands Ioannis Maheridis have turned the project of selling Greek territories in anger and claimed that "national sovereignty doesn’t have a price". As long as Greeks are in no mood for selling islands, while turning into oil giant and privatizing state property within the remaining brief term is merely impossible, the government is stuck with the last remaining option — seeking for an opportunity to borrow more.

Current situation stipulates the only option for that, which German financiers have mentioned recently. Greece might get the loans, having backed them the state assets itself, but mind that the Greek "factories, newspapers and steamers" would be estimated in strict accordance with the laws of free market — at an understated rate, which has little to do with what they’re actually worth. It might be that even the pledging the entire Greek property up to the last nail will be of small help.

Despite the fact that Greece still insists on its sovereignty, its destiny obviously belongs to France and Germany. If not for France and Germany, Greece will have nobody to apply for help. Yet, certain events are under way outside of Europe, which set us thinking that some powers aren’t just going to aid the EU, but are rather going to take advantage of its uneasy situation to their own benefit.

As we all remember, this summer Standard & Poor’s credit agency decreased the credit rating of the United States. The rest of the credit estimate market stuck to the "political suitability" policy and hurried to assure everyone that for them the stability of the U. S. financial system is beyond any doubts. Then the storm came — S&P was accused of infringing upon the national security of the USA and the financial markets and were even blamed for the current financial crisis itself. The further Bloomberg researches, however, indicated that the majority of global investors consider S&P position to be a true one. 67% of investors have upheld its stand. Yet, as of today, an actual ban on any action that may rattle the U. S. dominion is still in full power.

It means that when it comes to the USA, any hint of doubt regarding the steadiness of a monetary carcass is treated as subversion. What’s happening to Europe then? We’re having an impression that the rating agencies, mostly situated in the USA, do what they can to undermine the investors’ trust towards the European Union markets completely. All the doubts in the U. S. stability are to be hushed up by the self-censure, yet when comes to the EU, there are to be exclaimed out loud.

International Fitch Ratings agency decreased the long-term Spanish Issuer Default Rating (IDR) in local and foreign currency from AA++ to AA-, while Italian IDR was brought down from AA- to A+, the agency report states. Besides, Spanish short-term IDR in the foreign currency was reaffirmed at the F1+ level. The forecast is negative. Italian rating was cowered too — from F1+ to F1-. Long-term rating forecast is negative too. Moody’s doesn’t fall behind its counterparts — it decreased the Italian sovereign rating three steps at once — from AA2 to A2 — and "dropped" the depositary ratings of 12 British and 6 Portuguese banks. Schedules for the last quarter of year were voiced up too — Fitch is going to decrease Portuguese ratings too.

Few days earlier, famous financier George Soros stood up with a speech, putting the blame for the incoming financial crisis on Greece. Soros proposed to create a united European Treasury authorized to tax the countries and mobilize the investments. Frankly speaking, this idea initially appeared in Germany and France, but Soros added a small nuance. He urged Germany to sacrifice more in order to save Greece. "German people still believe that they have a choice, whether to aid the troubled countries or not. They are deceived, though" — Soros denoted. "All the assets and debts are tightly intertwined in the European financial system, based upon the united European currency and the collapse of euro will cause a full-scale crisis that no authorities will be able to withhold" — investor clarified. He added that "the more time Germany takes to comprehend this, the higher price it (and the rest of the world) will pay".

In other words, Soros believes that Germany is to save Greece on the account of its own economy and the wealth of its citizens, which is fraught with tremendous political and economic risks for Germany. Does Berlin really needs it and how does that match American interests?

That’s an equivocal situation indeed that makes us thinking that European crisis benefits the USA. Mind that if the ratings of European banks are collapsed and the major European states are bled by the donor transfusion of their money in favor of weaker countries, then the investors’ preferences (along with their money) will flow to better place, i. e. the USA.

By Alexander Vishnevsky

 

 

 

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  • Today few people doubt that the Greek crisis will turn into the euro crisis. The wish to write off Greek debts in order to avoid the future increase of debts and depreciation of loans seems to gain popularity in business and political circles. Yet the resistance of German voters, discontent with the realization of host plans will keep building up with each passing day, which means the only thing — crisis of euro may easily transform into a pan-European political crisis, which will question the very existence of the EU.

  • Globalization’s playing an evil joke on the global economics. Troublesome region can hardly be "contained" and put into a financial "quarantine", isolating it from the more or less healthy EU body until the recovery. Such medical analogies are rather popular these days — the former chief economist of the IMF Kenneth Rogoff has recently stated that "euro carry crisis from one country to another like an infection". Besides there already are several patients in Europe and the doctor is in the same ward with them.

  • The new power, designed to secure peace and stability in the Eastern Mediterranean, is to put itself forth with strength and energy. We have to say that Russia fits the role just fine. At that, Russia also has economic incentives to carry out active policy in that direction. It is well-known that Syria is going to develop trade relations with the Customs Union.

  • The U.S. and especially the EU authorities are willing save the operation ability of the current economic system and its institutions, although the stabilization efforts are often late, while their realization is often complicated by internal and external reasons. Interests of supranational alignments, national elites, major corporations, middle class and the poor clash in a Gordian knot of a conflict. There’s a great shortage of the available financial resources and, which is the most important, the time itself. Theoretically the situation still may be fixed, albeit the practical chance of achieving the desired result is dismal.

  • When all the attempts to overcome crisis fail, the witch hunt starts. The only way to give a satisfactory explanation for the obvious discrepancy of the undertaken actions and actually achieved results is to find an enemy without.

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THE EUROPEAN CRISIS AND THE SALVATION OF EURO. Will the USA profiteer on the financial collapse of the EU?
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