**Official PIIGS Collapse Thread**

http://www.wsws.org/articles/2011/mar2011/gree-m21.shtml
Savage Austerity Measures Provoke Resistance in Greece, Robert Stevens.

The Greek public sector trade union federation, Adedy, has called the ninth general strike since January 2010, to be held jointly with the GSEE private sector union federation, scheduled for April 6 or 7. The strikes have been called in response to the austerity programme of the social democratic Panhellenic Socialist Movement (PASOK) government of Prime Minister George Papandreou....
In calling them, the union bureaucracies have put forward no perspective to fight the austerity measures. Instead they have been utilised as a mechanism for the growing anger in the population to be harmlessly dissipated.
It is thanks to the trade unions that the government has been able to impose the most savage austerity programme. As a result living standards have declined by 30 percent, according to estimates, wages have been slashed by 20 percent, pensions cut, and massive increases imposed on the use of public services. Unemployment has risen by around 5 percent to 15 percent. Among young people it is up to 40 percent.
The last strike in February coincided with the announcement of an unprecedented €50 billion privatisation programme, including the sale of swathes of public land and assets......
Based on these [new austerity] measures on Monday, the IMF announced it was releasing €4.1 billion to Greece, the fourth tranche of the loan.
Despite this, last week the Moody’s credit ratings agency downgraded Greece’s government bonds to “highly speculative”, from Ba1 to B1. Moody’s stated that despite “very significant progress” Greece had made in reducing its deficit, the “task facing officials and managers remains enormous”.
The scale of the social devastation facing the Greek population was outlined by the conservative daily Kathimerini on Sunday. Addressing the privatisation programme, it stated, “Assuming the average size of a Greek deal is €100 million, the country will have to produce one such deal every three days to meet the goal of €50 billion in 1,500 days, as one investment banker put it.”
Daily Telegraph journalist Ambrose Evans-Pritchard questioned how such a gigantic sum could even be raised, asking, “State holdings in Hellenic Post, Hellenic Railways, Athens Public Gas, the Piraeus port authority, Athens airport, Thessaloniki water, and ATEbank, to name a few, will not fetch more [than] €15bn. What next?”
Following the downgrading, European Union leaders agreed to extend to seven-and-a -half years the time that Greece is to pay back its loans. At the same time the rate of interest was lowered by one percentage point, to an average of about 4.2 percent. Despite this “respite”, Greece is still expected to default on its debt. Largely due to the austerity measures already in place, growth is expected to fall 3.4 percent this year, increasing the debt level from 127 percent of GDP to 160 percent of GDP by 2013. As economist Peter Westaway stated, “Your debt will continue to increase as long as your growth rate is below the interest rate you are paying.”
Evans-Pritchard opined that the deal with the EU “does not restore solvency”, adding, “Greece’s debt spiral is too far advanced. The debt load will approach 150pc of GDP this year, and debt service costs are 14.4pc of tax revenue.”...
Portugal is widely cited in financial circles as being the next eurozone country that will need to resort to an EU/IMF bailout. Its 2009 public deficit of 9.3 percent of gross domestic product, is the fourth-largest in the euro region after Ireland, Greece and Spain.
This week Moody’s cut Portugal’s long-term government bond rating by two steps. They are now just four steps from “junk” status.....
Portugal must pay back €4.2 billion ($5.8 billion) of bonds next month and another €5 billion in June. However, yields on Portuguese government bonds have continued to rise. The downgrades of the “sovereign debt” of Greece and Portugal will now result in their governments being virtually prohibited from raising money on the international markets. [A brief mention is made of the likewise deteriorating situation in Italy, then domestic Greek politics].....
An editorial in the Guardian on Monday began by documenting the economic crisis engulfing Europe. “It is like being in an accident and emergency reception on a Friday night. To inhabit this place we call Europe is to see nations wheeled in on trolleys from a series of pile-ups. First the banking crash; then the sovereign debt crises of Greece and Ireland—with ambulance crews poised for 999 calls from Portugal, Spain and Italy. Once admitted, treatment can be worse than the trauma: the austerity packages, welfare cuts, job losses. Recovery is slow, fragile and sensitive to changes, like oil prices being pushed up by the revolution sweeping the Arab world.”
The Guardian noted the results of a recent poll of 5,000 people of working age in five EU states—Britain, France, Germany, Spain and Poland. The poll, wrote the Guardian, “clearly speaks to a crisis in European governance. Only 6% truly trust their government, and just 9% think their politicians are honest, either in power or out of it.”
Under these conditions, the recent mass protests in Portugal are of some significance as a pointer to the future.... A call directed at Portugal’s unemployed, “500 euro-ists” and other underpaid workers, part-time workers, students, and “mothers and fathers of Portugal”, attracted more than 300,000 people.[See recent articles]
While politically still limited, the strength of the movement was in its having broke out of the straightjacket imposed on the working class by the trade union bureaucracy. As the experiences of the working class in Europe throughout the last year have demonstrated, without such a rebellion of the masses against the trade union apparatus and their pseudo-left apologists, the ruling elite will carry out ever more brutal attacks on workers’ living standards.

Not to hijack, but to add to the PIIGS collapse theme, the authority that shall not be named indicated today that the Portuguese government is about to collapse due to fights over austerity/bailout.

Yeah, maybe we need a PIIGS collapse thread.

Yeah, maybe we need a PIIGS collapse thread.

done

Thanks, roccman. This means Portugal, Ireland, Italy, Greece and Spain, in case you forgot who the PIIGS are.

Portugal's parliament is expected to reject government austerity measures on Wednesday, setting the stage for the possible collapse of the minority Socialist administration a day before a European summit.

Prime Minister Jose Socrates has said he will resign if the plan is defeated. He has said its rejection would force the debt-laden country to follow Greece and Ireland and seek an international bailout, which he opposes.


http://www.reuters.com/article/2011/03/23/us-portugal-crisis-idUSTRE72M2CK20110323?feedType=RSS&feedName=topNews

http://www.zerohedge.com/article/irish-10-year-bonds-take-out-stops-yield-surges-past-10-first-time-history
Tyler Durden, 3/23/11.

Now that Europe is expected to keel over any minute, starting with the collapse of the Portuguese government, and proceeding right through the bankruptcy of Ireland, the market is starting to once again wake up. The first snooze button: Irish 10 Year bonds just passed above 10%, with numerous stops hit (see chart) for the first time in history. For all those who missed Citi's recommendation to buy Ireland CDS in advance of an event of default, the report can be found here. Said CDS are still a bargain offered at 630, considering they hit 680 in January.

[Chart follows]

http://www.wsws.org/articles/2011/mar2011/port-m24.shtml
Portuguese Prime Minister Resigns Amid Rising Social Tensions, Paul Mitchell and Alex Lantier.

Prime Minister José Sócrates resigned yesterday, after all five opposition parties rejected the budget presented by his minority Socialist Party (PS) government. The budget included huge spending cuts, tax increases and a freeze on pensions intended to prevent Portugal from seeking a bailout like those granted to Ireland and Greece last year.....
Until now, the minority PS government functioned with the tacit support of “opposition” parties like the PSD, which refrained from exercising their option of blocking the PS’s policies in the legislature. The right-wing Social Democratic Party (PSD) had abstained in previous votes on the austerity measures, allowing the minority PS government to pass them.
This time the PSD decided to vote against, declaring that “a broad government coalition” is needed to force the necessary austerity measures through.....
The PSD’s comments about protecting the unprotected are no more than crocodile tears. The PSD was founded as a right-wing organisation in 1974, two weeks after the Carnation Revolution that ousted the Salazar dictatorship, in a period when no party dared to call itself conservative. It has acted in the most aggressive manner to defend Portugal’s ruling elite ever since.
The PSD’s withdrawal of support from the PS is the sign of a shift within the Portuguese bourgeoisie over how best to impose austerity measures amid rising social opposition in the working class......
On March 12, hundreds of thousands of young workers and families took to the streets in 11 cities, organized on Facebook, outside of the political parties and trade unions, to protest the latest measures. An estimated 200,000 people marched in Lisbon and 80,000 in Porto. Demonstrators demanded the resignation of the government and the dissolution of the Parliament, denouncing them as “thieves.”
There have been mass protests against austerity measures on the last two weekends, and on Wednesday Lisbon train drivers went on strike, creating large traffic jams in the capital city.
The PS government wanted its austerity budget, which is vital to the Stability and Growth Pact it has agreed with the EU, approved ahead of a European summit on the euro-zone debt crisis today. The failure to do so, coupled with the likelihood that Ireland will need more support and Spain’s teetering on the edge of financial crisis, has created further speculation about the future of the euro.
There were already signs that Portugal is falling into another recession, the second in three years, which would make it even more difficult for the country to repay its debts. The Bank of Portugal had revised its forecast of zero growth next year, made at the end of last year, to a 1.3 percent drop. The bank said pay cuts, tax increases and increasing unemployment could cause domestic demand to slump by 3.6 percent this year and investment by 6.8 percent.
The interest rate on Portuguese sovereign debt has almost doubled over the last year, making it even harder for Portugal to repay its debts. Yesterday the rate on 10-year bonds rose to 7.8 percent, while 5-year bonds hit a euro record of 8.2 percent. Germany pays just 3 percent in contrast.......
An indirect bailout is already taking place, as the European Central Bank is the only buyer of Portuguese sovereign debt sold through government bonds in auctions on the financial markets. That is, the ECB is printing money to lend to the Portuguese government, under conditions where other banks are refusing to lend money to Lisbon.....
"The fear is that if Portugal failed to agree on austerity measures, we can potentially see the country forced into the EFSF [the European Financial Stabilization Facility],” said Mary Nicola, an economist at BNP Paribas.....
Sócrates’ resignation sets the stage for the election of a right-wing government, prepared to impose even more drastic social cuts on workers in alliance with international banks.
By voting against the PS’s austerity measures, the PSD has virtually guaranteed that financial authorities will force Portugal to accept a European bailout, while precipitating an election when Sócrates and the PS are at rock bottom in opinion polls due to their anti-worker policies. Currently, the PSD’s Coelho leads in the polls and is expected to be elected as the next prime minister.
A bailout will mean international financial institutions effectively taking direct control of the Portuguese economy and implementing spending cuts even more severe than those being carried out by the PS government....
Some bourgeois commentators have expressed concern that, should a financial crisis hit before the new elections, it might create an explosive situation where a caretaker government—that is, one without a formal mandate—attempted to impose unpopular social cuts on the population.

"The fear is that if Portugal failed to agree on austerity measures, we can potentially see the country forced into the EFSF [the European Financial Stabilization Facility],” said Mary Nicola, an economist at BNP Paribas.....

it might create an explosive situation where a caretaker government—that is, one without a formal mandate—attempted to impose unpopular social cuts on the population.

Translation from the IMF (i.e.,Farnese's) - "you are gonna get in step with the rest of the PIIGS or we are gonna shoot you in the head right hear right now in front of your mom...and brother...after we ass rape you."

http://www.zerohedge.com/article/portuguese-bond-liquidity-disappears-lchclearnet-kicks-portugal-paper-out-repoclear-basket-e
Tyler Durden, 3/25/11.

And another major hit for all those still unlucky enough to own Portuguese bonds: From LCH.Clearnet:
Following S&P's lowering of its sovereign credit ratings on Portugal to BBB on Friday 25 March 2011, RepoClear participants are advised that with effect from Monday 27 March 2011 Portuguese Government bonds will no longer be eligible for delivery in any of the RepoClear €GC Baskets.
Until today’s downgrade Portugal had been eligible for the single A €GC Basket.
This is in line with LCH.Clearnet Ltd’s Regulations*, which state that while the criteria which define each of the eligible €GC baskets remains fixed, the countries’ debt meeting the defined criteria for inclusion in each basket may change from time to time. Where the combined credit rating of a country that falls within the definition of Euro zone countries changes, LCH.Clearnet Ltd will add or remove that country’s debt from each of the relevant eligible €GC baskets based on the new combined credit rating of that country.
[Durden]Luckily, Portuguese bonds are still eligible for trading/repoing/margining on OTC/Bulletin Boards, where the bid/ask will soon be greater than the actual bonds price.