Debt Bomb: Are We on the Brink of Another Global Financial Crisis?

This week marks a decade since the collapse of the US investment bank Lehman Brothers triggered the worst global financial crisis since the Great Depression. What became known as the Global Financial Crisis saw banks collapse and even whole countries teeter on the brink of insolvency. While much of the world fell into prolonged recession, Australia's economy narrowly avoided that fate - but 10 years on, many individual Australians are still paying the price. Now, there are new warnings from financial insiders that the global economy could be even more vulnerable to a repeat meltdown.

The Financial Crisis: A Decade of Debt

Ten years on from the global financial crisis the world continues to reap the consequences. David McWilliams connects the financial, economic, social and political dots to reveal the true impact of the worst financial crash since the Great Depression.

Warren Buffett - How to Stay Out of Debt Forever

Do you want to know how to stay out of debt? In this video, Warren Buffett gives you timeless tips on how you can stay out of debt.

Living Debt: Rising Costs in UK Force Millions to Borrow

In the UK new figures have revealed the country's total personal debt has reached an all-time high. The rising costs of energy and other household bills are pushing people over the edge, with many even facing the risk of losing their homes. RT's Laura Smith investigates.

Germany Set to Allow Eurozone Bailout Fund to Buy Troubled Countries' Debt
THE GUARDIAN: Angela Merkel poised to remove opposition to direct lending by rescue fund in move seen as step towards sharing debt burden

Angela Merkel is poised to allow the eurozone's €750bn (£605bn) bailout fund to buy up the bonds of crisis-hit governments in a desperate effort to drive down borrowing costs for Spain and Italy and prevent the single currency from imploding.

Germany has long opposed allowing the eurozone's rescue fund, the European Financial Stability Facility, to lend directly to troubled eurozone countries, fearing that Berlin would end up paying the bill, and the beneficiaries would escape the strict conditions imposed on Greece, Portugal and Ireland.

But Merkel has come under intense pressure as financial markets have pushed up borrowing costs for Spain to levels that many analysts see as unsustainable.

Analysts are likely to see the decision as the first step towards sharing the burden of troubled countries' debts across the single currency's 17 members, though it falls short of the "eurobonds" proposed by the European commission president, José Manuel Barroso.

A spokeswoman for Merkel said: "Nothing has been decided yet." » | Patrick Wintour in Los Cabos | Tuesday, June 19, 2012

THE GUARDIAN: Germany surrenders over eurozone bailout fund: All the financial firepower Europe can muster will be used to drive down Spain's borrowing costs – that, at least, is the talk » | Larry Elliott, economic editor | Tuesday, June 19, 2012

Canada's Growing Debt Woes
Canadians are being told by their government to borrow less money as household debt climbs to near record levels. It is a bit of a blow for an economy that weathered the financial crisis better than most. Al Jazeera's Daniel Lak reports from Toronto on Canada's growing debt problems.

US Warned Over Debts, as S&P Cuts Outlook to 'Negative'
THE DAILY TELEGRAPH: America's ability to tackle its deficit has been given a strong vote of no confidence, after leading rating agency Standard & Poor's said the chances are rising that the country will lose its prized AAA status.

S&P downgraded the outlook for the US government's debt to negative from stable on Monday in a clear shot across the bows of Congress and The White House.

In sharp contrast to every other developed economy, the US has increased its budget deficit in the last year in an effort to accelerate the economic recovery here.

While President Barack Obama and the Republicans have in the last month laid out plans to reduce the deficit, S&P warned that a plan needs to be agreed upon within the next two years for the US to retain its status as a top borrower.

"More than two years after the beginning of the recent crisis, US policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," said Nikola Swann, an analyst at S&P.

The move by S&P sparked an immediate reaction in financial markets, with US government bond prices falling alongside the S&P 500. Gold prices jumped to a new record of $1,496. » | Richard Blackden, US Business Editor | Monday, April 18, 2011

Furious Greeks Press for Country to Default on Debt
THE OBSERVER: Violence on the streets as backlash grows over Greece's austerity package and €110bn bailout

A growing chorus of voices is urging the Greek government to restructure its debt as fears grow that a €110bn bailout has failed to rescue the country from the financial abyss and is forcing ordinary people into an era of futile austerity.

"It's better to have a restructuring now … since the situation is going nowhere," said Vasso Papandreou, whose views might be easier to discount were she not head of the Greek parliament's economic affairs committee.

Other members of prime minister George Papandreou's party have said that Greece is locked in a "vicious cycle", unable to dig itself out of crisis with policies that can only deepen recession.

International fears of a Greek default rose last week after the German finance minister, Wolfgang Schäuble, refused to rule it out and markets, sensing upheaval, sent Greek borrowing costs soaring.

The normally mild-mannered prime minister has vehemently rebuffed the prospect of Greece failing to meet its debt obligations, saying restructure would not only be catastrophic for the country – blocking its access to markets for years – but also for the eurozone's delicate economy. "Our problems will be addressed in depth not if we restructure our debt but if we restructure the country," he said, announcing the "road map" that would lead Greece out of crisis.

Amid speculation over the country's ability to avoid default, a wave of civil disobedience is causing many to wonder if Greece is becoming ungovernable. Read on and comment » | Helena Smith in Athens | Sunday, April 17, 2011

America Loves Debt!

Europe Debt Woes Hit Euro, Asian Shares
THE TELEGRAPH: Asian stock markets tumbled and the euro slid to a four-year low against the dollar on Monday as fresh worries over debt woes in Europe dampened sentiment across the region.

Japan's benchmark Nikkei 225 stock average dropped 2pc, Hong Kong's Hang Seng index lost 2.5pc and the Shanghai Composite 3.4pc. In South Korea, the Kospi slid 2.8pc and Australia's S&P/ASX 200 index was down 2.8pc.

Asian investors' mood turned downbeat on growing concerns that cost-cutting fiscal measures being taken by Greece, Portugal and Spain could hamper a recovery in the eurozone economy.

The euro fell as low as $1.2235 against the dollar and the pound weakened further, hitting $1.4252 at one stage against the US currency. >>> Angela Monaghan | Monday, May 17, 2010

Greek Debt Woes Ripple Outward, From Asia to U.S.
THE NEW YORK TIMES: The fear that began in Athens, raced through Europe and finally shook the stock market in the United States is now affecting the broader global economy, from the ability of Asian corporations to raise money to the outlook for money-market funds where American savers park their cash.

What was once a local worry about the debt burden of one of Europe’s smallest economies has quickly gone global. Already, jittery investors have forced Brazil to scale back bond sales as interest rates soared and caused currencies in Asia like the Korean won to weaken. Ten companies around the world that had planned to issue stock delayed their offerings, the most in a single week since October 2008.

The increased global anxiety threatens to slow the recovery in the United States, where job growth has finally picked up after the deepest recession since the Great Depression. It could also inhibit consumer spending as stock portfolios shrink and loans are harder to come by. >>> Nelson D. Schwartz and Eric Dash | Saturday, May 08, 2010

Agency Lowers Greek Debt Rating as Crisis Deepens
THE NEW YORK TIMES: FRANKFURT — Europe’s debt crisis deepened still further Tuesday after the ratings agency Standard & Poor’s downgraded Greek and Portuguese debt, investors sold off government bonds amid fears of a default, and workers in those Mediterranean nations took to the streets to protest austerity measures.

S.&P. downgraded Greek government debt to junk status, saying in a statement, “Greece’s economic and fiscal prospects lead us to conclude that the sovereign’s creditworthiness is no longer compatible with an investment-grade rating.”

The ratings agency also downgraded Portuguese government bonds, but they remain well above junk status.

“This thing is getting more and more urgent and tense,” said Robert Barrie, head of European economics at Credit Suisse in London. He predicted, though, that markets could settle down once Greece manages to refinance €8.5 billion, or $11.2 billion, in bonds that mature in May. “But it’s anything but calm at the moment,” he added.

As transport workers in both Portugal and Greece went on strike against austerity measures Tuesday, the risk premium on Greece’s bonds set new records even before S.&P. announced the downgrades.

A European Central Bank official warned all euro-zone countries to cut their soaring budget deficits and suggested that Greece may need to impose even harsher austerity measures to bring its debt under control. >>> Jack Ewing | Tuesday, April 27, 2010

German Opposition to Greek Debt Bailout Gathers Pace
THE GUARDIAN: Left and right unite to condemn Greece's 'blank cheque' rescue / Election in Germany's NRW state inflames opposition to bailout

Angela Merkel looking drawn and tired. Photo: The Guardian
Proposals for a rescue package for debt-ridden Greece have stoked a fierce political row in Germany with opposition towards a bailout growing within parties from both the left and the right.

Germany's reluctance to participate in the deal is summed up today in a single newspaper headline, which read 'Angst surrounds giving Greece blank cheque'.

The rescue plans have even caused a rift within the German government as arguments rage over how much Europe's largest economy should contribute to the fund, under what conditions and even whether any help should be forthcoming at all.

Among the loudest opponents are the liberal Free Democratic Party (FDP), junior coalition partners in chancellor Angela Merkel's government, who have warned against turning the European Union into a 'transfer union' at the expense of Germany, the club's biggest economic power.

"We cannot issue any blank cheques," said the FDP's chief, Guido Westerwelle. "Greece has first and foremost to do its homework and sort out its own household."

Meanwhile leading members of the Christian Social Union, (CSU), the sister party to Merkel's Christian Democrats, have even suggested that Greece should withdraw from the euro. >>> Kate Connolly in Berlin | Monday, April 26, 2010

Demand Is Strong for Greek Debt
THE WALL STREET JOURNAL: ATHENS—The Greek Public Debt Management Agency Tuesday sold €1.56 billion ($2.12 billion) of six- and 12-month Treasury bills met with strong demand and reassured investors that it can meet its short-term financial needs.

But the Greek government still finds itself having to pay very high interest rates, which will have to fall rapidly in future bond sales for plans to cut the budget deficit to remain on track.

The offering was the first test of investor demand for Greek government debt since finance ministers of the 16-member euro zone Sunday agreed to lend Greece up to €30 billion in the first year of any aid program, to which the International Monetary Fund is expected to add an estimated €15 billion.

"These auctions will be seen as a positive endorsement of the bailout measures announced over the weekend and perhaps reduce the chances of the support package from the euro zone being activated in the short term," said Ben May, an economist at Capital Economics. "But with bond yields at maturities of two years or more still at least 6%, the government will have to pay a high price to borrow the €40 billion that it needs over the remainder of 2010." >>> Emese Bartha and Nick Skrekas | Tuesday, April 13, 2010

ECB's President Jean-Claude Trichet on Greece's Debt Crisis

Dette de la Grèce: et si elle vendait ses îles?
Quelle folie! – Mark
TRIBUNE DE GENÈVE: PROPOSITION | Des députés allemands ont appelé la Grèce à vendre des îles pour aider à financer sa dette.

Photo: Tribune de Genève
Le quotidien populaire allemand Bild révèle cette information jeudi, qu'il résume l’idée en ces termes: "On vous donne du fric, vous nous donnez Corfou".

"L’Etat grec doit renoncer à sa participation dans des sociétés, et vendre des propriétés foncières, comme par exemple des îles inhabitées", a affirmé au journal le député libéral Frank Schäffler, du parti FDP au pouvoir. >>> AFP | Jeudi 04 Mars 2010

Greece Should Sell Islands to Keep Bankruptcy at Bay, Say German MPs
What a stupid idea! Really dumb! – Mark
THE GUARDIAN: Fire sale of Greek islands, Acropolis and Parthenon suggested / Greek public reacts with outrage and boycotts German goods

Josef Schlarmann told Bild newspaper that Greece should consider selling its uninhabited islands for debt redemption. Photograph: The Guardian
Greece must consider a fire sale of land, historic buildings and art works to cut its debts, two rightwing German politicians said today in a newspaper interview that is bound to exacerbate tensions between Athens and Berlin.

Alongside austerity measures such as cuts to public sector pay and a freeze on state pensions, why not sell a few uninhabited islands or ancient artefacts, asked Josef Schlarmann, a senior member of Angela Merkel's Christian Democrats, and Frank Schaeffler, a finance policy expert in the Free Democrats.

The Acropolis and the Parthenon could also fall under the hammer, along with temptingly idyllic Aegean islands still under state ownership, in a rush to keep bankruptcy at bay.

"Those in insolvency have to sell everything they have to pay their creditors," Schlarmann told Bild newspaper. "Greece owns buildings, companies and uninhabited islands, which could all be used for debt redemption." >>> Phillip Inman and Helena Smith | Thursday, March 04, 2010

Verkauft doch eure Inseln, ihr Pleite-Griechen ... UND DIE AKROPOLIS GLEICH MIT!
Welch eine Dummheit! – Mark
BILD.de: Jetzt machen die Griechen ernst, um ihr Land vor dem Bankrott zu retten, ohne auf EU-Hilfe angewiesen zu sein!

Gestern beschloss die Regierung in Athen: Die Mehrwertsteuer rauf (von 19 auf 21%), Alkohol, Luxusgüter und Tabak teurer, die Bezüge von Staatsdienern, Rentnern, Studenten gekürzt.

4,8 Mrd. Euro soll das Sparprogramm bringen – aber bei Staatsschulden von mehr als 300 Mrd. Euro ist das nicht mal ein Tropfen auf den heißen Stein ...

Was kann die Griechen dann noch retten?

Auch wenn es vielleicht verrückt klingt: Wenn wir den Griechen doch noch mit Milliarden Euro aushelfen müssen, sollten sie dafür auch etwas hergeben – z. B. ein paar ihrer wunderschönen Inseln. Motto: Ihr kriegt Kohle. Wir kriegen Korfu.

Tatsächlich ist es der größte Schatz der Griechen: 3054 Inseln, nur 87 davon bewohnt.

Und einen Markt gibt es! Derzeit bietet z. B. das Hamburger Maklerbüro Vladi Private Islands eine unbewohnte griechische Insel an – Verhandlungsbasis: 45 Mio. Euro.

Ob die Kanzlerin morgen mit ihrem Amtskollegen Papandreou bei dessen Berlin-Besuch die Insel-Frage anschneidet ...?

Der Koalitionspartner rät dazu. FDP-Finanzexperte Frank Schäffler zu BILD: „Die Kanzlerin darf keinen Rechtsbruch begehen, darf Griechenland keine Hilfen versprechen. Der griechische Staat muss sich radikal von Beteiligungen an Firmen trennen und auch Grundbesitz, z. B. unbewohnte Inseln, verkaufen.“

CDU-Mittelstandschef Josef Schlarmann: „Ein Bankrotteur muss alles, was er hat, zu Geld machen – um seine Gläubiger zu bedienen. Griechenland besitzt Gebäude, Firmen und unbewohnte Inseln, die für die Schuldentilgung eingesetzt werden können.“ >>> jan/pro/rok | Donnerstag, 04. März 2010

Greece on the Brink: Anatomy of a Debt Crisis

Europe's Original Sin: National Leaders Ignored Greece's Soaring Debt for Years
THE WALL STREET JOURNAL: Europeans are blaming financial transactions arranged by Wall Street for bringing Greece to the brink of needing a bailout. But a close look at the country's finances over the nearly 10 years since it adopted the euro shows not only that Greece was the principal author of its debt problems, but also that fellow European governments repeatedly turned a blind eye to its flouting of rules.

Though the European Commission and the U.S. Federal Reserve are examining a controversial 2001 swap arranged with Goldman Sachs Group Inc., Greece's own budget moves, in clear breach of European Union rules, dwarfed the effect of such deals.

Predicaments of the sort Greece is facing—years of overspending, leaving bond investors worried the country can't pay back its debts—weren't supposed to happen in the euro zone. Early on, countries made a pact aimed at preventing a free-spending state from undermining the common currency. The pact required countries adopting the euro to limit annual budget deficits to 3% of gross domestic product, and total government debt to 60% of GDP.

But an examination of budget reports to the EU shows Greece hasn't met the deficit rule in any year except 2006. It has never been within 30 percentage points of the debt ceiling. >>> Charles Forelle and Stephen Fiddler | Wednesday, March 03, 2010

Stock Markets Plunge Over Europe Debt Fears
TIMES ONLINE: European and American stock markets plunged yesterday as investors took fright over the difficulties in debt-ridden countries such as Greece and Portugal and fears mounted over the health of the world’s biggest economy.

There were concerns that Greece may not meet its tough budget plans as workers started the first in a wave of strikes, prompting worries that Spain, Portugal and the Irish Republic may also struggle to cut their soaring debts. In a sign of the scale of the problems, a gauge of the perceived credit risk of Western European nations overtook that of the most stable US companies for the first time. >>> Gary Parkinson and Gráinne Gilmore | Friday, February 5, 2010

A Greek Crisis May Well Become Germany’s Problem
TIMES ONLINE: This week the European Commission begins studying Greece’s latest plan for extracting itself from its financial crisis. But although the deployment of the Brussels machinery has taken the edge off the drama, any sense that the problem is now contained would be an illusion. The possibility that a country within the eurozone will get to the brink of defaulting on its sovereign debt remains real.

The new Greek Government’s plan remains incredible, based on a cut in the budget deficit from nearly 13 per cent to under 3 per cent in three years. That implies that Greece would, in one coherent sweep, push through profound reforms of the public and private sectors that it has not yet been able to tackle.

It remains likely, then, that Greece is headed for a crisis that tests the stability of the eurozone. The burden of Europe’s most difficult decision this year would fall on Angela Merkel, the German Chancellor, who would have to decide whether to rescue Greece to forestall a crisis throughout the currency club. But her Finance Minister openly rejects her declaration of a “common responsibility” for other members, and a rescue would be a hard sell to German taxpayers. Even more difficult, a real repair of the eurozone would require Germany to acknowledge that its financial management during the past decade has not been as virtuous as it likes to maintain.

Since October elections, Greece has been in an on-again, off-again crisis, since the new Government restated the budget deficit to 12.7 per cent of gross domestic product. Greece’s public debt is expected to rise this year from 113 per cent to more than 120 per cent of GDP. Markets have greeted with scepticism the assertion by George Papaconstantinou, the Finance Minister, that the plan is achievable. The costs of insuring against a default on debt have risen to the highest levels in six years since the market was launched — or $340,000 for every $10 million of debt annually over five years.

“I just think they can’t do it, and their growth prospects are worse than the Government is predicting,” Simon Tilford, chief economist at the Centre for European Reform think-tank, said. “They need to make cuts, but the country has shown little or no ability to do it” — either to cut the pension costs and early retirement extracted by the unions, to cut waste in hospitals and defence or to curb rampant tax evasion in the private sector.

Even if Greece made the cuts, that would push it into a slump and deflation; crippling for such a highly indebted country. “Whatever happens, it will be miserable for them,” Mr Tilford concluded. >>> Bronwen Maddox: Economic View | Monday, January 18, 2010