The European Commission has said Greece’s budget deficit plans are now on track, following the Greek government’s announcement on Wednesday (3 March) of fresh austerity measures worth €4.8 billion.

“This announcement confirms the Greek government’s commitment to take all necessary measures to deliver the [stability] programme’s objectives,” said commission president Jose Manuel Barroso in Brussels.

“Greece’s ambitious programme to correct its fiscal imbalances is now on track,” he added.

Athens presented its budgetary plan – known as a ’stability programme’ – to the commission in January, in which it pledged to reduce its budget deficit by four percent of GDP in 2010.

After a three-hour cabinet meeting on Wednesday morning, Greek government spokesman Giorgos Petalotis said the agreed new measures amounted to €4.8 billion, split between €2.4 billion in new revenues and €2.4 billion in spending cuts.

They include a dramatic 30 percent cut in the holiday bonuses of Greek civil servants.

The plans also include a 12 percent cut on other civil servant bonuses, a freeze on all pensions, a 2 percent rise in the VAT rate to 21 percent and a 20 percent increase in the tax on alcohol and tobacco, as well as an 8 cent-a-litre increase in the price of petrol.

There are also plans for a tax rise on luxury goods such as expensive cars.

A change of government in Athens last October, and subsequent upward revisal of the country’s budget deficit figure for 2009 to 12.7 percent of GDP, shocked EU member states and financial markets, prompting a flight from the country’s bond market and a weakening of the euro currency.

Read more here.

Related articles by Zemanta

• Greece outlines plan to cut massive deficit (money.cnn.com)
• Greece Expected to Release New Austerity Plan (nytimes.com)
• Greece Debt Crisis: Leaders Await EU ‘Solidarity’ After Huge Budget Cuts (huffingtonpost.com)

Prime Minister George Papandreou yesterday called on Greeks to “rally together” to stop the country from “going under” shortly before the European Union’s Commissioner for Monetary Affairs Olli Rehn, in Athens on an official visit, called on the government to take additional austerity measures to plug a gaping budget deficit.

During a televised Cabinet meeting, Papandreou appealed to all Greeks to back the government’s efforts to exit the crisis. “Otherwise, we risk losing the ability to determine our own fate,” Papandreou said, a clear reference to the risk of Brussels taking over Greek financial decision-making. The premier said the government already had the backing of a large section of the public. “I am touched that citizens are stopping me in the street and telling me they are ready to sacrifice a salary for the good of the country,” he said.

The reference to the salary touched a nerve among unionists, angered by speculation that a new raft of austerity measures might include the abolition of the so-called 14th salary – one of two additional annual salaries paid to civil servants and employees in the private sector. The leader of the civil servants’ union, Spyros Papaspyros, said the 14th salary was a right established in history and that attempts to cut it would “provoke reactions commensurate with its significance.”

The new raft of measures, expected to include a 2 percent increase to value-added tax, currently at 19 percent, a further increase in fuel tax and a new tax on luxury goods, is expected to be announced within days and certainly before Papandreou sets off for Berlin on Friday for talks with German Chancellor Angela Merkel.

Read more here.

Related articles by Zemanta

• Greece Told That More Cuts Must Be Made (nytimes.com)
• Merkel Seeks to Damp Greek ‘Emotions’ in Euro Crisis (Update1) (businessweek.com)

The US ambassador to the EU has brushed aside speculation that the ascendance of China or confusion arising from the Lisbon Treaty have undermined the special relationship between the two sides.

Focusing on the EU’s importance in the areas of security and crisis-relief, the ambassador, William E. Kennard, told EUobserver in an interview: “Anytime anything dramatic happens in the world …the world looks to what the US and the EU are going to do.”

“We have with the EU and its member states a shared history and a shared sense of values that we don’t have with any other large bloc of people,” he said. “The US and the EU collectively represent 800 million democratically-elected people, and so when issues arise, whether it’s of human rights violations or the need to bring stability to troubled parts of the world, whether it’s Afghanistan or Pakistan or the Middle East, the EU is our logical partner.”

The diplomat underlined President Barack Obama’s belief in multilateralism and progress in ties with China and Russia. But he indicated that the level of trust between the EU and US exceeds what it has with the emerging powers.

“We don’t share the same culture, history or values with Russia,” he said. “It’s a different category altogether.”

Mr Kennard arrived in Brussels in January at an awkward moment. The US at the Copenhagen climate summit in December clinched a last-minute deal on emissions with Brazil, South Africa, India and China, leaving the EU out of the room.

In February, the Spanish EU presidency learned via the media that President Obama planned to skip an upcoming summit. A US spokesman at the time said Washington did not know who was in charge in Europe following passage of the Lisbon Treaty. The European Parliament subsequently compounded unease by voting down a transatlantic pact on counter-terrorism, the so-called “Swift” agreement.

The US ambassador laid part of the responsibility for the summit debacle on Spain: “We had never committed to a summit and we had never told the Spanish government that we were coming to Madrid in May. I think there may have been an assumption that we were,” he said.

He also hinted that the meeting was a diplomatic nicety rather than a venue for pressing decisions. “All of our political leaders have incredible demands on their time, we have to be careful in deploying their time to make sure there are defined outcomes,” Mr Kennard said.

Read more here.

Max Göldi, the Swiss businessman jailed in Tripoli, could be released well before his four month sentence is up, European diplomats have told swissinfo.ch.

Spain, which currently holds the presidency of the European Union, has managed to reach a “settlement” with Libya, but Switzerland must also be prepared to play its part, said one top diplomat who wished not to be named.

Some are even predicting that Göldi could be pardoned by Libyan leader Moammar Gaddafi before the middle of March.

Switzerland’s Foreign Minister Micheline Calmy-Rey has so far merely said that Bern, benefiting from “the solidarity of the European Union”, is doing “everything in its power” to bring Göldi back to Switzerland. But it warns that the situation remains “difficult and delicate”.

The dispute between Switzerland and Libya was on the agenda of a meeting in Brussels on Thursday of the interior ministers of the Schengen countries, which is also being attended by Swiss Justice Minister Eveline Widmer-Schlumpf.

During the meeting, the ministers reaffirmed their solidarity with Switzerland. In a report Spain said Switzerland is to be supported by the Schengen countries, that Switzerland and Libya would have to intensify their diplomatic relations, and that the EU would work to strengthen its “tentative steps” towards a solution.

Ahead of the meeting, however, some European diplomats, speaking anonymously, were prepared to say more.

There is still a need for “immense prudence”, one of them told swissinfo.ch, although the “intense mediation efforts” to reach a solution to the Swiss-Libyan crisis “are beginning to bear fruit”.

Nonetheless, Libya’s leader, Muammar Gaddafi, yesterday called for a jihad, or holy war, against Switzerland, in an escalation of his vendetta against the country where police once arrested his son, says The Guardian.

At a meeting in the city of Benghazi to mark the prophet Muhammad’s birthday, Gaddafi described the country as an infidel state that was “destroying” mosques. Last year he urged the UN to abolish Switzerland and divide it between Germany, France and Italy.

“Any Muslim in any part of the world who works with Switzerland is an apostate – is against Muhammad, God and the Qur’an,” Gaddafi said.

Swiss voters last November backed a referendum proposal banning the building of minarets. The proposal was put forward by the Swiss People’s party, (SVP), the largest party in parliament, which claims minarets are a sign of Islamisation. The move was opposed by the government, which argued that it would harm Switzerland’s image, particularly in the Muslim world.

Gaddafi has nursed a grudge against Switzerland since his son Hannibal and daughter-in-law were arrested in Geneva in 2008 for allegedly beating two servants at a luxury hotel. The Gaddafis were released soon afterwards and the charges dropped. But the Libyan leader was so enraged by his son’s two-day detention that he shut subsidiaries of Swiss firms in Libya, had two Swiss businessmen arrested, cancelled most flights between the two states and withdrew about $5bn (£3.2bn) from his Swiss bank accounts.

Read more here.

Related articles by Zemanta

• Libya’s Gadhafi urges ‘jihad’ against Switzerland (calgaryherald.com)
• Gaddafi Calls For Jihad Against Switzerland (huffingtonpost.com)

Dubai has identified 15 new suspects in the assassination last month of a Hamas official, and 10 of those suspects share the names of Israelis who hold dual citizenship, Haaretz has learned.

Dubai police said Wednesday the total number of people believed involved in the death stands at 26.

Hamas military commander Mahmoud al-Mabhouh was killed last month in his hotel room in what Dubai police have said they are near certain was a hit by Israel’s Mossad spy agency. Police said the killers travelled to the Gulf Arab emirate using European passports.

Dubai authorities had earlier named 11 suspects, who they said travelled on fraudulent British, Irish, French and German passports to kill Mabhouh. Six were Britons living in Israel who deny involvement and say their identities were stolen.

“Dubai investigators are not ruling out the possibility of involvement of other people in the murder,” the statement said.

The suspected killers’ use of passports from countries including Britain and France has drawn criticism from the European Union that diplomats said was aimed at Israel. Some of governments involved have summoned their Israeli ambassadors.

“Friendly nations who have been assisting in this investigation have indicated to the police in Dubai that the passports were issued in an illegal and fraudulent manner,” the Dubai government statement said.

It said that pictures on the passports did not correspond to their original owners.

In a statement on Monday that European diplomats said was intended as a rebuke to Israel, EU foreign ministers said that the assassination was “profoundly disturbing.”

Read more here.

Parliament Speaker Filippos Petsalnikos yesterday condemned German press reports on Greece’s financial crisis that he said “surpassed all limits” and invited Germany’s ambassador to Greece, Wolfgang Schultheiss, to discuss the “offensive” coverage, says Greece’s Kathimerini.

Petsalnikos was responding to two articles – one in Stern magazine in the form of an open letter to Greeks from disgruntled German taxpayers, which also appeared in the February 19 issue of Athens Plus, and the other featured in an issue of Focus magazine whose front page depicts a statue of the Venus de Milo making an obscene gesture under the title “Greek cheats.” The House speaker condemned the two reports as “anything but objective” and containing “inaccuracies and false information.”

Petsalnikos accused Stern of offering an “oversimplified and populist take” on Greece’s financial crisis by lambasting Greeks for frittering away German taxpayers’ savings. In a letter sent to the magazine, Petsalnikos argued that Germany too had reaped benefits from European Union membership, stressing also that it was Greece’s main arms supplier. He noted that Germany was one of the countries that benefited most from EU membership, with more than 60 percent of its exports going to member states in 2007.

Meanwhile, clashes today erupted on Greek streets as protests against the Greek government’s prospective austerity plans engulfed the nation’s capital of Athens.

Police fired tear gas at a group of some 50 protesters as a rally attended by some 25,000 people ended in Athens. It is the second general strike in two weeks and coincides with growing anger at the EU’s response to the crisis. The action was the biggest since Greece’s socialist government introduced cuts to bring the country’s debt and deficit under control. Greece closed airspace to all flights, while trains and ferries stood idle and archaeological sites remained shut for the day.

The BBC’s Malcolm Brabant in Athens says that for the second time this month, Greece is isolated from the rest of the world for 24 hours as all flights into and out of the country have been cancelled. Commuters have been left without most forms of public transport, while public schools, ministries, and municipal offices have been closed. Many hospitals are operating only with emergency staffing.

The march was peaceful but scuffles broke out between some demonstrators and police as the rally came to an end, and tear gas was fired.

Groups of youths then threw stones and smashed shop windows, police said. Three people were arrested.

Related articles by Zemanta

• Strikes In Greece Serve As Economic Barometer (pamil-visions.net)
• Greek police clash with protesters as national strike takes hold (guardian.co.uk)
• Greece Weighs New Austerity Cuts (online.wsj.com)

There is a significant amount of hand-wringing going on in the US that the Euro is fraying on the edges. Some pundits have even coined a rather derogatory acronym for Euro-countries in economic distress: the PIGS (Portugal, Italy or Ireland, Greece, Spain). The acronym bunches together four countries with very different backgrounds but one shared fact: they all face serious budget shortfalls, writes the Atlantic Review.

The grouping of these countries, largely by investment banks, may simplify investment and policymaking decisions to an unfortunate level. Italy for one does not want to be part of the group, and the Italian bank UniCredit has waged an effective campaign to change the “I” in PIGS to Ireland. But Ireland too has begun to restore both consumer confidence and budget stability thanks to aggressive action by the central government. Commentators seem to keep the “I” because that is the crucial vowel that holds the acronym together.

Portugal, Spain, and Greece are also all facing very different challenges. Portugal has a sizable but manageable budget deficit, while Spain is struggling with a burst housing bubble a la Florida. Greece remains the real country of concern; but then again, Greece has roughly the same debt levels as Germany, so what is all the fuss about?

The classification overlooks the more important–and legally binding—organizations already in existence, namely the EU and the Eurozone. Talk of the dissolution of the Euro is premature but rampant.

How should we classify countries economically? Is there any value in grouping problem areas? Just as a reference, I did a quick look at state budgets in the US and found five states with budget deficits greater than 10% in 2009: Arizona, California, Nevada, New Jersey, Rhode Island. Do you think CARINN could catch?

The Stockholm area is one of the ten richest regions in the European Union, according to new figures from Eurostat, the EU’s statistics agency, says The Local.

Stockholm came tenth out of 271 regions on the list, which was led by London. Olle Zetterberg, CEO of Stockholm Business Region, the capital’s official investment promotion agency, told The Local that the city’s success was due to its good business climate. He added that Stockholm might do even better next time:

“Stockholm has weathered the recession much better than many other European regions. We have low unemployment – in fact we have around 75,000 more people in work now than three years ago.”

London had by far the highest GDP per capita of any European region in the list, which was compiled using figures from 2007, before the financial crisis plunged Europe into recession. Stockholm’s performance put it ahead of Copenhagen, in 18th place, or Åland, in 20th place. Stockholm was beaten by regions including Luxembourg, Brussels, Hamburg, Prague and Paris. The poorest regions on the list were in Romania and Bulgaria.

The figures come on the heels of a survey by fDi Magazine, in which Stockholm was ranked as one of European cities with the brightest economic futures. Stockholm came fourth in the rankings, which were also led by the British capital. The survey rated cities according to economic potential, human resources, infrastructure, quality of life and FDI strategy.

Zetterberg said that foreign investment in Stockholm had continued throughout the downturn, and his organization had assisted in 70 cases of foreign direct investment in 2009.

Read more here.

Italian Foreign Minister Franco Frattini will meet here on Wednesday with his Libyan counterpart Mousa Kousa in an attempt to resolve an issue with Tripoli over visas issued to citizens from the Schengen area.

The foreign minister of Malta, Tonio Borg, will also take part in the talks, after which there will be a press conference, the sources added.

Libya on Sunday invalidated all entry visas issued to citizens from European border-free zone, over a dispute with Switzerland.

The dispute between Libya and Switzerland began in July 2008 after the Swiss arrested a son of Libyan leader Muammar Gaddafi, Hannibal, and his wife for allegedly mistreating their domestic help. They were released after an out-of-court settlement was reached with the servants but Libya retaliated by holding two Swiss nationals in custody for 18 months on what appeared to be trumped-up charges. After Switzerland joined Schengen, in December 2008, it issued a ‘black list’ of 188 ‘undesirables’ who should be denied entry into the border-free area and included Gaddafi, his family and even members of his government.

Italian Foreign Minister Franco Frattini has faulted Switzerland for the dispute but said the European Union should help it resolve its ”bilateral” problem with Libya. According to the Italian diplomatic chief, the lists of people who Schengen members want kept out of the area should only include fugitives criminals or terrorists. By including Gaddafi and his family, Frattini said Monday night, Switzerland was holding the Schengen area ”hostage” over a bilateral dispute between Bern and Tripoli.

The Schengen area includes all European Union countries with the exception of Britain and Ireland, plus Iceland, Norway and Switzerland.

Read more here.

Related articles by Zemanta

• EU deplores Libya entry visa ban (news.bbc.co.uk)
• Libya bars Europeans in Swiss row (news.bbc.co.uk)

Greece was in a tug of war with the European Union yesterday over whether the government will adopt additional measures to rescue its economy, as Athens pushed for the eurozone to put together a more specific assistance package that would deter speculators, reports Kathimerini.

Having already announced cuts in public spending and some tax hikes, the PASOK government was yesterday prompted by EU officials to come up with more ways to reduce its public debt and deficit.

Finance Minister Giorgos Papaconstantinou was due to be put under more pressure yesterday and today, when the finance ministers of the eurozone will meet separately but he insisted that no extra measures are needed at this time. Instead, he argued that following an expression of political support from eurozone members last week, more specific details about the help that Greece could expect needed to be put forward. “My guess is that what will stop markets attacking Greece at the moment is a further, more explicit message that makes operational what was decided last Thursday.”

Markets attacking Greece. This is precisely the position the Greek Finance Minister is taking regarding the dire situation of his country’s finances. Targeting investment banks and the shady world of hedge funds appears to top Papaconstantinou’s agenda as he accused his EU partners of creating a “psychology of looming collapse,” according to the EU Observer.

Yet, investment firms including Goldman Sachs arranged currency swaps for Greece over the last decade that allowed Athens to raise funds to reduce its budget deficit while pushing payments well into the future. Those transactions were not classified as loans, reports the the New York Times, and not made known to Brussels officials.

European Commission economy spokesman Amadeu Altafaj Tardio told a news conference in Brussels that the EU’s statistics office, Eurostat, has already sought answers to the allegations, but Mr Papaconstantinou defended his country’s actions.

“These kinds of more exotic financial instruments were, at the time, completely Eurostat legal,” he said. “Greece was not the only country using them. They have since been made illegal and Greece has not used them since,” he added.

But skepticisim over the Greek position reigns in other Eurozone countries including Germany, which is expected to lead an eventual Greek bailout. Süddeutsche Zeitung writes:

Historical revisionism related to the financial crisis is in high gear. Higher powers are blamed, Wall Street is ascribed supernatural influence and bankers have been credited with omnipotence. Indeed, high finance is now said to have lured Greece with a siren song of concealed debt, to Europe’s vexation.”

“But this mystification conceals reality. Those responsible for the Greek debt crisis can be found in Athens. The Greek government made promises to the country that it couldn’t afford. That is why they worked with the investment bank Goldman Sachs to conceal the true dimensions of public debt from the European Union budget watchdogs. The adage currently circulating in Brussels is true: There are lies, damned lies and Greek statistics. Yes, Goldman helped in the deception and even profited from it. But the bankers weren’t sirens. Competition mandated that they offer all of their financial products to those who were willing to pay for them — including governments who were only interested in cheating.

The BBC brings the focus in on neither the Greeks nor the hedge funds but the very volatile Euro:

…there are widespread doubts among those who support the euro that it can survive in its present form whilst fiscal policies are decided at the level of national governments.

So as Nicolas Veron of the Bruegel Institute says “the markets are testing the limits of the single currency policy framework”.

In fact, concludes the BBC, the respected economist Paul Krugman had a take on all this today: “The real story behind Europe’s troubles lies not in the deficit but in the policy elites, who pushed the Continent into adopting a single currency well before the Continent was ready for such an experiment.”

Related articles by Zemanta

• EU Wants Answers From Wall St. On Greek Debt (econotwist.wordpress.com)
• Greek Finance Minister Begs For Bailout Details, Says Markets Are ‘Attacking’ Greece (huffingtonpost.com)
• EU Wants to Know about Wall Streets Role in Greek Debt (grantlawrence.blogspot.com)