The European Stabilization Mechanism, Or How the Goldman Vampire Squid Just Captured Europe

Posted on April 18, 2012 by Ellen Brown

The Goldman Sachs coup that failed in America has nearly succeeded in Europe—a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers. 

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress.  But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair.  Paulson’s plea for apermanent bailout fund—the Troubled Asset Relief Program or TARP—was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank president Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion Euro bailoutfor European banks without asking anyone’s permission.  And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press.  The ESM imposes an open-ended debt on EU member governments, putting taxpayers  on the hook for whatever the ESM’s Eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight.  The ESM is cheered by Eurozone governments, their creditors, and “the market” alike, because it means investors will keep buying sovereign debt.  All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the Eurozone governments?

There is another alternative to debt slavery to the banks.  But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB . . . .

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as Member States representing 90% of the capital commitments have ratified it, something that is expected to happen in July 2012.  A December 2011 youtube video titled “The shocking truth of the pending EU collapse!”, originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length.  It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM:  a treaty of debt. . . . The authorized capital stock shall be 700 billion euros.  Question: why 700 billion?  [Probable answer: it simply mimicked the $700 billion the U.S. Congress bought into in 2008.] . . . .

[Article 9]: “. . . ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them . . . within seven days of receipt of such demand.”  . . . If the ESM needs money, we have seven days to pay. . . . But what does “irrevocably and unconditionally” mean?  What if we have a new parliament, one that does not want to transfer money to the ESM?  . . . .

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 . . . accordingly.”  Question:  . . . 700 billion is just the beginning?  The ESM can stock up the fund as much as it wants to, any time it wants to?  And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding, and assets . . . shall enjoy immunity from every form of judicial process . . . .”  Question:  So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.”  Question: . . . [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization?  That’s a pretty powerful treaty!

[Article 30]:  “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them . . . and shall enjoy inviolability in respect of their official papers and documents.”   Question:  So anyone involved in the ESM is off the hook?  They can’t be held accountable for anything? . . . The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity.  There are no independent reviewers and no existing laws apply?  Governments cannot take action against it?  Europe’s national budgets in the hands of one single unelected intergovernmental organization?  Is that the future of Europe?  Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman exec Mario Draghi replaced Jean-Claude Trichet as head of the ECB.  Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments—lavish money on them at very cheap rates.  French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years.  I say “lent”, but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.

The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18% interest, debt doubles in just four years.  It is this onerous interest burden, not the debt itself, that is crippling Greece and other debtor nations.  Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments.  But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say.  OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship.  Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government.  Yet the government is the people—or it should be.  A democratically elected government represents the people.  Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse article 123 of the Lisbon treaty.  Then the ECB could issue credit directly to its member governments.  Alternatively, Eurozone governments could re-establish their economic sovereignty by reviving their publicly-owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest-free.  This is not a new idea but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies.  This right needs to be returned to sovereign governments.  Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here. 

_________________
Ellen Brown is an attorney and president of the Public Banking Institute,http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites arehttp://WebofDebt.com and http://EllenBrown.com.

EXCLUSIVE: GREEK GOVERNMENT ROBBED PUBLIC INSTITUTIONS TO COMPLETE BOND SWAP

by John Ward on maandag, maart 26th, 2012 

“But Lucas my dear, if you run out of poor people, you can always steal from the sick”

REVEALED: HOW VENIZELOS REGIME SECRETLY REMOVED 70% OF MAJOR HOSPITAL, UTILITY & UNIVERSITY BANK ACCOUNT FUNDS TO PAY BONDHOLDERS

Bank of Greece complicit in broadscale embezzlement revealed by respectable Greek health site

The illegally denied default of Greece entered a dramatic new phase this afternoon with the revelation by mainstream Greek public health website Health News that, shortly before midnight on March 8th – the eve of Greece’s psi completion on Friday March 9th – on average 70% of public utility funds in varous large, interest-bearing accounts at the Bank of Greece were raided. These included most of the State’s regional hospital budgets, various universities and (it is alleged) at least one utility company.
The shortfalls came to light late last week and this morning as various hospital purchasing cheques in particular began to bounce. The monies – estimated by one source to total some 1.4 billion euros – appear to have been used to pay off the tiny minority of private sovereign creditors who, under the original terms of their bond purchase, were entitled come what may to full payment of the bond’s yield entitlement.
Setting aside the amoral audacity of this act, it does yet again raise the issue of a Greece so utterly lacking in any real funds in the real world, that to pay off a minute proportion of the bondholders it had to resort to such a desperate measure.
“The Greek government used this money in order to purchase government bonds from various bondholders without getting permission from the bank account owners,” one reliable Athens source told The Slog in commenting on the story, “hospitals and universities have been robbed of hundreds of millions of Euros, absolutely essential for their core functionality.”

On being pointed at the Health News site, The Slog immediately contacted another of many Athens sources who have flocked to this website in recent weeks. This informant in turn offered access to a senior administrator in a major teaching hospital. The person thus contacted told me: “There can be no doubt about this. It isn’t even very subtle. All the monies were withdrawn over a brief period of time on March 8th after normal banking hours. I have spoken to teaching contacts at Universities over the weekend, and it has been confirmed that they too have the same embarrassment. These people are criminals who should be brought to justice. But in the Greece of today, it will not happen”.

One final source told me shortly before posting, “The Bank of Greece is naked in this matter. We ask them for the reasons why this has happened, and they claim to have no knowledge of such things. This is ridiculous. This could not have been done without their cooperation. There is nobody now in Greece we can trust”.

Equally, nobody should be surprised that senior politicians and government officials have conspired to do such a thing. The Venizelos elite has shown itself to be without ethics or remorse in many ways already. The European Central Bank, Brussels, the IMF and even Berlin have also shown a compliant willingness to look the other way or simply ignore the Law if it suits them so to do. But now, I think institutions around the world – and their stakeholders – need to look at what’s happening in southern Europe and ask themselves, ‘Is this really right? Is any cause worth this amount of depravity and deprivation?’

Footnote: sharp-eyed Sloggers may have noticed that last Friday – that ill-starred March 23rd – the Greeks once again postponed the time by which English Law bondholders have to participate in psi. The reason: they aren’t going to participate, and Athens does NOT have the money to pay them…as the above post demonstrates rather well.

source: http://www.infomag.nl/nieuws_item/2012/03/26/exclusive-greek-government-robbed-public-institutions-to-complete-bond-swap/

Endlich etwas Wahres vom Deutschen!

Greece Default Is Official; Insurance Payouts Triggered

Greece Default Is Official; Insurance Payouts TriggeredPublished: Friday, 9 Mar 2012 | 3:18 PM ET By: CNBC.com

This is why

A group representing dealers in credit default swaps decided Friday that Greek's bond swap constitutes a "credit event" that entitles holders of Greek credit default swaps to compensation.

 

 The "yes" vote by the International Swaps and Derivatives Association triggers roughly $3.2 billion in CDS, which are insurance policies that pay out if a bond issuer defaults. That amount is actually much smaller than many had feared.

The decision was widely expected, and stocks were slightly down after the announcement.

Greece pushed through a bond swap deal on Friday, forcing  bond holders to take a significant "haircut" on the return of their money. The swap was approved by about 84 percent of the holders, and Greece is moving to activate a rule forcing the rest of the bondholders to go along with the deal.

The triggering of that rule, known as the Collective Action Clause, is what prompted the ISDA to decide that Greece has created a "credit event."

“There’s three types of credit events as defined by ISDA,” said Gavan Nolan, Credit Analyst at Markit. “There’s a bankruptcy, a failure to pay and a restructuring.”

“What we’re talking about here with Greece is a restructuring," he told CNBC. "A request is made to the ISDA Determinations Committee—which is the arbiter of whether a credit event has occurred—and they have to agree whether or not it is a credit event.”

Out of the 15 members of the ISDA committee, 80 percent had to agree.

The net volume of CDS on Greece now stands at $3.2 billion, according to the Depository Trust & Clearing Corporation, which holds data on credit default swap contracts.

“It’s peanuts really compared to the government bond market," said Nolan. "So I think it’s sometimes overplayed as to how important it is.”

LEAKED MEMO REVEALS DEVASTATING CONSEQUENCES OF A GREEK DEFAULT

For months now, The Blaze hasmeticulously covered events in Greece as they have
unfolded and, for anyone who has been paying attention, the situationdoes not look
 good. Indeed, many analysts believe that the eurozone crisis will only get worse.

But perhaps you still think it’s just a lot of “Chicken Little” nonsense and that a Greek default wouldn’t be that “that bad.” Well, perhaps this leaked memo from the Institute of International Finance (IIF), the organization representing private sector holders of Greek debt in official negotiations, will change your mind.

“[The memo] gives us the most detailed data we’ve seen so far about how the eurozone and the world would be affected by such a move,” writes Business Insider’s Simone Foxman. “It also explains just why EU leaders are doing everything in their power to prevent a disorderly default and Grexit [Greek exit] — the costs would be absolutely astronomical and the fallout uncertain.”

Indeed, judging by the language used in the leaked memo, eurozone leaders are far more afraid of a Greek default than they have been willing to admit.

“And while investors may think that these costs are ‘priced in,’” Foxman notes, “a Greek hard default really might just be another Lehman.”

Which is to say, “disastrous.”

Here are some of the most frightening implications from the IIF’s confidential report (via Athens News and Business Insider):

1. “First, Greece would fail to honor payments on its €368 billion ($486 billion) in debt obligations,” Foxman writes, “That would probably collapse its banking system.”

Indeed, according to the IIF, that would immediately threaten:

• €91 billion in Greek banks’ obligations to foreign lenders and depositors, €28 billion of which are in the eurozone
• €247 billion Greek households and companies owe to Greek banks. 15 percent of these loans are already nonperforming.
• €21 billion that Greek corporations owe to foreign lenders

2. €73 billion of Greece’s debts are held by eurozone countries and the IMF, which means if the small Mediterranean country can’t make its payments . . .

“Additionally, the IIF estimates that the official sector — either governments or bailout funds — would easily have to provide €160 billion ($211 billion) to make sure banks don’t go under, or else force higher capital-to-liabilities ratios through sharper deleveraging,” Foxman writes.

3. The European Central Bank (ECB) could be irreparably damaged. According to IIF estimates, the ECB has as much as €177 billion ($234 billion) tied up in Greece:

• €43 billion in Greek government bonds purchased as part of the Securities Markets Program
• €110 billion in Greek government bonds and other securities that domestic banks used as collateral to borrow from the ECB
• €24 billion in loans to Greek banks through the emergency liquidity assistance program (ELA)

4. Given all the above, there is probably no way that Greece will be able to stay on the euro – or in the eurozone for that matter (via Athens news [emphasis added]):

“Given these financial traumas, it is difficult to conceive that Greece can remain a functioning member of the Euro Area in the event of a disorderly default. The Greek authorities would have little option but to regain monetary policy independence by exiting from the Euro Area and introducing a new national currency…

The issue of whether Greece can remain in the European Union after defaulting and leaving the Euro Area is not clear-cut. The likely imposition of capital controls and possible inability to honor other EU laws and directives would raise important questions.”

5. Perhaps the biggest threat is that, as many analysts have been saying for months, the Greece contagion will spread [author’s note: can we call it a Greece Fire? Has anyone done that yet? If not, we claim it]. In fact the IIF believes the fears about the possibility of a Greek contagion are actually understated:

Financial linkages are potentially more powerful, especially since market developments since the onset of the crisis in 2007 have highlighted a propensity for “runs” to occur on a scale and at a pace that had previously been unimagined. Many policy makers incorrectly believed that the fallout from a Lehman bankruptcy would be contained, since markets had been apparently pricing in a significant default risk well ahead of the actual event.

Click here to see the full IIF report / Read the full BI list here

source:http://www.theblaze.com/stories/leaked-memo-reveals-devastating-consequences-of-a-greek-default/ 

GREEK DEFAULT EXCLUSIVE: SENIOR US BANKERS GIVEN EXPLICIT TIMETABLE FOR ATHENS DEFAULT

DOCUMENTS RAISE AWKWARD QUESTIONS FOR WASHINGTON, IMF & BERLIN

A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January. The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented “a timetable, not a contingency”. The plan gives a firm date of March 23rd for default to be announced after the close of business.

Senior bankers on Wall Street have been given detailed documentation setting out a timetable to Greek default, including firm dates and technical ‘orders’ about last use of the euro as a currency there. The revelation arrived at Slogger’s Roost last Monday, since when I have been trying to obtain corroboration. This arrived in the early hours of today (Thursday). One of the banks is Barclays Capital (Barcap) run by controversial figure Bob Diamond. The other must remain anonymous for the time being, in order to protect sources.

The document asserts that Greece will officially be declared in default by all the ratings agencies after the close of business on Friday march 23rd . At the weekend all Greek bank accounts will be frozen, with emergency measures detailed to prevent the flight of capital. Included in the paperwork is a list of very limited exceptions to the ‘no withdrawals’ order. All major banks ‘are instructed  not to deal with euro exchange  as of open of business in Greece on Monday 25th march. All Greek markets will close for one day ‘at least’.

As yet, I have been unable to establish the source of the documents. But one of my informants admitted, “I have strongly suggested to Greek business friends and clients that they sell up fast, do a sale and leaseback on property, empty bank accounts, and change to a hard currency.”

I have little doubt that such a critical path analysis leading to default in Athens can be easily brushed aside as contingency planning. But this is not the impression Slog sources were given: and its existence is bound to further raise suspicions in ClubMed about the real intentions of ‘EU Nord’, Washington and the Troika – especially the IMF. In particular, the alleged creation of the document both supports (and/or coincides closely with):

1. Washington going cold on further IMF funding

2. IMF intervention in the Athens debt talks

3. Persistent rumours surrounding Wolfgang Schauble’s plans

4. Evidence previously assembled by The Slog  concerning Americo-German coordination

5. A string of delaying tactics by senior EU and Troika officials since mid January.

Reviewing the timeline of the Greek Debt Marathon, the back end of it is pretty obviously one of persistent sabotage from Berlin, Brussels, and the IMF:

1. It’s the second week of January 2012, and the bondholder deal is a few small steps away from lawyers crossing t’s and dotting i’s. Enter Schauble saying the haircut is nowhere near short enough. Bondholders’ leader Charles Dalloran walks out.

2. The Troika barges into the Athens/Bondholder talks, and they turn into chaos, then grind to a halt.

3. FinMinCom meets in Brussels and several encouraging noises are made about progress towards a deal ‘over the weekend’. Enter Merkel bearing demand to fire the Greek Government and replace it with an EU commissioner. This produces four more days of circular delay, following which Nicolas Sarkozy declares that the German demand was never a demand.

4. Lucas Papademos gets personally involved and strikes a deal with Dalloran. Then he extracts the support of all Party leaders for the deal. We’re almost there. Enter Schauble and Brussels saying no, your economy’s worse than we thought – we need a closer haircut and more savings.

5. The troika is now talking direct to the bondholders with Athens outside the loop. The creditors feel on the back foot. They agree to a lower percentage rate for the new bond issues and a 70% haircut. Venizelos meanwhile focuses on finding additional savings. Papademos intervenes again with leaders and creditors. We are now ‘hours away’. Mario Draghi says no, the haircut is too close for the ECB, and not enough for everyone else.

6. Draghi relents a little, the bondholders say they are “tentatively flexible”. We’re two small steps away from a deal. Enter Schauble moaning about £325m of savings unaccounted for…a thousandth of the total Greek debt.

6. Tempers get inflamed back in Athens. Greek leaders start muttering about doing what they have to do, getting the deal signed, and then having elections. Berlin and FinMinCom demand that all Greek Party leaders sign a document ordering them to stick to the deal regardless of election results. This loses another two days….but the bondholders are still keen to sign.

7. The German Bundesbank leaks a story to German newspaper Handelsblatt saying the Greeks will not be able to satisfy bondholder demands, and thus technical default is now a certainty. The story is traced back to the office of anti-bailout hawk Jens Weidmann.

8. Deutsche Mittelstands Nachtrichen runs a story claiming another 2.5 bn euro hole has been found in the Greek budget proposals. The story is deconstructed by The Slog and others and turns out to be complete bollocks. But the FinMinCom meeting in Brussels is postponed, and replaced with a conference call.

9. Merkel says she doesn’t trust New Democracy leader Antonis Samaras. Athenian leaders must now sign another pledge after the additional 325m euros of savings have been found and agreed. They all sign (Wednesday morning – yesterday – 15th February).

10. Yesterday afternoon, the EU finance ministers’ conference call begins to talk about cutting its losses. A firm proposal is tabled – by Berlin, it seems – to divide the next bailout tranche into smaller slices. The next Com meeting is put off for six days.

11. Schauble describes the Greek debt as “a bottomless pit”. Merkel joins the fray by suggesting the bailout be put back until after the April elections. This clearly makes no sense, as from March 16th Greece will be in technical default without more money. But Schauble adds that indeed, Greece should postpone its elections…..and “install a technocrat government similar to Italy’s.”

12. Wen Jiabao makes nice noises about what a fine place Europe is to visit, but van Rompuy and Barroso come away predictably empty-handed.

13. Thursday dawns with everyone wondering where we are. Venizelos accuses “forces trying to push Greece out of the eurozone”. German government spokesman Steffen Seibert calls this “false” and adds, “I can state quite clearly on behalf of the federal government that Germany has taken no such decision.” Nobody said you had, Ducky. Berlin briefs on amphetamines about Angela Merkel being ‘resolutely opposed to default’. A majority of market opinion leaders and bondholders think the EU is bluffing, reports the FT. But a French source tells The Slog earlier today he thinks Germany “is talking from a position of strength. There is no doubt in our minds [in the Elysees] that Berlin has the necessary plans in place.”

We’re but an hour into the working day EU time (1hr ahead of GMT) and already the main EU players are busy installing further roadblocks. Boss of radio Luxembourg Jean-Claude Juncker said, “Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing.” An intention as vague as that could take forever to fulfil….or until March 23rd.

A senior German official quoted by Reuters has added: “Questions remain that are very important to Germany and other member states about the sustainability of the programme.”

Ultimately, not even the Germans can see into the future: this is get off the pot time….but only if you’ve been devious for some time about being on the pot in the first place. The Slog’s recent profile of Angela Merkel demonstrated beyond too much doubt that the Fuhrerine in Berlin is more than capable of being devious.

In the last three weeks, several EU officials have pumped out the line – over and over again – that Greek default is no longer the bogeyman people thought it was….or to be more precise, they told us it was. “It would have led to a credit crunch immediately and hurt us all,” said a senior eurozone official. “Now, the odds [of such a catastrophic impact] are something like 10-20%. It’s still possible, but it’s not a certainty.”

First of all Draghi pumps money into the banking system, then the Troika/Berlin axis slows everything down. Now awkward facts come to light about the existence of ‘a plan’ which would protect America – by dumping the Greek contagion – and help the eurozone by concentrating  the bailout cash available to save the bigger players: Italy, Spain and France. An unpleasant phrase is doing the rounds in Brussels at the moment: ‘amputate and corterise’. It’s certainly beginning to look like that. And without doubt, that’s the way Mario Monti sees it.

Were I Greek, Portuguese or Irish, I’d be a worried man this morning.

The Slog

Germany, France & Holland Sold Greece €1 billion of Arms Amid Debt-Crisis

Posted by keeptalkinggreece 

There is no money for wages, pensions, medicines and books, but there is money for arms. Especially when they are sold by EU countries, our eager-to-bailout-Greece friends. Friends willing to give loans but only under one condition: Trade “arms” for “bailout”.  Citing official EU figures, the website euobserver.com revealed that Eu countries like Germany, France and the Netherlands sold Greece arms worth one billion euro at the same time as they were negotiating the first Greek bailout in 2010.

EU figures show crisis-busting arms sales to Greece

Official figures show that EU countries sold Greece over €1 billion of arms at the same time as negotiating its first bail-out back in 2010.

France was by far the biggest seller, with a €794 million aircraft deal, according torecently-released European Council data on arms licences granted by member states. It also sold €58 million of missiles and €19 million of electronics used for aircraft countermeasures and target acquisition.

Pro-austerity advocates the Netherlands and Germany together sold almost €90 million of mostly electronics and ground vehicles. Italy sold €52 million of rifles and aircraft parts, while Spain sold €33 million of military-grade chemicals.

Greece is currently trying to shave every possible centime off its budget, but it still remains one of the biggest arms spenders in the region due to a perceived threat from Turkey.

The then Greek deputy defence minister, Panos Beglitis, in 2010 told Reuters that fellow member states did not put pressure on Athens to buy the arms in order to get the bail-out. “This [large scale arms purchases] has always been the case with these countries. It is not because of the crisis, there is no link,” he said.

But an aide to the then Greek leader, George Papandreou, who asked to remain anonymous, told the news agency: “No one is saying ‘Buy our warships or we won’t bail you out.’ But the clear implication is that they will be more supportive if we do.”

Looking to the Middle East, the 2010 figures tell a tale of EU countries arming their Sunni Muslim allies in the ‘Cold War’ against Shia Muslim enemies Iran and Syria.

EU countries granted €2.5 billion of licences for exports to Saudi Arabia, €1.5 billion for the United Arab Emirates and €1.2 billion for Oman. Sales to smaller Sunni-controlled regimes – Bahrain, Jordan, Kuwait, Qatar and Yemen – added up to €1.1 billion.

They sold almost nothing to Iran and Syria (barring half-a-million-worth of Greek aircraft parts for Syria’s President Bashar Assad, who buys mostly from Russia). (Further Reading EUOBSERVER)

In recent months, there were several reports mostly by German media about the arms deals amid the severe Greek debt-crisis that pushed millions of households into fast-track impoverishment.

source: http://www.keeptalkinggreece.com/2012/03/07/germany-france-holland-sold-greece-e1-billion-of-arms-amid-debt-crisis/

How Greece could take down Wall Street

 By Ellen Brown
21.02.2012

In an article titled "Still No End to 'Too Big to Fail,'" William Greider wrote in The Nation on February 15th:


Financial market cynics have assumed all along that Dodd-Frank did not end "too big to fail" but instead created a charmed circle of protected banks labeled "systemically important" that will not be allowed to fail, no matter how badly they behave.


That may be, but there is one bit of bad behavior that Uncle Sam himself does not have the funds to underwrite: the $32 trillion market in credit default swaps (CDS).  Thirty-two trillion dollars is more than twice the U.S. GDP and more than twice the national debt. 


CDS are a form of derivative taken out by investors as insurance against default.  According to the Comptroller of the Currency, nearly 95% of the banking industry's total exposure to derivatives contracts is held by the nation's five largest banks: JPMorgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs.  The CDS market is unregulated, and there is no requirement that the "insurer" actually have the funds to pay up.  CDS are more like bets, and a massive loss at the casino could bring the house down.


It could, at least, unless the casino is rigged.  Whether a "credit event" is a "default" triggering a payout is determined by the International Swaps and Derivatives Association (ISDA), and it seems that the ISDA is owned by the world's largest banks and hedge funds.  That means the house determines whether the house has to pay. 


The Houses of Morgan, Goldman and the other Big Five are justifiably worried right now, because an "event of default" declared on European sovereign debt could jeopardize their $32 trillion derivatives scheme.  According to Rudy Avizius in an article on The Market Oracle (UK) on February 15th, that explains what happened at MF Global, and why the 50% Greek bond write-down was not declared an event of default. 


If you paid only 50% of your mortgage every month, these same banks would quickly declare you in default.  But the rules are quite different when the banks are the insurers underwriting the deal. 


MF Global: Canary in the Coal Mine?


MF Global was a major global financial derivatives broker until it met its unseemly demise on October 30, 2011, when it filed the eighth-largest U.S. bankruptcy after reporting a "material shortfall" of hundreds of millions of dollars in segregated customer funds.  The brokerage used a large number of complex and controversial repurchase agreements, or "repos," for funding and for leveraging profit.  Among its losing bets was something described as a wrong-way $6.3 billion trade the brokerage made on its own behalf on bonds of some of Europe's most indebted nations.


Avizius writes:


[A]n agreement was reached in Europe that investors would have to take a write-down of 50% on Greek Bond debt. Now MF Global was leveraged anywhere from 40 to 1, to 80 to 1 depending on whose figures you believe. Let's assume that MF Global was leveraged 40 to 1, this means that they could not even absorb a small 3% loss, so when the "haircut" of 50% was agreed to, MF Global was finished. It tried to stem its losses by criminally dipping into segregated client accounts, and we all know how that ended with clients losing their money. . . .


However, MF Global thought that they had risk-free speculation because they had bought these CDS from these big banks to protect themselves in case their bets on European Debt went bad. MF Global should have been protected by its CDS, but since the ISDA would not declare the Greek "credit event" to be a default, MF Global could not cover its losses, causing its collapse.


The house won because it was able to define what " winning" was.  But what happens when Greece or another country simply walks away and refuses to pay?  That is hardly a "haircut."  It is a decapitation.  The asset is in rigor mortis.  By no dictionary definition could it not qualify as a "default."


That sort of definitive Greek default is thought by some analysts to be quite likely, and to be coming soon.  Dr. Irwin Stelzer, a senior fellow and director of Hudson Institute's economic policy studies group, was quoted in Saturday's Yorkshire Post (UK) as saying:


It's only a matter of time before they go bankrupt. They are bankrupt now, it's only a question of how you recognise it and what you call it.


Certainly they will default . . . maybe as early as March. If I were them I'd get out [of the euro].


The Midas Touch Gone Bad


In an article in The Observer (UK) on February 11th  titled "The Mathematical Equation That Caused the Banks to Crash," Ian Stewart wrote of the Black-Scholes equation that opened up the world of derivatives:


The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold.  But the markets forgot how the story of King Midas ended.


As Aristotle told this ancient Greek tale, Midas died of hunger as a result of his vain prayer for the golden touch.  Today, the Greek people are going hungry to protect a rigged $32 trillion Wall Street casino.  


Avizius writes:



The money made by selling these derivatives is directly responsible for the huge profits and bonuses we now see on Wall Street. The money masters have reaped obscene profits from this scheme, but now they live in fear that it will all unravel and the gravy train will end. What these banks have done is to leverage the system to such an extreme, that the entire house of cards is threatened by a small country of only 11 million people. Greece could bring the entire world economy down. If a default was declared, the resulting payouts would start a chain reaction that would cause widespread worldwide bank failures, making the Lehman collapse look small by comparison.


Some observers question whether a Greek default would be that bad.  According to a comment on Forbes on October 10, 2011:


[T]he gross notional value of Greek CDS contracts as of last week was €54.34 billion, according to the latest report from data repository Depository Trust & Clearing Corporation (DTCC). DTCC is able to undertake internal netting analysis due to having data on essentially all of the CDS market. And it reported that the net losses would be an order of magnitude lower, with the maximum amount of funds that would move from one bank to another in connection with the settlement of CDS claims in a default being just €2.68 billion, total.  If DTCC's analysis is correct, the CDS market for Greek debt would not much magnify the consequences of a Greek default-unless it stimulated contagion that affected other European countries. 


It is the "contagion," however, that seems to be the concern.  Players who have hedged their bets by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.  The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme.  The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives "weapons of financial mass destruction."  It is also why the banking system cannot let a major derivatives player-such as Bear Stearns or Lehman Brothers-go down.  What is in jeopardy is the derivatives scheme itself.  According to an article in The Wall Street Journal on January 20th:


Hanging in the balance is the reputation of CDS as an instrument for hedgers and speculators-a $32.4 trillion market as of June last year; the value that may be assigned to sovereign debt, and $2.9 trillion of sovereign CDS, if the protection isn't seen as reliable in eliciting payouts; as well as the impact a messy Greek default could have on the global banking system.


Players in the future may simply refuse to play.  When the house is so obviously rigged, the legitimacy of the whole CDS scheme is called into question.  As MF Global found out the hard way, there is no such thing as "risk-free speculation" protected with derivatives.   


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Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com and http://EllenBrown.com