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3 Eurozone Countries With Debt-to-Income Ratio Over 300%

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Forget the usual Debt-to-GDP ratio that is thrown about when discussing a countries ability to pay. A more realistic ratio is between its debt and its income since debt is paid from a governments income. When you consider this comparison, then 3 countries in the eurozone have  a ratio greater than 300%. Worse still is the US with a debt-to-income of 304% in 2012.

Ireland, Greece and Portugal are labouring under debt-to-income ratios of more than 300%, according to figures that expose the indebtedness of eurozone governments in relation to their government revenues.

The measure, intended to show governments’ abilities to pay debts, shows Ireland’s total debt in 2012 was €192bn (£163.1bn), or 340% of the government’s income. Ireland came a narrow second in the table to fellow bail-out recipient Greece, which has amassed an even worse debt-to-revenue total of 351%. Portugal – which has also received aid from the troika of the International Monetary Fund, the European commission and the European Central Bank – came third with a debt-to-revenue ratio of 302%, while Britain was sixth last year on the list of 27 European Union member states, with a debt-to-revenue ratio of 212%, according to calculations based on European commission figures.

 Debt figures are usually calculated as a ratio of a country’s national income and expressed as a proportion of GDP. But national income figures reflect activity across the whole economy, in both the public and private sectors. governments must pay debts from tax receipts and other government income, not the income for the economy as a whole. Some analysts argue a government’s debt-to-revenue ratio provides a clearer picture of its ability to fund annual debt payments once interest rates are taken into account.

The US is in even worse shape than Greece. Its $16tn (£10tn) debt is the equivalent of 105% of GDP, but more than 560% of government revenues. Washington’s debt payments are cheap after a plunge in the interest it pays on government bonds, but with revenues of only 14% of GDP compared with about 40% across much of the EU, its ability to pay is weakened.

Ireland, which is often commended for its recovery from the banking crash, has seen a sharp rise in its debt-to-revenue ratio in the last four years. In 2009 the ratio was 187%. A year later it had jumped to 262% before reaching 340% in 2012. However, the country appears to be in better shape when debt-to-GDP figures are used. It ranks fourth, with a 117.6% ratio, after Greece, Italy and Portugal.

Greece’s performance, by contrast, has improved. It has pushed through a huge clampdown on government spending and has seen its ratio fall from 402% in 2011 to 351% in 2012.

Some of Europe‘s strongest economies have jumped up the league table of indebted EU nations when the debt-to-revenue measure is used. Germany has a ratio of 181%, Malta’s is 178%, while France has a ratio of 174%, all higher than countries that are often cited as troubled and at risk of default such as Slovenia (120%) and Hungary (168%).

The healthiest economies according to the debt-to-revenue measure are the Nordic nations, where Sweden enjoys a 75% ratio, Denmark a 82% ratio and Finland a 99% ratio in 2012.

In the aftermath of the 2009 banking crash, the US investment bank Morgan Stanley argued that debt-to-government-revenue ratios should be included in any discussion of a possible sovereign debt default.

Analyst Arnaud Marès, who has since left the firm, said in August 2010: “Whatever the size of a government’s liabilities, what matters ultimately is how they compare to the resources available to service them. One benefit of sovereignty is that governments can unilaterally increase their income by raising taxes, but they will only ever be able to acquire in this way a fraction of GDP.

“Debt/GDP therefore provides a flattering image of government finances. A better approach is to scale debt against actual government revenues. An even better approach would be to scale debt against the maximum level of revenues that governments can realistically obtain from using their tax-raising power to the full.

This is a function of the people’s tolerance for taxation and government interference. Seen from this angle, the US federal debt no longer compares quite so favourably with that of European governments.”

In 2010, US debt to revenue was 365%.

Source: The Guardian

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Iceland Vs Greece

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Sometimes a chart says it all. Its no wonder the lamestream media completely ignore the Icelandic success story because to follow would mean the end of the Euro. Taxpayers must be forced to prop it up at all costs so we know where Cyprus is heading judging by this chart.

Iceland Vs Greece – who made the right decision?

US Debt Per Person Higher Than Greece

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They always get us to focus on the wrong things……….all the talk this week has been deal on Greece but what about this for a chart.

Source: Bullion Management Group

Greece Once Again Threatens The Euro

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During the week the Greek finance minister was caught out lying about a troika bailout outcome but now Greece needs to face up to labour reforms over the weekend or else…

Tim Geithner’s carefully scripted plan to avoid European “reality” until the US election is unraveling. While previously Greece was not supposed to be an issue until after November 6, the recent escalation with the Greek FinMin openly lying about a Troika interim bailout outcome (which may or may not happen, but only following yet another MoU which would see Greece fully transitioning to a German vassal state in exchange for what is now seen as a €30 billion shortfall over the next 4 years, and which would send Syriza soaring in the polls in the process ensuring that a Grexit is merely a matter of time) has forced a retaliation. According to the Greek press, the Troika now demands that Greece resolve its objections to labor reforms (which as reported earlier have forced the ruling coalition to split) by Sunday night, or else… The implication, it appears, is that absent a compromise, the next Troika tranche of €31.5 billion is not coming, and Greece is out.

……

From Kathimerini:

The government is facing a Sunday deadline for a full agreement on the package of measures that will see it cash in the next bailout tranche of 31.5 billion euros. The three-day extension it got in order to get maximum backing within the three-party coalition will be necessary as minor partner Democratic Left insists on an improvement in the terms concerning labor reforms that it staunchly opposes.” Will Greece come through in the clutch? And if not, just what happens with the EURUSD on Sunday night as Greece calls the Troika’s bluff? Deja vu shades of early summer, and plunging European risk come to mind…

It will not be an easy agreement to reach and any fallout will be assessed on Monday by the Euro Working Group.

The Euro Working Group (EWG) of eurozone finance ministry officials will convene again on Monday to discuss whatever conclusions Athens has come to and prepare the blueprint that the Eurogroup of euro area finance ministers may discuss on Wednesday through a video conference that sources from Brussels say is likely to take place in order to discuss Greece.

The prime minister appears determined to have the measures passed immediately through Parliament, either in one or in two draft laws, ordering on Thursday the preparation of the bills required.

At the same time there are also disagreements within PASOK, the other minor coalition partner, as a number of deputies are threatening to vote against a Finance Ministry measure regarding privatizations.

Source: ZeroHedge

ECB Balance Sheet At $15 Trillion and Growing

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What was it that Jean Claude Juncker used to say?, “When it becomes serious, you have to lie”. Well, when it comes to the ECB’s balance sheet, they must have taken a leaf out of Junker’s book. According to ZeroHedge, the real figure of the balance sheet is $15 trillion because “guaranteed debt” is not counted even if its Greece.

The ECB, as I quoted recently from their own published balance sheet, has $15 trillion in loans outstanding to Europe. They claim a $4 trillion balance sheet based upon not counting guaranteed loans by various nations and by not counting contingent liabilities. This is the same scheme that is used for calculating the debt to GDP ratios of the countries in Europe. The methodology is consistent. If a loan, a debt, is guaranteed by a nation or if the liability is “contingent;”it is not counted. This, of course, does not mean that possibility of having to fund or write-off something is not there; it just means it is not counted.

Furthermore all guaranteed loans or debts of any nation, including Greece, are deemed “risk-free” and so the balance sheet of not just the ECB but the banks in Europe are skewed, as in incorrect by American standards, by the methodology employed. What is the “Standard Operating Procedure” in Europe would be fraudulent in the United States and while you may think that everyone is entitled to their own manner of doing things it also must be said that the European invention allows for increased risks and leverage that could overcome the Continent at any point. “Not counted” does NOT mean “not there” and so the cause for my great concern.
 
European banks were supposed to be de-leveraging  in accordance with the Basel III rules but have grown by 7% according to recent data released by Eurostat. Target2 was supposed to be shrinking but has grown to almost one trillion Dollars. The loans at the ECB have been increasing and whether the credit line to the Spanish banks or the loans to the banks of many countries in Europe to buy their debt at auction keeps on growing. The risk factor is magnified so far past any margin of safety that I am fearful, more than fearful, that some event, some relatively minor event in fact could throw Europe off a cliff that will make our fiscal cliff look like a gently rolling hill in comparison.
 
I repeat and repeat again:

“NOT COUNTED” DOES NOT MEAN “NOT THERE!”

Source: ZeroHedge

Greece Takes Next Step To Serfdom

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The bankers demands get more and more brazen but this latest one takes the biscuit. According to a leaked Troika letter, Greeks are about to be asked to work a 6 day week. This comes on top of a OECD report in 2010 which said the Greeks are the 2nd hardest workers in the world, after the South Koreans.

Area: Flexibility of labour arrangements
Measure: Increase flexibility of work schedules:
 
•     Increase the number of maximum workdays to 6 days per week for all sectors.
•     Set the minimum daily rest to 11 hours.
•     Delink the working hours of employees from the opening hours of the establishment.
•     Eliminate restrictions on minimum/maximum time between morning and afternoon shifts.
•     Allow the consecutive two week leave to be taken anytime during the year in seasonal sectors.
This is right up there with that Australia nut job, (300 lb) Rinehart (the worlds richest woman, who inherited her wealth and knows nothing about having to work for it).
Australian mining magnate Gina Rinehart has criticised her country’s economic performance and said Africans willing to work for $2 a day should be an inspiration.
Chrstine Lagarde’s recent condescending comments towards Greece demonstrate further, what the elites feel about them. Whats in store for the rest us ?
“I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time because I think they need even more help than the people in Athens.”

Greece Is Printing Its Own Euros And Everyone Turns A Blind Eye

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Nobody is brave enough to finally pull the plug on Greece and force it to exit the euro so the game continues. The Troika are due to release their report in September but in the meantime on 20 August a €3.2 billion bond is due to be paid. The ECB has stopped accepting Greek collateral. So where does Greece get its funding from? And here lies the fragility of the monetary system because Greek is printing its own money and everyone is turning  a blind eye.

A lot of politicians in Germany, but also in other countries, issue zingers about a Greek exit from the Eurozone and the end of their patience. Yet those with decision-making power play for time. They want someone else to do the job. Suddenly Greece is out of money again. It would default on everything, from bonds held by central banks to internal obligations. On August 20. The day a €3.2 billion bond that had landed on the balance sheet of the European Central Bank would mature. Europe would be on vacation. It would be mayhem. And somebody would get blamed.

So who the heck had turned off the dang spigot? At first, it was the Troika—the austerity and bailout gang from the ECB, the EU, and the IMF. It was supposed to send Greece €31.2 billion in June. But during the election chaos, Greek politicians threatened to abandon structural reforms, reverse austerity measures already implemented, rehire laid-off workers….

The Troika got cold feet. Instead of sending the payment, it promised to send its inspectors. It would drag its feet and write reports. It would take till September—knowing that Greece wouldn’t make it past August 20. Then it let the firebrand politicians stew in their own juices.

 

In late July, the inspectors returned to Athens yet again and left on Sunday. After another visit at the end of August, they’ll release their final report in September. A big faceless document on which people of different nationalities labored for months; a lot of politicians can hide behind it. Even Merkel. And the Bundestag, which gets to have a say each time the EFSF disburses bailout funds.

Alas, August 20 is the out-of-money date. September is irrelevant. Because someone else turned off the spigot. Um, the ECB. Two weeks ago, it stopped accepting Greek government bonds as collateral for its repurchase operations, thus cutting Greek banks off their lifeline. Greece asked for a bridge loan to get through the summer, which the ECB rejected. Greece asked for a delay in repaying the €3.2 billion bond maturing on August 20, which the ECB also rejected though the bond was decomposing on its balance sheet. It would kick Greece into default. And the ECB would be blamed.

But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.

Its against the governing treaties but when has that stopped the elites in the EU who can break the rules whenever it suits them. As Eddie Van Halen once said, “To hell with the rules. If it sounds right, then it is.”

Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.

If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.

“We don’t have any time to lose,” said Eurogroup President Jean-Claude Juncker. The euro must be saved “by all available means.” And clearly, his strategy is being implemented by hook or crook. Then he gave a stunning interview. At first, he was just jabbering about Greece, whose exit wouldn’t happen “before the end of autumn.” But suddenly the floodgates opened, and deeply chilling existential pessimism not only about the euro but about the future of the continent poured out. Read….. Top Honcho Jean-Claude Juncker: “Europeans are dwarfs”

Source: Testosteronepit.com

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