KeNo's Housing and Economic Portal: Saturday May 8 Housing and Economic stories

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Greeks’ Anger Rises; EU, IMF Prepare Talks on Bailout - (www.bloomberg.com) European Union and International Monetary Fund officials are due to travel to Athens this week to start laying down conditions for a 45 billion-euro ($61 billion) bailout package as public anger mounts over more austerity measures. Prime Minister George Papandreou’s decision to call for the talks prompted a reaction of “rage” among 48 percent of Greeks surveyed in a poll in the Eleftheros Typos newspaper yesterday. Nine of 10 people surveyed said they expected the IMF to insist on more belt-tightening. Labor unions have threatened new strikes over the prospect of more budget cuts. “The Greek government has managed to ride out the storm of public protest, which for the most part has been reasonably peaceful,” Colin Ellis, an economist at Daiwa Capital Markets Europe Ltd. in London, wrote in an e-mail to investors. “But if public opposition to further austerity measures hardens, the Greek government could find it even tougher to put the public finances back on a sustainable footing.” The talks in Athens, which originally were scheduled to start today, have been delayed until April 21 because of the volcanic ash cloud disrupting European air travel, the Greek Finance Ministry said yesterday. European Central Bank officials also will attend the discussions. Initial talks will be held by phone today, a European Commission spokesman said.

Brussels decrees holidays are a human right - (www.timesonline.co.uk) AN overseas holiday used to be thought of as a reward for a year’s hard work. Now Brussels has declared that tourism is a human right and pensioners, youths and those too poor to afford it should have their travel subsidised by the taxpayer. Under the scheme, British pensioners could be given cut-price trips to Spain, while Greek teenagers could be taken around disused mills in Manchester to experience the cultural diversity of Europe. The idea for the subsidised tours is the brainchild of Antonio Tajani, the European Union commissioner for enterprise and industry, who was appointed by Silvio Berlusconi, the Italian prime minister. The scheme, which could cost hundreds of millions of pounds a year, is intended to promote a sense of pride in European culture, bridge the north-south divide in the continent and prop up resorts in their off-season. Tajani, who unveiled his plan last week at a ministerial conference in Madrid, believes the days when holidays were a luxury have gone. “Travelling for tourism today is a right. The way we spend our holidays is a formidable indicator of our quality of life,” he said. Tajani, who used to be transport commissioner, said he had been able to “affirm the rights of passengers” in his previous office and the next step was to ensure people’s “right to be tourists”. The European Union has experience of subsidised holidays. In February the European parliament paid contributions of up to 52% towards an eight-day skiing trip in the Italian Alps for 80 children of Eurocrats. Tajani’s programme will be piloted until 2013 and then put into full operation. It will be open to pensioners and anyone over 65, young people between 18 and 25, families facing “difficult social, financial or personal” circumstances and disabled people. The disabled and the elderly can be accompanied by one person.

Greece’s bail-out only delays the inevitable - (www.ft.com) The European Union finally agrees a bail-out, and the much-predicted rally of Greek bonds turns into a rout. A week later, spreads on Greek bonds had reached their highest levels since the outbreak of the crisis. The financial markets have recognised that, bail-out or no bail-out, Greece is in effect broke. The bail-out prevents a default this year, but makes no difference whatsoever to the likelihood of a subsequent default. Just do the maths: Greece has a debt-to-gross domestic product ratio of 125 per cent. Greece needs to raise around €50bn ($68bn, £44bn) in finance for each of the next five years to roll over existing debt and pay interest. That adds up to approximately €250bn, or about 100 per cent of Greek annual GDP. In 2010, the Greek economy will contract, on the most credible estimates, by between 3 and 5 per cent. Inflation will fall towards zero, so nominal growth will also contract sharply. Nominal GDP will probably contract even more sharply in 2011, and will continue to contract, perhaps at a slower rate, in 2012 and the following years. The reason for the persistent contraction in nominal GDP is that Greece needs to turn a primary deficit of more than 7 per cent into a primary surplus – before interest payments – of at least 5 per cent, a turnround of more than 12 percentage points, while at the same time improving its competitiveness through wage cuts. The latter implies deflation. As the Greek economy goes through the adjustment process, the debt-to-GDP ratio will deteriorate towards 150 per cent or so.

Human rights take a trip to la-la land - (network.nationalpost.com) Just what is a human right? The right to life? To freedom from oppression? To equal treatment before the law? How about to... vacations? Yep, you read that right. Apparently the good bureaucrats in the European Union, not satisfied with the mere time off that they receive, have decreed that travelling during that time is a right as well. According to Antonio Tajani, the European Union commissioner for enterprise and industry, travelling for tourism today is a right. The way we spend our holidays is a formidable indicator of our quality of life." The plan -- just who gets to enjoy the travel package has yet to be determined -- would see taxpayers footing some of the vacation bill for seniors, youths between the ages of 18 and 25, disabled people, and families facing "difficult social, financial or personal" circumstances. The disabled and elderly can also be accompanied by one other person. The EU and its taxpayers are slated to fund 30% of the cost of these tours, which could range from youth exploring abandoned factories and power plants in Manchester to retirees taking discount trips to Madrid, all in the name of cultural appreciation. Wow. Talk about a reason to move to Europe if you’re a senior, youth, disabled person, or family in “difficulty”. And talk about a reason to flee if you are a working stiff whose taxes will be used to fund vacations for all these people. Aesop’s fable of the exhausted ant, toiling while the grasshopper plays, has perhaps never found greater application.

Goldman Sachs Executive Committee Knew - (online.wsj.com) The 2007 mortgage deal that set off controversy at Goldman Sachs Group Inc. was quickly approved by a group of roughly a dozen senior executives in a routine meeting in a drab conference room, according to people familiar with the matter. That group of senior-level executives—which included those helping to manage Goldman's mortgage, credit and legal operations—has surfaced as an important participant in the Securities and Exchange Commission's securities-fraud case against Goldman, which has rocked the firm and Wall Street. The Goldman group that approved the deal was led by Daniel Sparks, Goldman's mortgage chief, according to people familiar with the matter. Mr. Sparks, who left the firm two years ago, referred questions about the case to the firm. In a civil lawsuit filed on Friday, the SEC accused Goldman and a young mortgage trader of misleading investors by not notifying them of the role of hedge-fund investor John Paulson, who was dubious about the housing boom, in selecting what went into the mortgage deal, which later cratered. But the decision by the group of executives—Goldman's "Mortgage Capital Committee"—indicates that the involvement in the deal went far higher than Fabrice Tourre, the young trader accused of fraud, according to the complaint. Goldman and Mr. Tourre are fighting the charges.