LISBON (Reuters) - Investors sold off stocks in Portugal, Spain and Greece and the euro plunged on Thursday as market fears over the fiscal problems of debt-laden southern members of the euro zone widened. The head of the International Monetary Fund called for painful steps to cut huge fiscal deficits across Europe, saying no country should be under the illusion that it was possible to escape the financial crisis without paying the cost. The Portuguese government's defeat over a regional finance bill, a climbdown by the Spanish government over pension reform, and protests by tax officials in Greece added to the woes of states struggling to cut budget shortfalls bloated by recession.
LISBON (Reuters) - Investors sold off stocks in Portugal, Spain and Greece and the euro plunged on Thursday as market fears over the fiscal problems of debt-laden southern members of the euro zone widened.
The head of the International Monetary Fund called for painful steps to cut huge fiscal deficits across Europe, saying no country should be under the illusion that it was possible to escape the financial crisis without paying the cost.
The Portuguese government's defeat over a regional finance bill, a climbdown by the Spanish government over pension reform, and protests by tax officials in Greece added to the woes of states struggling to cut budget shortfalls bloated by recession.
We are getting a sell-off every morning as Europe goes through the daily ritual of waking up and seeing the cost of default protection rise and rise. This morning Greece is with STUPID (Spain, Turkey, UK, Portugal, Italy & Dubai) as five-year sovereign credit default swap spreads were recently at 4.23 percentage points, compared with Wednesday's closing level of 3.97 percentage points. That means the annual cost of insuring €10 million of Greek government debt against default for five years had risen €26,000 to €423,000. In a nutshell, that's 4.23% annually to insure Greek bonds from default so Greece needs to offer 4.23% more interest on their bonds than an Aaa nation to attract investors.
As we expected in yesterday's post, Greek workers were none too pleased with the EU's budget plan for their country and is rejecting the idea of wage freezes on top of wage cuts. Greece's biggest union is moving towards a mass strike and the public-employee union is planning a job action next week as well. Tax collectors are striking, customs workers are striking, which is screwing up the airports and shipyards and delaying commerce all over Europe - shades of things to come perhaps?
Napoleon said: "A revolution is an idea which has found its bayonetes" and John Kennedy said: "Those who make peaceful revolution impossible will make violent revolution inevitable" and what we are seeing here is backlash as workers of the world have been pushed to the brink for many years and now, as the governments are asking them to take that one final step into the abyss - they are, not surprisingly, pushing back. That's why my 2010 Outlook was titles "A Tale of Two Economies." As we expected, Jobless Claims were a disappointment this week with another 480,000 people involuntarily joining the revolutionary masses (and we will get one whopper of an adjustment tomorrow to the unemployed totals!). Also as we expected, productivity is up nicely - up a whopping 6.2% in Q4 as workers literally kill themselves to keep their jobs. The 138M remaining workers were rewarded with a 4.4% reduction in unit labor costs, which is how US corporations managed to put up those astounding cost savings in Q4 as that's roughly $60Bn in additional profits wrung off the backs of workers in a single quarter. Go capitalism!
As we expected, Jobless Claims were a disappointment this week with another 480,000 people involuntarily joining the revolutionary masses (and we will get one whopper of an adjustment tomorrow to the unemployed totals!). Also as we expected, productivity is up nicely - up a whopping 6.2% in Q4 as workers literally kill themselves to keep their jobs. The 138M remaining workers were rewarded with a 4.4% reduction in unit labor costs, which is how US corporations managed to put up those astounding cost savings in Q4 as that's roughly $60Bn in additional profits wrung off the backs of workers in a single quarter. Go capitalism!
