Econintersect: The Greek parliament approved the latest austerity measures for the 2013 budget last week, even in the face of violent rioting in the streets. But now the Greek banks cannot find enough collateral to cover the €5 billion ($6.5 billion) treasury bill auction scheduled for Tuesday (13 November). According to the Financial Times the banks can only raise about €3.5 billion. The auction is required to cover the government's expenditures until the next international aid package of €31.5 arrives.
A further problem arises because the Tuesday treasury auction will require a temporary €17 billion ceiling for issuance and that has not been approved by the ECB (European Central Bank). The ceiling is supposed to be reduced this month to €12 billion, according to the Financial Times.
Meanwhile some are saying that Greece still has a social payment system which is bloated relative to tax revenues, which are, of course shrinking further under austerity. See the comments of Greek blogger Nikos Tsafos:
Readers have challenged my recent posts on austerity—and my argument that Greece has yet to practice it—in various ways. Either, people say, the data is incorrect or it is irrelevant. Let me try one more time.
This is the starting point. On one hand, we say “the state is being starved and cannot perform basic functions.” On the other, Greece still have a *primary* budget deficit, which means that we still cannot raise enough money to pay the bills even if we just ignored the debt. So we have a contradiction: we cannot both being starved and be eating too much. It does not add up.
There are two hypotheses: either revenues are too low or spending is too high. There is no other way for us to have a budget deficit.
The following video from CBS News shows some of the violence and discusses the European situation.
- Greece battles to avert €5bn default (Kerin Hope, Financial Times, 11 November 2012)
- Greek Austerity Budget for 2013 Approved by Parliament (Demtris Nellas and Elena Becatoros, Huffington Post, 11 November 2012)
- Austerity - Again (Nikos Tsafos, Greek Default Watch, 11 November 2012)