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The one and only thing that might possibly spare Greece the agony of a completely worthless currency is Greece's small hoard of 111 tons of gold.


Pact With the Devil

Yet, in the fine print in the latest deal, Greece’s lenders will have the right to seize its gold reserves according to the New York Times article Growing Air of Concern in Greece Over New Bailout.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

“This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders,” said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development. She was one of several independents who joined 43 lawmakers from the two largest parties in voting against the loan agreement.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

Causing a Nightmare Scenario

On Tuesday, Finance Minister Evangelos Venizelos defended the new debt agreement, calling it “the most significant deal in Greece’s postwar history” and asserting that it had “averted a nightmare scenario.”

Today this same puppet of the Troika installed government claims, as he has been for weeks, No Loan Deal Means Absolute Catastrophe

Greece Finance Minister Evangelos Venizelos said Thursday Greece would face an absolute catastrophe if it didn't approve the terms demanded by international creditors in exchange for a second bailout, which includes a EUR107 billion debt write-down plan.

Greece is already in a state of absolute catastrophe. The one thing 100% guaranteed to make matters worse for Greece is if Greece lost its hoard of gold to the thieves and plunderers at the IMF and Troika.

Rather than "averting a nightmare scenario" that pact is going to "cause" a nightmare hyperinflation scenario.

Value of 111 Tons of Gold

One tonne = 1000 kilograms = 32150.746 troy ounces.
At $1780 per troy ounce, the value of that gold is roughly $6.35 billion.

Given an estimated size of the Greek economy at $290 billion or so, that is not a huge hoard.

However, something is better than nothing as Zimbabwe proves. Something is enough to prevent a currency from going completely worthless, although obviously not enough to prevent a massive devaluation.

Still Time

There is still time for Greece to come to its senses and reject the deal. Also recall the conditions of the deal  require a constitutional change and that is impossible before 2013.

For details, please see Greece Needs New Constitutional Provision Imposed by the Troika; Slight Problem, Constitutionally It Can't Do it

Biggest Hope for Greece is Germany

In an enormous irony, Germany may be the biggest hope for Greece. Although France and other countries do want this pact to go through, Germany's words and actions prove that Germany does not.

Germany has put up roadblock after roadblock attempting to get Greece to scuttle the deal, only to have fools like Finance Minister Evangelos Venizelos agree to them.

It may be up to Germany to come up with still more ludicrous demands in hope that the Greek finance minister and Greek politicians finally get the message "it's not wise to make a pact with the Troika devil", especially one that requires Greece to relinquish its gold.

By Mike "Mish" Shedlock

source

By Gabi Thesing and Flavia Krause-Jackson

May 3 (Bloomberg) -- Euro-region ministers agreed to a 110 billion-euro ($146 billion) rescue package for Greece to prevent a default and stop the worst crisis in the currency’s 11-year history from spreading through the rest of the bloc.

The first payment will be made before Greece’s next bond redemption on May 19, said Jean-Claude Juncker after chairing a meeting of euro-region finance ministers in Brussels yesterday. The 16-nation bloc will pay 80 billion euros at a rate of around 5 percent and the International Monetary Fund contributes the rest. Greece agreed to budget measures worth 13 percent of gross domestic product.

“It’s an ambitious program, it’s austere but it’s absolutely necessary,” Juncker told reporters. European Central Bank President Jean-Claude Trichet, speaking at the same press conference, said Greece’s plan will “help to restore confidence and safeguard financial stability in the euro area.”

Policy makers agreed to the unprecedented bailout after investors’ concerns about a potential Greek default sparked a rout in Portuguese and Spanish bonds last week and sent stock markets tumbling. At stake is the future of the euro 11 years after its creators left control of fiscal policy in national capitals.

Interest Rate

The extra yield that investors demand to hold Greek debt over German bunds surged to 826 basis points on April 28 after Standard & Poor’s cut its rating to junk. It eased to 594 points on April 30 as signs of an agreement emerged. The Portuguese spread jumped to the most since at least 1997 last week and the premium on Spain climbed to the highest since March 2009.

The euro, which fell to a 12-month low of $1.3115 on April 28, strengthened to $1.3294 two days later.

European Union leaders will meet on May 7 to discuss the pace of parliamentary approval of the Greek loans. Germany plans to debate the plan on the same day.

“The EU can afford to bail-out Greece and even Portugal, but it cannot afford bailing out Spain,” said Andrew Bosomworth, Munich-based head of portfolio management at Pacific Investment Management Co., which oversees the world’s largest mutual fund from Newport Beach, California. “Therefore a lot is resting on getting Greece right.”

Germany will provide 28 percent of the euro region’s overall contribution.

‘Not an Easy Day’

In return for rescue funds, Greece agreed to measures that the ADEDY civil servants union called “savage.” Greece will cut wages and freeze pensions for three years as well as increase the main sales tax to 23 percent from 21 percent. Progress will be monitored quarterly, the Greek government said.

“It is not an easy day,” said Finance Minister George Papaconstantinou in Brussels. “It’s not going to be easy for Greek citizens. But it’s absolutely clear that the Greek government is prepared to do what it needs to do.”

The financial lifeline lasts three years and forces Greece to cut its budget deficit below the European Union’s limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned. The shortfall was 13.6 percent last year, the second-biggest in the region after Ireland.

Greece now expects its economy to shrink 4 percent this year and 2.6 percent before returning to growth in 2012. The package will also set up a “financial stabilization” fund to help banks with potential bad loans stemming from the austerity measures. Ten billion of the total rescue package will be earmarked for the fund, said EU Monetary Affairs Commissioner Olli Rehn.

Ringfence

Policy makers are trying to ringfence the Greek crisis after yields surged across the euro region’s periphery on concern Spain, Portugal and Ireland will also struggle to cut their deficits. S&P followed its decision to cut Greece’s credit rating to junk on April 27 with downgrades on Portugal and Spain.

Rehn indicated that the Greek bailout plan can’t be seen as a blueprint for other euro nations as Greece is a “special case” because of the way previous governments fudged its deficit statistics.

At 11.2 percent of GDP, Spain’s budget deficit was the third-highest in the euro region last year and Portugal’s was the fourth-biggest at 9.4 percent.

Asked about contagion risks, Austrian Finance Minister Josef Proell said yesterday’s agreement “will send a clear signal to the markets that Europe is able” to handle the crisis and “minimize the risk” of it spreading.

Debate

The Greek bailout marks an end to nearly three months of debate among EU leaders on whether and how to rescue a euro region nation teetering on the brink of default. German Chancellor Angela Merkel has been reluctant to put taxpayers’ funds at risk as her government faces a regional election in North Rhine-Westphalia on May 9.

Fifty-six percent of Germans oppose giving Greece aid, calling such support “wrong,” Bild am Sonntag reported, citing an Emnid survey. Germany hopes to secure parliament’s approval for the plan by May 7.

Merkel yesterday said she was right to demand IMF involvement in the fund over the objections of her European peers.

“Three months ago it would have been unthinkable that Greece would accept such tough conditions,” she said in Bonn.

Austerity

Greek Prime Minister George Papandreou is likely to face his own difficulties. The austerity plan has sparked opposition in Athens, with the federation of civil servants calling a 48- hour strike starting May 4.

“They won’t manage to enforce these measures,” said Pavlos Nikolaou, 39, who runs a mini-market in Athens. ‘I don’t think this will be the end of measures, they’ll have to announce more next year. Cutting salaries is also not what’s going to solve Greece’s problems.”

“Implementation will now be investors’ foremost concern in the coming months, and Greece will have to work hard to rebuild its reputation and regain market confidence,” said Annunziata. “It will be an uphill struggle.”

source HERE