Should Muslims Be Allowed To Be Separate From Others In Europe? The Answer Is A Resounding "No!"

Europe's Civil War: The Politics of Separateness

by Saba E. Demian
January 25, 2015 at 5:00 am

http://www.gatestoneinstitute.org/5135/europe-civil-war-the-politics-of-separateness

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The politics of separateness -- whether churning up racial divisions in America or separating Muslims in Europe from their non-Muslim neighbors -- is now a big business.
Europe is in the middle if a civil war, for the grand prize of the dominance of the few over the many. Even presuming that the majority of Muslims in Europe wish to adapt and blend in with the "natives," they are hampered by the violent minority.
The militant minority are a power to be reckoned with, because the prize they offer is so temptingly salacious to youths with still-confused emotional needs. The guiding and funding sources are mostly away from the scene of the fray. If these sources could be dried up, there would be more hope for a peaceful resolution.
Captivating tax incentives for economic growth and upward mobility might also, in addition to addressing the economic malaise in disadvantaged areas, begin to revive at least some of the economies of Europe.
If Europeans practice delusional denials, they are surely marching toward defeat.

Who captains this continent nowadays? Is it the richest, Germany, or is it the UK, which only linked itself geographically, belatedly, by the building a rail route under the English Channel? France insists on having its own path regardless.
The European countries cannot be lumped together. The countries of the European Union [EU] are not culturally homogeneous. The Euro-Zone countries are economically separated from those outside this zone. Members of NATO -- even the expanded NATO -- are viewed differently militarily than those outside the organization. There are also, of course, distinct differences between the Eastern countries of the former USSR and its satellites, and Western democracies; between monarchies and republics; between Catholics and Protestants; between Muslim Europe (e.g. Albania, European side of Turkey, parts of Bulgaria and Bosnia-Herzegovina) and Christian Europe.
These differences were resolved partially or totally, permanently or temporarily, to allow "business to go on."
Then entered another variable: the Islamization of previously-Christian Europe. Before developing a severe headache by pondering that, we should be prepared to learn more of the history of Islam: its previous conquests, the Islamic Empires, its decline -- and more about these recent inhabitants of the continent to which they immigrated and which many of them say they hope to Islamize. This is urgent, as many Muslim countries are stuck in the thought processes of a millennium or so ago. The hiatus is often so great that it defies rationality. We cannot expect an instant change just for our convenience. The ingredients of Europe's newest melting pot either cannot or will not "melt," even for the sake of living together in peace and working towards prosperity.
Even presuming that the majority of Muslims in Europe wish to adapt and blend in with the "natives" and live not only side by side, but totally intermingled in all aspects of life, they are hampered by the violent minority. Many immigrants, also, have a hard time moving away from their past. They can feel lost. They have left behind their origins and heritage but are not in tandem with their progeny, even though they were the ones who willingly and deliberately sought this monumental change. Actually, their offspring frequently reject their values as well as them, mostly because they simply don't comprehend them. It is equally true of the "natives." The "generational gap" is not often bridged for the sake of peace and harmony.
The militant minority, though, have a totally different agenda. They are hell-bent on the Islamization of every single person in Europe, which is the same across the globe. They are a power to be reckoned with because they are recruiting other newcomers from all corners of the earth, and the prize they offer is so temptingly salacious to youths with still-confused emotional needs. The guiding and funding sources are mostly away from the scene of the fray. If these sources could be dried up, there would be more hope for a peaceful resolution. The politics of separateness -- whether churning up racial divisions in America or separating Muslims in Europe from their non-Muslim hosts -- is now a big business and will not easily be given up.
One unanswered question is whether Islam is a religion of peace. First, the Arabic word Islamdoes not mean "peace" but an act of subjugation to God (Allah) and His will. Second, the basis and teaching of Islam is understood universally to consider non-Muslims as infidels. Third, infidels have to be wiped out. There is no gainsaying the word of Allah in the Koran, the hadithof the Prophet Muhammad and the shari'a. Thus, Muslims by birth or conversion, regardless of whether they are ultraconservative, moderates or secularists, are trapped in this vise-grip of enforcing the will of Allah on everyone, non-Muslim or Muslim, if they veer away from the straight and narrow.
What is poignant to me, an Egyptian Coptic Christian who has lived and worked as a physician in Muslim and non-Muslim countries, is the abysmal lack of understanding of Islam by the Western media, leaders and the man-on-the-street. It is mind-boggling to see the degree of ignorance of blatant truths and facts in the way many policies are handled.
Europe is in the middle of a civil war like no other -- for the grand prize of religious dominance by the few over the many. Regardless of the denials of many Europeans and observers from around the world -- who say that the terror acts are not related to Islam, or if in any way Islamic at all, are merely committed by deviants from the "true" origins of Islam -- in reality, the mayhem we see currently is generated by jihadist Islam. This minority is bolstered by others of a similar conviction, but with even more militant ideas and deeper purses.
The rest of the world is at risk of the same fate. There is chapter and verse, other than 9/11, 7/7, the Madrid train bombing and attacks in India, Argentina, Russia, Israel, Canada, Belgium, Australia, Britain and France, among others. As first steps, governments in the West need honestly to study Islam; and an ominous force must confront, contain and cut off the supply of jihadists and their sources of funding.
If European Islamists wish to leave the continent to fight in Syria and Iraq, that should be allowed to exit, but they should not expect to be allowed back. In addition, lawmakers need to enforce laws prohibiting cooperation with designated terrorist organizations. They might also remind people that if they cooperate with designated terrorist groups, they might be subject to arrest upon returning to their home countries, or possibly barred from entering at all. Captivating tax incentives for economic growth and upward mobility might also, in addition to addressing the economic malaise in disadvantaged areas, begin to revive at least some of the economies of Europe.

The Dutch-Turkish jihadist known as Yilmaz, who left the Netherlands to fight in Syria, has proven adept at the use of social media in Dutch, English and Turkish for jihadist "public relations" and recruitment.

If Europeans practice delusional denials, they are surely marching toward defeat.

Saba E. Demian, M.D., is a retired Professor of Laboratory Medicine at the Medical Schools of USC and LSU, and resides in South Carolina.

Cyprus Banking Crisis Update

The following story (from the New York Times) is a follow up on our previous posting today.  However, before you jump for joy, it could be the beginning of another Eurozone crisis if either of the two following things do not occur.  Should the EU not provide money for the Cypriot banks on Thursday, they might not open which would wreck their economy and cause a currency crisis in Europe. And secondly if they EU does provide money, it might cause other issues with the liquidity of the Euro itself.

The failure of the bank deposit tax is a good thing, however, it would not have happened if the Parliament had not postponed its vote until today. Had it done its work on Friday as had been planned, it would have been fait accompli. Someone will end up paying dearly for this mistake as the European finance ministers will want to punish Cyprus for not doing what had been negotiated.

We would expect that some other deal will be worked out and that for a short window of time Cyprus will get the backing of the EU.  However, it all could blow up and we could be in another Euro crisis.

The lesson to be learned is that decisions must be made slowly and deliberately. Had we done that in 2008, we probably would not be in the mess we are now.

Conservative Tom

Cyprus Rejects Bank Deposit Tax, Scuttling Bailout Deal

Petros Giannakouris/Associated Press

Protesters outside the Cypriot parliament in Nicosia during the vote Tuesday on a bailout package.

By LIZ ALDERMAN

Published: March 19, 2013 23 Comments

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NICOSIA — The Cypriot Parliament on Tuesday overwhelmingly repudiated a €10 billion international bailout package that would have set an extraordinary precedent by taxing ordinary depositors to pay part of the bill.

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Related

• Cyprus Bailout Incites Turmoil as Blame Flies (March 19, 2013)

• Resistance in Cyprus Grows to Europe’s Bailout Plan (March 19, 2013)

• DealBook Column: A Bank Levy in Cyprus, and Why Not to Worry (March 18, 2013)

• Room for Debate: Should Depositors Save Cyprus's Banks?(March 18, 2013)

• Second Thoughts in Europe as Anxiety Rises in Cyprus (March 19, 2013)

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A Russian Commercial Bank branch in Nicosia on Tuesday. Cypriot banks were expected to be closed through Wednesday.

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The lawmakers sent President Nicos Anastasiades back to the drawing board with international bailout negotiators to devise a new plan that would allow the country to receive a financial lifeline and avoid the specter of a devastating default that would reignite the euro crisis.

Lawmakers rejected the plan with 36 voting no and 19 abstaining arguing that it would be unacceptable to take money from account holders. Some in the opposition party even suggested abandoning aEuropean Union bailout altogether and appealing to Russia or China to lend Cyprus the funds it needs to keep the economy and its banks afloat. One member of Parliament who was out of the country did not vote.

Analysts had also raised the possibility of bank runs and a halt in liquidity to Cypriot banks from the European Central Bank if the measure did not pass, meaning banks might not be able to open their doors Thursday, the day that a scheduled bank holiday was supposed to end.

The measure failed despite a revision that would remove some objections by exempting small bank accounts from the levies.

The original terms of the bailout called for a one-time tax of 6.75 percent on deposits of less than €100,000, or $129,000, and a 9.9 percent tax on holdings of more than €100,000. The levies, a condition imposed by Cyprus’s fellow E.U. members, are designed to raise €5.8 billion of the total €10 billion bailout cost.

Under a new plan put forward by Mr. Anastasiades early Tuesday, depositors with less than €20,000 in the bank would be exempt, but the taxes would remain in place for accounts above that amount.

The rejection drew loud cheers and cries of joy from a crowd of more than 500 protesters who had gathered in front of Parliament since late afternoon, carrying banners denouncing what they said was a confiscation of their private funds. Some wielded unflattering posters of Chancellor Angela Merkel of Germany, a day after a demonstrator breached security at the German Embassy and climbed to the roof, throwing down the German flag.

“Today, Germany is engaging in Nazism again, not with the weapon of force, but with money,” said a pensioner, Dimitris, 67, who would give only his first name.

The central bank governor, Panicos O. Demetriades, had said the revised plan would fall €300 million short of the €5.8 billion demanded by the international lenders. The gap would be considered a breach of the bailout agreement, he said, and “perhaps might not be accepted” by the bailout negotiators.

And even as Mr. Anastasiades submitted the revised plan to Parliament, he had acknowledged that the changes probably would not be enough to secure a majority in the 56-member legislature. “I estimate that the Parliament will turn down the package,” he said on state television as he headed into a series of meetings.

The managing director of the International Monetary Fund, Christine Lagarde, said earlier Tuesday that she was in favor of modifying the agreement to put a lower burden on ordinary depositors. “We are extremely supportive of the Cypriot intentions to introduce more progressive rates,” she said in Frankfurt.

She had urged leaders in Cyprus to quickly approve the plan agreed by European leaders in Brussels last weekend. “Now is the time for the authorities to deliver on what they have commented,” Ms. Lagarde said.

She complained that critics have not recognized the value of the agreement, in that it would force banks in Cyprus to restructure and become healthier.

In Brussels, Simon O’Connor, a spokesman for Olli Rehn, the E.U. commissioner for economic and monetary affairs, said Tuesday that finance ministers from countries using the euro had agreed the previous night in a teleconference that Cyprus could adjust the way the levy would operate.

But Mr. O’Connor said the E.U. authorities were still waiting to see whether the adjustments being discussed in Cyprus delivered “the same financial effect” as the agreement between Cyprus and international lenders in the early hours of Saturday.

“On the parameters of this levy, we will not comment as long as that’s a process that’s still under way,” Mr. O’Connor said.

On the prospect that expatriates in Cyprus may not have access to their bank accounts any time soon, the British Ministry of Defense said Tuesday that it had sent a Royal Air Force plane to Nicosia with €1 million on board to offer loans to British military personnel there.

The money, it said, was meant to “provide military personnel and their families with emergency loans in the event that cash machines and debit cards stop working completely.”

The ministry also said that it offered to pay the salaries of employees in Cyprus into British bank accounts. “We’re determined to do everything we can to minimize the impact of the Cyprus banking crisis on our people,” the ministry said in a statement.

James Kanter contributed reporting from Brussels, Jack Ewing contributed from Frankfurt and Julia Werdigier contributed from London.

America's Fall From World Leadership

The following article is the background on the piece we just posted by Barry Rubin. It gives his rather negative view of the future of the US and those who side with us.

Conservative Tom

Bio

by Barry Rubin

After the Fall: What Do You Do When You Conclude America Is (Temporarily or Permanently) Kaput?

January 7th, 2013 - 10:46 am

 

If we reach the following highly unpleasant conclusion, what are the implications?

The United States has taken a political turn which, at least for the next four years, will guarantee that it does not play the role of a great power mindful of and willing to protect its own true interests, to support its allies, and to combat its real foes. On the contrary, through inaction or active effort the leadership of America will take counterproductive actions that achieve the opposite result. And there are certain factors — radical ideological hegemony, a weak economy and growing debt, structural social changes, the weakness and disorganization of the opposition — that may make this situation regarding America’s international behavior and policies a long-term, partly irreversible condition. In other words, we don’t know if America is finished as the world’s leading power, but we do know that it will not have leadership and certainly not leadership in a good direction for a while and perhaps will never fully recover.

So what do those outside the United States do to face this situation? (Please note that I am speaking here only of U.S. foreign policy and just remarking on the domestic situation.)

There are those readers who would contest the accuracy of this statement. They will say that Barack Obama is a great president, or at least a decent one, and there is no big problem regarding U.S. foreign policy at all. In fact, he and his team, which now includes Secretary of State-designate John Kerry, will be just fine, or at least okay. They will make the point — valid, but irrelevant — that the United States doesn’t control everything in the world.

Of course, but what about the things it can affect? Unfortunately, American allies and clients cannot afford the luxury of clueless optimism or wishful thinking. Some will grumble publicly and scramble to limit the damage. Others will smile, praise the president, and scramble to limit the damage.

To put it another way: it doesn’t matter whether you agree with me. I’m telling you what’s actually happening.

Other readers will want to debate endlessly on the cause of the problem. Why is this happening? Is it deliberate or due to incompetence and bad ideology? Various conspiracy theories will be raised, and time wasted on them. To putthis another way: for the purposes of this particular article at least I don’t care who or what you blame or what you intend to do about it, I’m talking about what’s happening right now.

It is fortunate that in these post-Cold War times there is no candidate to replace America as world leader. Instead, we have candidates to be regional leaders: China in Asia; the European Union already playing that role in Western Europe; Russia trying to do this in Central/Eastern Europe; and Egypt, Iran, and Turkey competing for hegemony in the Middle East.

But here’s the real issue: things look bad. What does this mean specifically, and how can potential victims react? Let’s begin with a very brief survey of the world scene.

Latin America: there are now several radical regimes in the area — most notably Venezuela — alongside, of course, Cuba. America’s allies in the region are dismayed that the former group (except for Cuba) gets soft, even favorable, treatment by Washington. Fortunately, radical revolutions or major armed insurgencies don’t seem probable. So leaders in the region will worry a lot, be frustrated (why should we be nice to the United States when it doesn’t help us, and even rewards being anti-American?) but get through it. Ironically, of course, the current administration favors policies that are sure to fail in South America, so to the degree Washington has influence it will be to help sabotage the region’s economic progress.

Sub-Saharan Africa: what is truly remarkable is how the Obama administration has done nothing to change U.S. policy in the area. One might have expected that given its worldview and certain ethno-racial factors and ideas in the U.S. leadership, Obama would have wanted to make this region a showcase of how he differed from his predecessors; a model of reparations for past colonialism and racism. But no such luck for the Africans. They will continue to suffer economic and political hardship without significantly increased U.S. help. Bad, but not a change from the usual neglect. Let them eat rhetoric!

South Asia: the pro-Pakistan policy will continue; India will be mistreated. Again, bad but no big change. It will just be more watching Pakistan help conceal al-Qaeda terrorists, working for a radical Islamist Afghanistan once the U.S. forces withdraw, and sponsoring terrorism against India as Washington pays more billions in aid money. The Afghanistan issue might cause a crisis: why did hundreds of Americans die there? Someone — albeit not likely someone in the mass media — might ask this if and when Kabul is taken over by a new anti-American regime.

Also slated to be killed: Afghans who helped the Western forces. They will start seeking new protectors very soon.

East Asia: the smaller countries which want U.S. help and protection from what they perceive as an ever-stronger China won’t get it; this will make them very nervous indeed. Since I believe China doesn’t have aggressive geopolitical intentions, that situation won’t deteriorate too much in military terms. Yet in economic terms the U.S. government is ceding a great deal to China. Much or most of Asia may become a Chinese economic zone, and that will be costly to Americans since potential markets for American goods will in some cases go to China instead, further reducing opportunities for the U.S. economy. Leaders of other countries will scramble to get in the good graces with the new regional superpower, as they perceive the United States no longer matters very much. And we all better hope that North Korea doesn’t get too confident — hopefully Beijing will restrain the wacko dictatorship — and attack the South.

Western Europe: honk if you love Obama. Since European leadership is still obsessed with the EU project and seeks to varnish over rather than deal with their deep economic and social structural problems, they will have no big problems with Obama. He doesn’t attack them, just feeds their addictions.

We are familiar with the European stereotype of Americans as ignorant, irresponsible cowboys (applied to George W. Bush), but there is far less talk about the European stereotype of Americans as naive, blundering, would-be do-gooders who make a giant mess (Barack Obama). Yet there are elements of American decline that many Europeans and European leaders like. The day may come when they think otherwise. As I once remarked to a European ambassador, who agreed: they spent eight years trying to hold Bush back and now are spending four years trying to pull Obama forward.

Central/Eastern Europe: here is a potential big problem. Russian leader Vladimir Putin thinks he can do whatever he wants. He will continue to turn as much as possible of the ex-Soviet, now-independent states into a Russian zone of influence. If he ever decided he wanted to take over Belarus or Ukraine or to attack Georgia again, he knows this can be done without any problem from America. Similarly, the regional states know they cannot depend on American support. Have no doubt that people in countries like Poland and the Czech Republic think about this every day.

So we see in Latin America, Asia, and Central Europe that American allies have no reliable protector anymore. They are left potentially helpless to possibly voracious local powers that are more radical than themselves. And of course they are all hurt by the ongoing poor state of the American economy. Lesson: don’t make the bad guys angry if possible; move away, if possible, from relying on the United States.

Some, however, will benefit from policies that ensure the export of American jobs. But the Chinese — who seem on the surface to be the main beneficiaries — are horrified to find themselves holding so much American debt as a U.S. government inflates the dollar and goes ever deeper into debt. It is a very bad investment indeed.

The thing to watch for is if there’s a crisis: how well would the United States respond to wars, coups, invasions, revolutions, economic collapses? What kind of leadership would be shown in cases paralleling, say, the 1990 Iraqi invasion of Kuwait? What would Washington do if massive repression breaks out in Egypt with the massacre of Christians? Or how would Obama respond if Putin were to grab some neighbor’s territory in part or in full?  You can come up with a great many scenarios that could happen, and in each case the local leaders and a lot of people both think and worry about such scenarios becoming real. At a minimum, knowing they cannot depend on the U.S. makes moderates and democrats more reluctant to fight, more willing to concede or surrender, and certain to despair.

In short, this current (voluntary, not inevitable) decline of the United States places a lot of people at risk. The question is whether there will be crises in which bad and weak American performance makes things worse.

And this brings us to the Middle East, where we know such crises will take place. I don’t want to repeat what I’ve written many times, but to put the whole thing into three sentences:

Israel, relatively moderate Arab regimes (including, yes, Saudi Arabia), and real moderate opposition movements know they cannot depend on the United States for the next four years and perhaps for much longer. To make things worse, the U.S. government is aiding their enemies. Consequently, they must act on their own to protect themselves.

For the Saudis, this can mean supporting establishment (Bahrain’s government, Lebanese Sunni Muslims) or even Salafist forces (as in the Syrian opposition) that they feel can be turned into clients.  We all have good reasons for not liking the current Saudi regime but imagine the country being run and the oil money being in the hands of someone like Usama bin Ladin or the Muslim Brotherhood, dedicated to overthrowing all the other regimes in the region and forcing out U.S. influence.

For Israel, lacking a chance to build real alliances with Arab states or oppositions, it requires unilateral action.

Everyone else — including Christian minorities and women who want equality — is pretty much up the creek without a paddle. The democratic oppositions (and that includes Egypt, Tunisia, and Lebanon as well as Turkey and Iran) will have their hearts broken as they see their own countries lost to a long reign of even worse tyranny and their hopes for better days dashed. Countries as diverse as Algeria, Morocco, and Jordan will have to maneuver and use force to keep Islamists from taking over. In other words, you may be very courageous, but you will give some serious thought to running away as far as possible, to Europe, North America, or Australia.

It is very scary and even tragic for a lot of people.

Here, however, is the main point I wish to communicate: Americans can debate whether this shorter-term vacuum of responsibility and longer-term decline is happening, but much of the world already takes this outcome for granted.

Will Europe Collapse--Swiss Prepare

Should Europe collapse, Switzerland is preparing for a disaster.  Why? The financial problems facing the Euro Zone must be significantly worse than anyone could imagine otherwise why would this traditionally neutral country would be preparing for the worst.
Will we see riots in France, Greece, Italy and others? What effect will it have on other European countries?

Lots of questions and very few answers.  Most of the answers will become apparent when the financial leaders of the Euro-zone  decide how they will solve their problems. The result will range from a minor blimp to a financial disaster. Let's hope they are smarter than the Obama Administration.

Conservative Tom

Switzerland Prepares Army for Euro Zone Fallout

By CNBC | CNBC – 1 hour 7 minutes ago

@cnbc on Twitter

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With anti-austerity protests across Europe resulting in civil unrest on the streets of Athens and Madrid, the European country famed for its neutrality is taking unusual precautions.

Swiss Defense Minister Ueli Maurer, left, visits a tank recruit school.Switzerland launched the military exercise "Stabilo Due" in September to respond to the current instability in Europe and to test the speed at which its army can be dispatched. The country is not a member of the union or among the 17 countries that share the euro.

Swiss newspaper Der Sonntag reported recently that the exercise centered around a risk map created in 2010, where army staff detailed the threat of internal unrest between warring factions as well as the possibility of refugees from Greece, Spain, Italy, France, and Portugal.

The Swiss defense ministry told CNBC that it does not rule out having to deploy troops in the coming years.

"It's not excluded that the consequences of the financial crisis in Switzerland can lead to protests and violence," a spokesperson told CNBC.com. "The army must be ready when the police in such cases requests for subsidiary help."

Some 2,000 troops were part of the drill exercise in eight different towns across the country. Infantry soldiers were used as well as the Air Force and special forces personnel in an assignment that took years to organize.

Quoted in a Schweizer Soldat magazine, Defense Minister Ueli Maurer warned of an escalation of violence in Europe.

"I can't exclude that in the coming years we may need the army," he said.

According to the minister, under pressure to save, some European countries didn't renew their armies as they could no longer afford the upkeep of modern systems.

He said that the situation could amplify dramatically, with countries that couldn't defend themselves facing the possibility of "blackmail." In the paper, he also asked how long the crisis could be calmed with money alone.

Der Sonntag newspaper also reported that army chief André Blattmann is set to submit a proposal in December to utilize four battalions of military police. This will consist of 1,600 soldiers guarding strategic points in the country including the airport, industrial plants, and the international organizations in Geneva.

Protests have taken place in numerous European cities since the financial crisis hit the continent in 2008. In September, 70,000 people marched to the Greek Parliament in Athens and the protests ended with demonstrators clashing with police.

Last week, at least 7,000 plainclothes police and hundreds more undercover agents were mobilized to lock down Athens. Snipers, commandos, frogmen, and helicopters were also present as German Chancellor Angela Merkel visited the country and thousands of protesters streamed into Syntagma square.

Greek Bailout-- Is A Greek Tragedy Next

We continue to read the issues with Greece and its bailout with concern and trepidation.  Our concern is, will it transpire as planned and are there contingencies in place should it not go the way they want. Additionally, we hope it will not cause other countries (Italy, Portugal, Spain for example) to follow suit due to deteriorating financial conditions. There also should be some reservation on the banks and how they will react to the near default and the provisions put in place. For example, will they ever lend to Greece again and if they don't, how does the country build itself back?


Our trepidation is one we have expressed earlier.  Will Germany have to take over the Greek economic system and therefore actually conquer the country without firing a shot? If Portugal, Spain and Italy follow suit, will Germany also take over those countries?  


We have not been a party to the negotiations and we doubt even those closest to the agreement could answer our rather basic questions, as this will have to work itself out.  As far as we know, there never has been a country that was saved from default. We are in virgin territory.  Will the Greeks live up to their agreements, if not, what occurs? Do they go on their own and if so, who lends them money. Surely, no international bank would. Do they go back to barter.  If their economy would be run by another country, how would their citizens react?  


The Greeks are going to have a lot of luck to get through this and come out the other side without major damage.  We definitely wish them luck. Hopefully, the creditor nations will learn from this experience and make better decisions for the next country that comes down the bankruptcy pike.


Conservative Tom

Greece's bailout is back in private sector hands

By Ben Rooney | CNNMoney.com – 9 minutes ago

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It looks like Greece will avoid an outright default in the short run now that eurozone finance officials have signed off on a second bailout for the debt-stricken nation.

But the rescue package worth €130 billion is contingent on a historic debt reduction agreement with private sector investors that must be approved before any bailout money can be released.

Assuming private sector investors sign off, Greece should be able to secure the funds it needs to make a €14.5 billion bond payment in March.

The terms of the private sector agreement include a write down of 53% on the face value of Greek government bonds, steeper than the previous 50% reduction agreed to in October.

The proposal will now be presented to members of the Institute of International Finance, which represents the private sector. The IIF's full committee will review the details and make a decision "in accordance with their own individual processes," according to a statement.

IIF director Charles Dallara said in an interview with CNN's Richard Quest that he expects a high participation rate, but he acknowledged that each investor has the right to make their own decision.

Eurozone approves new $173B bailout for Greece

Under the terms of the agreement, Greece's debt load will be cut by about €107 billion, equal to 50% of the nation's estimated economic output for the year. It will also reduce the amount of debt Greece needs to refinance over the coming years by roughly €150 billion, according to the IIF.

In addition to the write down, investors would exchange existing bonds for securities with lower interest rates. At the same time, investors would receive securities that could increase in value as the Greek economy improves, and EU officials would kick in a €30 billion "sweetener."

According to the IIF, the agreement represents the largest sovereign debt restructuring in history.

Overall, the deal will result in losses of 74% for the private sector, according to Marc Chandler, head of global currency strategy at Brown Brothers Harriman.

Euro economy shrinks, is recession next?

Given the onerous terms, he said reaching the targeted 95% participation rate "seems unlikely." He also suggested that an official endorsement by the IIF may not mean that all private sector investors are on board.

"It is not clear how much the IIF really represents the private sector," said Chandler, in a note to clients.

The concern is that a large number of investors will balk at the deal, forcing the terms to be renegotiated. That could delay the just-approved bailout and put Greece back at risk of a disorderly default.

The Greek government is expected to pass legislation this week that would force investors who reject the agreement to take losses on Greek bonds issued under domestic law, which make up the majority of the nation's debt load.

The presence of so-called collective action clauses would not qualify as a "credit event," according to the International Swaps and Derivatives Association. But the association suggested that activating the clauses could trigger credit default swaps, a form of insurance that investors use to protect against a default.

Credit default swaps, or CDS, were a major contributor to the 2008 financial crisis, when declines in the U.S. housing market caused banks to suffer major losses on mortgage-backed securities.

But analysts say the Greek CDS market is small and such a credit event would probably not shock the global financial system.

"The net Greek CDS positions of systemically-relevant financial institutions appear to be relatively limited," said Tobias Blattner, euro area economist at Daiwa Capital Markets.