Apr 19

Related article:

CDS Traders Are Betting That France Is Next Up For A Sovereign Shakedown (As Are Spain And Portugal)

Must Germany bail out Portugal too?

The historic part of Lisbon, the Portugeuse capital, recreated after an earthquake devastated the City in 1755

The long-drawn saga in Athens can perhaps be deemed a case apart. Greece lied. Its budget deficit was egregious at 16pc of GDP last year on a cash basis. It wasted its EMU windfall, the final chance to bring public debt back from the brink of a compound spiral.

You cannot blame the euro for this, although EMU undoubtedly created a risk-free illusion that lured both Athens and creditors deeper into the trap – and now prevents a solution. Nor would an orderly default under IMF guidance along Uruguayan lines necessarily imperil Europe’s banks. The Bundesbank hints that letting Greece go would prove a healthier outcome for EMU in the long run, upholding discipline.

However, Portugal did not cheat (much) and did not start as an arch-debtor. It did mishandle the run-up to EMU in the 1990s, failing to offset a fall in interest rates from 16pc to 3pc with fiscal tightening. Boom-bust ensued. But that was a long time ago. Portugal has since settled down to a decade of sobriety. The reward never came.

Brussels admitted last week that Portugal’s external accounts have switched from credit in the mid-1990s to a deficit of 109pc of GDP. This has been caused by the incentive structures of EMU itself. “The more broadened access to credit induced a significant reduction in the saving rate, while consumption kept growing faster than GDP. This development led to an increase in Portuguese indebtedness,” it said.

The IMF’s January report – worth examining for its horrifying charts – said “The large fiscal and external imbalances that arose from the boom in the run-up to adoption of the euro have not been unwound, resulting in the economy becoming heavily indebted and growing banking system vulnerabilities. The longer the imbalance persists, the greater the risk the adjustment will be sudden and disruptive.” The IMF noted the “heavy reliance” of banks on foreign wholesale funding, equal to 40pc of total assets. Continue reading »

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Mar 27

Over the last few years, WikiLeaks has been the subject of hostile acts by security organizations. In the developing world, these range from the appalling assassination of two related human rights lawyers in Nairobi last March (an armed attack on my compound there in 2007 is still unattributed) to an unsuccessful mass attack by Chinese computers on our servers in Stockholm, after we published photos of murders in Tibet.

In the West this has ranged from the overt, the head of Germany’s foreign intelligence service, the BND, threatening to prosecute us unless we removed a report on CIA activity in Kosovo, to the covert, to an ambush by a “James Bond” character in a Luxembourg car park, an event that ended with a mere “we think it would be in your interest to…”.

Developing world violence aside, we’ve become used to the level of security service interest in us and have established procedures to ignore that interest.

But the increase in surveillance activities this last month, in a time when we are barely publishing due to fundraising, are excessive. Some of the new interest is related to a film exposing a U.S. massacre we will release at the U.S. National Press Club on April 5.

The spying includes attempted covert following, photographing, filming and the overt detention & questioning of a WikiLeaks’ volunteer in Iceland on Monday night.

I, and others were in Iceland to advise Icelandic parliamentarians on the Icelandic Modern Media Initiative, a new package of laws designed to protect investigative journalists and internet services from spying and censorship. As such, the spying has an extra poignancy.

The possible triggers:

  • our ongoing work on a classified film revealing civilian casualties occurring under the command of the U.S, general, David Petraeus.
  • our release of a classified 32 page US intelligence report on how to fatally marginalize WikiLeaks (expose our sources, destroy our reputation for integrity, hack us).
  • our release of a classified cable from the U.S. Embassy in Reykjavik reporting on contact between the U.S. and the U.K. over billions of euros in claimed loan guarantees.
  • pending releases related to the collapse of the Icelandic banks and Icelandic “oligarchs”.

We have discovered half a dozen attempts at covert surveillance in Reykjavik both by native English speakers and Icelanders. On the occasions where these individuals were approached, they ran away. One had marked police equipment and the license plates for another suspicious vehicle track back to the Icelandic private VIP bodyguard firm Terr. What does that mean? We don’t know. But as you will see, other events are clear. Continue reading »

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