Our profit, your loss

Erected by Greenpeace outside Shell's head office

 

Apocalyptic fires besiege Athens

 From The Guardian

Little had prepared any of us on the Athens-bound flight for the sight of the great fire-induced clouds that swept either side of the plane as it made its descent on Friday.

News of the extreme heat engulfing Greece had spread beyond its borders all week, packaged in increasingly desperate language. Temperatures were breaking records few had ever imagined. If Monday was bad, then Tuesday was worse. In some parts of the country, the mercury had hit 47C (117F), with thermal cameras on drones recording the ground temperature in downtown Athens at 55C.

By Wednesday, we were hearing that entire tracts of suburban forest on the Greek capital’s northern fringes had gone up in flames. Infernos seemingly redolent of Dante’s hell had incinerated everything in their path; friends had lost homes; thousands had been evacuated with residents and tourists fleeing blighted zones by any means possible. Terraces, an Athenian’s respite against the blazing heat, had been transformed into ash-laden no-go zones.

“It’s been crazy over here. Between the extreme heat and the wildfires, it feels apocalyptic,” Eleni Myrivili, a friend recently appointed to the role of Athens’ first chief heat officer, wrote in an email on Thursday as the army was deployed to assist firefighters. “Ash is raining down on us here in Athens.”

From the sky, it was frighteningly clear that the city was under siege, caught in a cycle of insufferable heat fuelling conflagrations on terrain so parched it was ready to ignite at any moment.

Fires, some big, some small, some extinguished and then rekindled, were raging nationwide, the country’s civil protection chief, Nikos Hardalias, told reporters. Conditions were not only “extremely dangerous” but unprecedented, he said, estimating that firefighters trying to protect populated areas, electricity installations and historic sites had battled 154 wildfires over the space of the week. More than 60 conflagrations were still raging on Saturday.

“Over the past few days, we have been facing a situation without precedent in our country, in the intensity and wide distribution of the wildfires, and the new outbreaks all over [Greece],” he said. “I want to assure you that all forces available are taking part in the fight.”

Under skies of acrid smoke – so dense, authorities urged residents to wear masks outdoors and close windows in their homes – other nations, including the UK, have stepped up to help this weekend, dispatching water-bombing planes, firefighters and vehicles to Athens.

Although temperatures had dropped after 11 days of exceeding 40C, winds also picked up on Friday, fanning new flashpoints in and around the city.

By Saturday a huge blaze that had burned through forests and houses towards Lake Marathon, the city’s main reservoir, was advancing up the slopes of Mount Parnitha, surrounding a national park regarded as Athens’ last substantial “green lung” and sending yet more choking smoke across the Attica basin.

On Evia, the island east of the capital, where fires have also rampaged from west to north across rugged woodland, dramatic scenes unfolded as ferries, tourist boats and fishermen rushed to evacuate more than 1,000 people from seaside villages and beaches. Men and women could be seen clutching babies and carrying the elderly and vulnerable on chairs as they boarded the ships to safety.

Further south in the Peloponnese, emergency services struggled for a fifth straight day to contain fires that have destroyed large parts of Ilia and Messinia and threatened ancient Olympia, where the Olympic flame is lit every four years.

Mindful of the huge loss of life from fires that tore through the seaside resort of Mati in the summer of 2018, the Greek government has prioritised evacuations.

Two deaths linked to the latest fires have so far been reported – one victim was a volunteer firefighter and the other Konstantinos Michalos, the British-educated head of the Athens chamber of commerce and industry, who was found dead after rushing to his factory as a devastating wildfire advanced on Kryoneri, a suburb in north-east Athens.

Greece’s prime minister, Kyriakos Mitsotakis, said climate change was clearly to blame for temperatures that “have turned the country into a powder keg” and sparked infernos described as the worst in decades in neighbouring Turkey and Italy.

Once again―who still believes that climate change is something which will happen in the future?  Apart from those who get paid by fossil fuel companies not to believe it?  Who still believes that it will cost more to transition to a zero-carbon economy than the cost of climate disasters, year after year into the future?

Locals fleeing with their animals as a wildfire rages in a suburb north of Athens. Photograph: Giorgos Moutafis/Reuters

This is the consequence of ill-advised austerity

Trenchant cuts to government spending and large rises in taxes don't balance the budget, because they cause the economy to go into recession or to deepen the existing recession.

The Greek unemployment rate is now at a new record high of 25.4%.  A year ago it was bad enough: 18.4%.  But it has risen an incredible 7% points in one year, and this isn't the first year of the recession.  It's the fifth.  And its prospects of repaying its debts are no better than they were at the beginning of this whole sorry fandangle.

This is higher than the unemployment rate reached during the Great Depression in the US.  And it is still rising!   Holy ninniebarn!

What a shameful spectacle of gross incompetence by those in charge; incompetence made worse by the fact that not only has it not achieved its target, but it has inflicted scars on Greece which will last a generation.  Pointlessly.

Meanwhile, the same tired old remedy is being proposed to solve the budgetary difficulties of all the other deficit countries (Spain, Italy, the UK, Australia....), and of course we face a "fiscal cliff" in the US where the rabid right cling desperately to their failed nostrums.  Like medieval blood-letting: if the treatment doesn't work you just repeat it until the patient dies.

(You might also want to read Lessons from History)

The Greek Debt Crisis (again)

Once again, markets are being roiled by concerns that Greece will default on its debts.  For some time now it's been obvious that a restructuring of Greek debt is inevitable, but bureaucrats and politicians have continued to pretend that austerity will be enough to guarantee payment.

The Greek government’s debt to GDP ratio exceeds 100%.  This means that the interest paid on this debt will be a significant percentage of GDP.  If interest rates are low, say 1 or 2%, as they are in Japan, the interest cost of the debt will also be low.  But if doubts arise about the ability or willingness of the government to repay the debt, then interest rates start rising, and the interest burden starts to rise as markets increase the risk premium applied to that country’s debt, thus increasing the risk that the debts won’t be paid.  This doom loop has hit Greece.  10-year bond yields are now above 17%. 

The burden on the Greek population is insupportable.  It is likely that the government will fall today or in the next few days and Greece will default.

Does this crisis mean you should switch into defensive investments such as cash?  No (though it's close) for 6 reasons:

1. Chinese growth will continue. China is the world’s second largest economy (and is the world’s largest consumer of raw materials).   Chinese growth is now driven by internal forces rather than exports.
2. Though US growth is slowing this has much to do with natural disasters – the tsunami in Japan stopped car part production which affected US car production and sales; and floods in the mid-west also impacted output and sales.  Outside the PIGS (Portugal, Ireland, Greece, Spain) growth in Europe is strong.
3. Share markets are a lot cheaper than they were--though they're still not screaming buys.
4. The markets have seen this crisis developing over the last year, and most of the bad news is now “in the price.”  Nobody now believes Greece will avoid default except bureaucrats and politicians.
5. Policy makers are extremely aware of the dangers and will move aggressively to ease liquidity on any sign that the crisis is spreading.  If necessary, central banks can buy bank bonds or lend banks unlimited cash on the security of government paper or even lend them money directly.
6. Unlike the situation at the beginning of the GFC, when economies were ripe for a cyclical downturn, now we are still in the middle of the upswing from the trough of the recession.

But it's hard to see share markets booming on this, isn't it?