Wednesday, February 22, 2012

Above the law?

Import Restrictions Declared 'Extra Legal'

By Richard Giedroyc

After reviewing the new restrictions on importing certain coins, two University of Miami law professors have declared the U.S. State Department’s actions as “extra legal,” according to a spokesman for the Ancient Coin Collectors Guild.

Washington attorney Peter Tompa, speaking at the Jan. 7 ACCG meeting held during the New York International Numismatic Convention, said the two professors examined laws regarding the import of certain coins and how these laws are being enforced, despite having no personal interest in coins or in coin collecting. Their conclusion, according to Tompa, was that those enforcing these laws have been going beyond the letter of the law, using the law term “extra legal” to describe these actions.

The ACCG, alongside other numismatic organizations, has been conducting an ongoing series of lawsuits regarding where the ACCG views seizures of coin imports or coins already in the United States as being unjust.


ACCG spokesman Wayne Sayles reported at the NYINC meeting that the ACCG now has 793 individual members as well as 21 affiliated clubs that represent approximately 5,000 additional collectors. Sayles was careful to clarify what collectors and dealers should and should not do. “It is not in our best interests to find a way to get around the law. It is in our best interest to change the law,” he declared.

One of the problems Sayles identified is that U.S. Customs agents don’t apply the laws consistently restricting the import of certain ancient coin types. Part of this may be a lack of understanding regarding these coins, however Sayles said, “We need to get involved internally with [U.S.] Customs.”


Customs agents have been told to seize specific type coins, rather than basing the coins on where they were found. In some instances, the coins may have been legally excavated in a country other than the country of issue. For example, an ancient coin struck on Cyprus may have been excavated in another country.


An additional factor to consider, according to the ACCG, is that some customs agents are favoring the stance of archaeologists who are against any coins being available to collectors. The archaeologists who favor a full ban on the import of such coins is a minority, according to Sayles. He noted that at a recent hearing only eight percent of archaeologists favored coins being named among future import restriction laws now being considered by the U.S. State Department.

Sayles told those at the ACCG meeting some coin dealers are now giving clients invoices on which photographs of their coins appear. Current statutes require an affidavit both from the dealer and from the buyer that some specific ancient coins are being imported legally. The provenance and the date of purchase of such coins is becoming increasingly important due to these restrictions.





The State Department has effectively declared its decisions to impose US import restrictions on ancient artifacts to be "above the law" in its response to the ACCG's Baltimore test case appeal, which seeks judicial review of these decisions. Not only do these decisions go beyond the letter of the law (exceeding the authority it grants to the State Department), they also clearly violate its legislative intent.

The State Department additionally refuses to comply with reporting and disclosure requirements mandated by US law, on grounds that its actions must be kept secret because they involve diplomatic negotiations and confidentiality obligations to their sources of information.

Collectors of ancient artifacts (including coins) in all nations, Germany being one significant example, may find themselves exposed to oppressive official actions if constant vigilance is not maintained to ensure that government officials themselves obey the law. Examples of what can happen when they do not may be found here:

It is very costly and time-consuming for individuals to contest such unwarranted official actions, and in most cases the collector or dealer involved would not find it economically sensible to sue for judicial review.

Antiquities collectors in European nations should not imagine that because they live outside US jurisdiction, the efforts of the ACCG and its legal allies to enforce judicial review and the rule of law as constraints on government officials in the USA are not also vitally important to them. These efforts, although focused on coins, are the only concerted action presently being taken in defense of antiquities collectors' rights. Legal precedents that result may have importance to cases involving collecting and trading in all types of antiquities.


Tuesday, February 21, 2012

Bailout Uncertainties

Greek debt pact is far from a done deal

By John W. Schoen

In their jubilant celebration over the latest agreement to solve Greece's debt debacle, European officials forgot to check with two important groups: the Greek voters and the bondholders who lent Athens the money it now says it can’t pay back.

The agreement once again buys the eurozone some time. Greek officials agreed to deeper spending cuts of 325 billion euros ($430 billion) and stricter budget oversight by the European Union. They also agreed to ask investors to accept less than 50 cents on the dollar on Greek bonds they hold. If all goes well, Athens will once again dodge bankruptcy with the infusion of the latest, $172 billion (€130 billion) installment in the ongoing bailout of the rapidly contracting Greek economy.

But the ink was barely dry before the top official of the International Monetary Fund, which has to sign off on the payment, gently reminded the parties that two important conditions still need to be met.

“As soon as the prior actions agreed with the Greek authorities are implemented and adequate financial contribution from the private sector (bondholders) is secured, I intend to make a recommendation to our Executive Board regarding IMF financing to support a program,” Christine Lagarde, Managing Director said in a statement.

The first condition -- making those $430 billion in budget cuts stick -- is a tall order. For the past four years, the Greek economy has been in a tailspin, shrinking by 20 percent as repeated rounds of government spending cuts imposed by European officials have stifled economic growth, further shrinking the country's tax base and fueling a vicious downward spiral. The Greek unemployment rate has more than doubled during that time; today, roughly half of Greeks aged 15- to 24-years-old are out of work. Each round of spending cuts has only intensified the economic pain on Greek citizens.

Greek voters will get a chance to weigh in on the deal in April, when parliamentary elections are scheduled. Candidates running on an “austerity” platform can expect an uphill battle in a country mired in a deep depression. Earlier this month, riots flared in Athens and other Greek cities as thousands joined protest rallies, burning dozens of buildings and looting businesses. On Sunday, thousands of demonstrators in Athens staged a repeat anti-austerity protest.

The architects of Tuesday’ bailout deal are hoping that Greek voters believe continued membership in the European Union is worth the pain of the austerity measures being imposed as a condition for remaining part of the economic club. The expectation is that leaders of the two main parties, the center-left Panhellenic Socialist Movement (PASOK) and the conservative New Democracy (ND), will win re-election and form a coalition that enforces spending cuts European officials are demanding.

“Certainly (the parties) will publicly voice their disgust with the program, but privately they will continue to go along with it,” said Douglas Borthwick, a currency trader at Faros Trading. But that scenario may prove overly optimistic. Support for the two main parties is at historic lows, providing an opening for smaller left-leaning parties opposed to the spending cuts, according to IHS Global Insight economist Diego Iscaro and country analyst Blanka Kolenikova.

“If the current polls prove true when the general election is held, neither the ND nor the PASOK would secure sufficient support to create a majority government,” they wrote in a note to clients Tuesday. “The winning party would be then forced to team up with smaller, radical parties, which would bring uncertainty and instability mid-term.”

Some observers doubt Europe’s demands are possible -- no matter who is elected.

“The package is based on unrealistic economic assumptions and will be no more successful than the first deal,” said Ben May, an economist at Capital Economics. “Accordingly, Greece or (European officials) may still decide to terminate the bail-out within months.”

The bailout bargain faces another hurdle well before the election, when Greece faces a March 20 deadline to come up with a 15 billion euro ($20 billion) bond payment it can’t make. To head off that default, Tuesday’s bailout bargain calls for Greece to tell bond holders they’ll have to “volunteer” to accept less than half of what they're owed. Though Greece has not yet technically defaulted, investors fearing they won’t get their money back have already bid down the value of more than 400 [billion ] euros of government debt outstanding. “For some reason, this is not officially being labeled a ‘default’ even though more than 100 billion euros of Greek debt are being written off by private bondholders,” said David Rosenberg chief economist at Gluskin Shiff.

The latest bond write down demanded by Tuesday’s deal would inflict even heavier losses than past proposals. Much of that “haircut” will be taken by European banks, who are now borrowing at record low rates from the European Central Bank. The hope is that those low rates will help them offset the hit they’ll take when Greece pays them back less than it originally promised. But those losses also will be inflicted on private investors, including hedge funds who have been gambling that the government won't come up with the money to pay them back. They've been betting against full payment with so-called “credit default swaps” -- a kind of insurance policy that pays off when a borrower defaults. That leaves them little incentive to agree to the deal.

If too many private bond holders refuse to take the haircut, those credit default swaps could be triggered -- with largely unknown consequences. In 2008, the cascading impact of credit default swaps sparked by the collapse of Lehman Brothers touched off a global financial panic.


“All the authorities have been able to do is delay default by a few weeks, perhaps a few months at best,“ hedge fund manager Dennis Gartman wrote in his investor newsletter. “Greece will default, but perhaps not under the present government in power.”




There is now a bailout agreement that has bought some time for the EU and for the Greek government, averting financial panic for the moment, but there is little confidence that it will be a long-term solution. It is hard to believe that Greek voters, confronted with steadily increasing economic pain under EU austerity measures which will continue for many years, will not at some point rebel and once again turn to politicians offering temporary relief, at the expense of further mortgaging the nation's future. But the limit to which the future of Greece can be mortgaged is fast approaching.

The only real uncertainty appears to be when and how Greece will default and leave the Euro system to return to the drachma. It is still possible for Greece to avert that dire extremity, restructure its economic policies and continue membership in the European Union. In the long run that would lead to a far better future for Greeks, however the short-term political consequences are so formidable that most knowledgeable observers do not expect this to happen.


Monday, February 20, 2012

Greek Bailout

Eurozone seals second Greek bailout after tortuous talks

Euro zone finance ministers sealed a second bailout for debt-laden Greece on Tuesday that will resolve its immediate financing needs but seems unlikely to revive the nation's shattered economy. After 13 hours of talks, euro zone officials said ministers had finalized measures to cut Greece's debt to 120.5 percent of gross domestic product by 2020, a fraction above their original target of 120, after negotiators for private bondholders accepted bigger losses to help plug the funding gap. Agreement on the 130-billion-euro ($172 billion) rescue package, subject to strict conditions, will help draw a line under months of uncertainty that has shaken the currency bloc, and avert an imminent Greek bankruptcy.

"We have reached a far reaching agreement on Greece's new program and private sector involvement that would lead to a significant debt reduction for Greece and pave the way towards an unprecedented amount of new official financing ... to secure Greece's future in the euro area," Luxembourg's Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference.

The euro jumped almost half a cent, reversing earlier losses, after Reuters reported a deal had been struck.

A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece needed extra relief to cut its debts near to the official debt target given the ever-worsening state of its economy. If Athens did not follow through on economic reforms and savings, its debt could hit 160 percent by that date, said the report, obtained by Reuters. "Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the nine-page confidential report said, highlighting the fact that Greece's problems were far from over.

The accord will enable Athens to launch a bond swap with private investors to help reduce and restructure its vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone. Around 100 billion euros of debt will be written off as banks and insurers swap bonds they hold for longer-dated securities that pay a lower coupon, although it is not clear how many will take the deal. Private sector holders of Greek debt will take losses of 53.5 percent on the nominal value of their bonds. They had earlier agreed to a 50 percent nominal writedown, which equated to around a 70 percent loss on the net present value of the debt. "Given the balanced agreement reached with the creditor group ... and the fact that the package delivers debt sustainability for Greece we expect a high participation rate," Juncker said.

The debt sustainability report delivered to ministers last week showed that without further measures Greek debt would only fall to 129 percent by 2020. The IMF had said if the ratio was not cut to near 120 percent, it may not have been able to help finance the bailout, putting the whole scheme in jeopardy. To help fill the financing gap, euro zone central banks will also play their part. A Eurogroup statement said the ECB would pass up profits it has made from buying Greek bonds over the past two years under its emergency bond-buying program to national central banks for their governments to pass on to Athens "to further improve the sustainability of Greece's public debt." The ECB has spent about 38 billion euros on Greek government debt that is now worth about 50 billion euros.

Whatever its constituent parts, economists say the deal may only delay a deeper default by a few months. A turnaround in the economy could take as much as a decade, a prospect that brought thousands of Greeks onto the streets to protest against austerity measures on Sunday.


Skeptics question whether a new Greek government will stick to the deeply unpopular program after elections due in April, and say Athens could again fall behind in implementation. That could prompt lenders to pull the plug once the euro zone has stronger financial firewalls in place. While there are doubts in Germany and other countries that Greece will be able to meet its commitments, including implementing 3.3 billion euros of spending cuts and tax increases, the threat of contagion from a chaotic Greek default always made a deal more likely than not, no matter how tortuous the negotiations.

Greek Prime Minister Lucas Papademos, IMF Managing Director Christine Lagarde and ECB President Mario Draghi attended the Brussels talks, signaling they were likely to be decisive.

The private creditor bond exchange is expected to launch on March 8 and complete three days later, Athens said on Saturday. That means a 14.5-billion-euro bond repayment due on March 20 would be restructured, allowing Greece to avoid default. "It's a result that can be justified and that creates the preconditions to get Greece onto a sustainable return to economic health if the swap deal with private creditors is successful," German Finance Minister Wolfgang Schaeuble told reporters.

The vast majority of the funds in the 130-billion-euro program will be used to finance the bond swap and ensure Greece's banking system remains stable; some 30 billion euros will go to "sweeteners" to get the private sector to sign up to the swap, 23 billion will go to recapitalize Greek banks. A further 35 billion or so will allow Greece to finance the buying back of the bonds. Next to nothing will go directly to help the Greek economy.

No one is pretending it will end Greece's problems. Figures last week showed its economy shrank 7 percent year-on-year in the last quarter of 2011, much more than expected, with further cuts likely to make matters worse.





A bullet has been dodged, but it is important to realize that this bailout agreement is only for one refinancing transaction, which does not address long-term structural problems with the Greek economy - or create real confidence that Greece can avert leaving the Euro zone in the long run.

The measures required to get Greece onto a sustainable return to economic health are so severe (and unpopular) that it is hard to visualize how any Greek government could possibly survive the political consequences of the coming austerity regime. In some respects, this prospect recalls the Weimar Republic and the economic disasters Germany endured during the early 1920s.

What has been accomplished is to buy time. Time for the euro zone to create firewalls and other protective measures to contain the impact of a possible disorderly default, and time for the Greek government to plan and implement a realistic economic policy, either to manage the austerity regime or (which appears to be more probable) to plan and implement eventual withdrawal from the Euro zone and a return to the drachma.

There is also an opportunity for the Greek government to come to its senses regarding its antiquities policies. There is still time to take measures to significantly reduce its insupportable custodial burden and generate significant income, by releasing redundant artifacts for acquisition by collectors. No one measure (including this) can solve all the problems Greece faces, but that would be a wise first step in facing reality and instituting sustainable economic policies, instead of continuing to recklessly mortgage the future to buy political success today.


Sunday, February 19, 2012

Greek Default Impends

Germany drawing up plans for Greece to leave the euro

By Bruno Waterfield

Plans for Greece to default, potentially leaving the euro, have been drafted in Germany as the European Union begins to face up to the fact that Greek debt is spiraling out of control - with or without a second bailout. The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.

Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order.

But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them. His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.

"He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he - and a growing group - are convinced it will not pull Greece out the hole," said a eurozone official. "The idea instead is that the Greek government should officially declare itself bankrupt and begin negotiating an even bigger cut with its creditors. For Schäuble, it is more a question of when, not if."

The German finance minister's comments are certain to plunge the authorities in Athens into even deeper gloom. On Saturday they tried to sound optimistic, with a cabinet meeting to thrash out the final details of an austerity package. The cuts, including a reduction in the minimum wage, mass redundancies within the public sector, and a slashing of the health and defence budgets, sparked rage on the streets of Athens last week, with buildings set on fire amid angry protests. But the country's politicians are resolutely trying to sound upbeat. "The Greek people have done everything they can and we are determined to make good on our commitments," said Christos Papoutsis, public order minister.

The French prime minister, Francois Fillon, lent his support to the embattled Greeks when he cautioned last week that Europe should not "play with the default of Greece" and must now play its part. "The Greeks have promised very important reforms," he told RTL radio. "The Europeans now have to keep their commitments."

With Greek morale at rock bottom, the national mood darkened yet further after armed thieves looted a museum on Friday in Olympia, birthplace of the Olympic Games, and stole bronze and pottery artefacts - just weeks after the country's National Gallery was burgled. One Greek newspaper suggested the state could no longer properly look after the nation's immense cultural heritage. "The Greek state has gone bankrupt, let's face it," the conservative daily Kathimerini said in an editorial. "If the state cannot guard the country's great cultural heritage for financial or other reasons it must find other ways to do it."

Mr Schäuble's pessimism will not be welcomed in Athens. The hugely influential German politician's doubts have been growing for several weeks, and prompted angry exchanges when Greece accused Germany of trying to drive it out of the euro. His scepticism is not yet fully shared by Angela Merkel, who is said still to be determined to prevent Greece's financial collapse. "She thinks Greece going bust could cause a shock wave that buries other countries - with Spain and Italy among them. It could break apart the entire monetary union," said an official.

But it has support from Austria and Finland - holding the prospect that a eurozone meeting tomorrow will fail to agree the next set of EU-IMF payments for Greece. Greece must service €14.5 billion of debt on March 20 and, before EU-IMF cash can flow into its accounts, persuade private creditors of the country, mainly banks, insurance companies and funds, to give up on 70 per cent of their claims. "The private sector involvement takes at least four weeks to issue the prospectus and to get subscribers, and without a deal on Monday then time will run out in March," said an EU diplomat.

Rumors are already circulating in Wall Street that banks are preparing for a "credit event" - a technical term used by credit agencies to mean a default - in the days immediately following March 20, as Greece looks likely to be unable to meet its debts. The sense that an endgame is approaching has been fuelled by the secret "troika" report, by EU, IMF and ECB officials on Greek debt "sustainability". It found that even if Greece implemented all the austerity measures expected of it, and if it achieves highly optimistic economic growth targets, it will still fall short of what is needed, with debt likely to total 129 per cent of GDP in 2020.





In reality Greece is bankrupt, and Mr. Schäuble is now recognizing that reality. The situation appears to be irretrievable, and the consequences of Greek default will include hard times for Greeks for many years to come.

The consequences will also include serious financial problems both for the EU and for other debtor nations such as Spain and Italy. It seems probable that the economic effects will not be confined to Europe, but will have global impact.

A leading Greek newspaper has now questioned whether that nation can properly look after its immense cultural heritage. It is past time for the US government to take action (as is required by US law) to review the deterioration of security in Greece, and that nation's apparent inability to adequately support its custodial responsibilities for archaeological sites, ancient monuments and artifacts.

Given that Greece seems to be incapable of taking care of artifacts it already has, what sense does repatriation of additional artifacts to Greece make? Repatriation of artifacts and enforcement of import restrictions requested by Greece should be suspended.