Greece, in the middle of its own financial crisis, is teetering on the brink of a default. Many of its wealthier citizens are also uneasy about what lies ahead for their cash. According to estimates from private bankers in Greece and Cyprus, as much as 10 billion euros have left the country for Greek-owned bank subsidiaries in Switzerland and Cyprus in the last couple of months.

"Customers are coming…from Greece on a daily basis," says one private banker who works for a Greek bank in Cyprus. "They fly here in the morning, bring us a check and fly back to Athens in the afternoon."

One banker in Athens reports that many of his clients have sent funds out of the country in recent weeks, fearing that the government will take a bigger bite of their money. "They’re afraid they’ll have to pay tax on their cash," he says.

Countries in economic turmoil historically look for unpopular ways to raise revenue, according to economists. So when things start to go sour, "everyone becomes convinced that the stage is being set for higher taxes," says former IMF economist Dev Kar, the lead economist for Global Financial Integrity, an international policy research center. "People with wealth then ship their money out, so government does not come and get it when it all comes crashing down."

But growing concerns that Greece’s financial crisis will spill over to its banking system appear to be driving most of the outflow. The fear isn’t totally unfounded: Late last month, Fitch Ratings downgraded the country’s four major private-sector banks to two notches above junk status on fears that demand for loans may plunge, denting their potential profitability .

"I’m scared," says one 40-year-old Athenian woman, who’s considering taking her nest egg to Cyprus. "I want to take my money out of the country before the banks run out of cash."

Not as bad as it seems

A run on the bank, a la Argentina, is not imminent, say banking and government officials. They acknowledge that money is leaving the country, but say that reports of massive capital outflows are "grossly overstated."

"There is a trickle, but nothing like a real flight that would put the system under pressure," says Anthimos Thomopoulos, chief financial officer of the National Bank of Greece, which holds a third of Greece’s 250 billion euro total deposit pool.

The situation isn’t overly worrisome right now, bank and government officials say, because most of the money has flowed to those Greek-owned banks abroad and should, in theory, be easier to repatriate. What’s happening, says Nikolaos Karamouzis, deputy CEO of Eurobank EFG, a private bank in Greece with 84 billion euro in assets, is "not materially significant, despite the fact that there is widespread concern among our clients."

Exactly how much cash has left the country since the crisis exploded in mid-December is hard to determine, however. According to the most recent quarterly statistics available, the national deposit pool at the end of December dropped by less than a half a percent free 3-in-1 credit report. But analysts point out those numbers do not reflect the full impact of the crisis, which picked up momentum in January and February after the government announced its belt-tightening measures.

A pesos to drachmas comparison

Unlike Greece today, Argentina’s government had an arsenal of financial tools in 2001 to deal with its crisis. It devalued the peso and imposed capital controls. But as a member of the European Union, Greece does not have those options; it can’t devalue, and because the Union has rules that call for a free movement of capital within its boundaries, it can’t stop citizens or businesses from moving cash from one partner country to another.

"The only way Greece could impose capital controls would be to leave the EU," says Michael Melvin, head of currency and fixed income research at global asset management firm BlackRock. "And there’s close to zero probability of that."

A return to the drachma isn’t likely any time soon either, but Greek citizens do have good reason to believe that taxes are going to go up. The socialist government of Prime Minister George Papandreou has already announced a slew of tax hikes, including increases in the value-added tax, new excise taxes on luxury goods, such as yachts and cars, and up to a 20% tax on cigarettes, alcohol and fuel.

In addition, a key tenet of the socialist government’s plan is to go after tax cheats aggressively — economists figure that nearly 30% of the country’s gross domestic product goes unreported to authorities. For decades, Greece’s shadow economy has thrived because many Greeks — doctors, plumbers, electricians and lawyers among them — conduct business entirely in cash. Much of that money has ended up in bank accounts in other countries, say economists — and a lot of it is not reflected in national statistics.

"The outflow of cash from Greece is not a new phenomenon. If you could calculate the outflow of the last 50 years, you’d get an astronomical figure," says University of Maryland economics professor Theodore Kariotis. "Greeks are a very sneaky people."

The government’s new rules intend to change that. Last week it announced new measures to encourage those who have transferred money out of Greece to bring it back within six months, no questions asked. They’ll be taxed 5% on the total, however. Another option offered: declare the money, leave it in foreign accounts — and be subject to an 8% tax. After that, foreign governments will cooperate with Greek tax authorities to pursue lawbreakers, says a source in the finance ministry.

Greek Finance Minister George Papaconstantinou hopes the government’s new measures will produce results. "As the reform program unfolds, a lot of this lost, or quasi-lost, liquidity will come back to the system," he said in a mid-January interview. "It is an immediate concern, of course, but it is reversible."

Maybe it is, but according to economists, money that leaves a country rarely returns. "I’m not holding my breath," says Global Financial Integrity’s Kar. "Once [cash] leaves, it’s hard to get it back." 

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Testifying before a congressional watchdog group Thursday, Pandit tried to explain away the government’s decision to give the New York City-based bank a second aid package of $20 billion in November 2008, blaming short sellers as well as general malaise in financial markets.

Members of the Congressional Oversight Panel, who called the hearing to gather details on the current state of the government’s investment in the firm, were hardly satisfied.

"I’m sorry Mr. Pandit, but everyone was in dysfunctional markets at that point," said Elizabeth Warren, the oversight panel’s chairwoman.

Pandit told the panel he could not recall whether he spoke with anyone at the Treasury Department during the third week of November 2008, a fateful period for the company in which its stock had lost close to two-thirds of its value.

Unlike rival Bank of America (BAC, Fortune 500), which endured significant scrutiny for accepting more than one taxpayer bailout following its decision to purchase Merrill Lynch, the government’s rescue of Citigroup has not garnered much attention from lawmakers in the wake of the crisis.

Public scrutiny of Citi has subsided somewhat since the company moved to repay the combined $45 billion it received under the Troubled Asset Relief Program, or TARP, in December.

U.S. taxpayers however still own a 27% stake in the company, which is overseen by the Treasury Department.

Treasury Assistant Secretary Herb Allison, who also appeared at Thursday’s hearing, indicated to members of the panel that he expects the government will make money on its investment.

"If Treasury were able to sell all its Citigroup common shares at the current market price, taxpayers would realize a positive return," Allison said in his statement.

Citigroup (C, Fortune 500) shares rose more than 1.5% in afternoon trade Thursday after closing at $3.40 per share in the previous session.

Allison would not offer details on the timing or method by which Treasury would sell the remaining shares, but reiterated that it planned to dispose of its stake in Citigroup "as soon as possible."

With billions of dollars still tied up in the company though, it came as no surprise that Pandit endured such pointed questions from the panel.

The Citi chief fielded inquiries on everything from what the company was doing to fix the firm to his stance on the Obama administration’s proposal to curtail so-called proprietary trading.

"I do think banks should be banks," Pandit said, noting that his firm had sold off a lot of its trading-oriented businesses as part of its ongoing restructuring program.

The recovery for Citigroup, however, has hardly been smooth. Even as the company shed some $168 billion in assets housed within its Citi Holdings division, the company lost $7.6 billion in the fourth quarter.

Pandit warned of further consumer-related loan losses, but stressed Thursday that the overall bank was well positioned to return to profitability this year.

"Today, Citi is operating on a very strong foundation and is positioned to contribute to the economic recovery and generate sustained profitability for the benefit of all our stakeholders," he said. 

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“Amounts will be set with the aim of ensuring smooth conditions in money markets” and avoiding “significant spreads” between the ECB’s benchmark rate and the rate at which money is alloted, Trichet said freecreditscore. The benchmark rate serves as the minimum bid rate.

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Rehn will meet with Prime Minister George Papandreou as German lawmakers say euro-area officials are devising a plan to grant Greece about 25 billion euros ($34 billion) in aid should it need help financing its debt, possibly by using state-owned lenders such as the KfW Group to buy its bonds.

German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker signaled yesterday that Rehn will warn Greece it must do more to narrow the EU’s largest budget gap and can’t rely on taxpayers elsewhere to help until it acts. Adding to the political pressure, the fiscal strategy of Papandreou’s government may soon be tested by investors as it readies a sale of as much as 5 billion euros of 10-year notes.

“If the Greek government cannot raise the necessary funds in the commercial market, which continues to look unlikely, then bilateral loans will be forthcoming,” said Erik Nielsen, chief European economist at Goldman Sachs Group Inc. in London.

Rehn arrives after European officials pored over the government’s books to verify it’s doing enough to knock 4 percentage points off its budget deficit from last year’s 12.7 percent of gross domestic product. The country has until March 16 to satisfy fellow EU governments that its deficit reduction plan is on track and faces being pressed to increase consumer taxes and lower capital spending if it can’t show sufficient progress.

‘Additional Actions’

Juncker, who speaks for euro-area finance ministers, yesterday indicated more will be demanded. Greece needs to “take additional actions” to pare its shortfall and “must understand that the taxpayer in Germany, Belgium or Luxembourg isn’t prepared to correct the mistakes of Greek fiscal policy,” he told Eleftherotypia newspaper.

In an interview with ARD Television, Merkel denied money has been set aside to bail out Greece and said the country has to “do its homework.” Speaking after the euro recorded its third straight monthly loss against the dollar, its longest losing streak since November 2008, Merkel said the single currency is “certainly facing the most difficult phase.”

Billionaire investor George Soros said on CNN yesterday that the euro “may not survive” the Greek turmoil.

Bonds

Investors last week continued to question Greece’s chances of cutting its budget deficit. Greek two-year yields rose by as much as 75 basis points on Feb. 25, the most since Jan. 20. The spread between 10-year German bunds and Greek securities of a similar maturity widened 12 basis points in the week to 330 basis points quick payday loan.

Still, the cost of insuring against default on Greek government debt fell for the first day in more than a week on Feb. 26 on speculation the nation will pledge tougher steps. Credit-default swaps on Greece dropped 35.6 basis points to 364.02, according to CMA Datavision. The contracts are down from Feb. 4’s record 428.25 basis points.

Papandreou told the Greek parliament on Feb. 26 that the nation will “meet the challenge with whatever cost and pain we will need to go through.” Government spokesman George Petalotis said in an interview the same day that more measures will be concerned if the EU deems it necessary.

Greece needs to raise 53 billion euros this year and redeem more than 20 billion euros of bonds by the end of May, according to data compiled by Bloomberg. It vows to reduce its budget gap below the EU limit of 3 percent of GDP in 2012. The European Commission forecasts a debt equivalent to 124.9 percent of GDP this year.

KfW

KfW’s purchase of Greek bonds, backed by German government guarantees, would be an emergency measure as it would risk inviting investors to speculate against other euro region countries, the German lawmakers said on condition of anonymity because the information is confidential. France’s state-owned Caisse des Depots may also be involved, Greece’s Ta Nea newspaper reported Feb. 27. The Wall Street Journal said the plan may total 30 billion euros.

“Greece won’t be allowed to sink on the condition it respects its commitments to stabilize its budget,” French Finance Minister Christine Lagarde told Europe 1 radio yesterday. “We have a certain number of proposals in the euro zone, involving either private partners or public partners or both.”

Strikes

EU leaders ordered Greece on Feb. 11 to slash its budget deficit, while promising “determined” yet unspecified action to help if needed. Papandreou will on March 5 meet with Merkel, who yesterday suggested she is worried “emotions” may be spinning out of control.

Complicating the country’s efforts last week were another round of strikes and warnings from Standard & Poor’s and Moody’s Investors Service that they may soon cut Greece’s debt rating if the government flounders in reducing its deficit.

The government intends to sell 10-year notes by early March, according to a Jan. 26 statement from the Public Debt Management Agency. Fund managers who may take part in the issue say Greece must offer the biggest premium over benchmark German debt since 1998, paying a coupon of about 7 percent.

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If the partial acquisition of Coca-Cola Enterprises Inc. goes through, the rest of the bottler would remain independent and buy Coke bottling operations in Scandinavia and Germany, the newspaper reported cash advance to savings account.

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Shares of the world’s biggest developer by market value added 1.7 percent to HK$101.80 at 10:41 a.m. Hong Kong time after gaining as much as 2.5 percent.

The apartments at the Yoho Midtown apartment complex in Yuen Long sold for an average HK$5,400 per square foot, Amy Teo, Sun Hung Kai project director, said in an interview. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, according to Wong Leung-sing, an associate director at Centaline Property Agency Ltd.

Hong Kong’s home prices surged 29 percent in 2009 as low interest rates and an increase in buying by mainland Chinese stoked demand. Norman Chan, chief executive of the Hong Kong Monetary Authority, told lawmakers Feb. 1 that the city faces a “huge” potential risk of bubbles forming in its asset markets given high liquidity.

“All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,” said Buggle Lau, chief property analyst at Midland Holdings Ltd. “If more speculators enter the market then it could push prices up too high.”

The city had the world’s fastest-growing major housing market last year, according to a survey compiled by real-estate agents Knight Frank LLP.

Crowds Attracted

Some 120,000 prospective buyers have flocked to the show homes since Feb. 19, Teo said, speaking at the display properties set up in a shopping center near the apartment complex in the city’s northern New Territories. Sun Hung Kai increased the number of apartments on sale to 900 from 700 because of demand, she said. The building complex has a total of 1,890 homes, according to Teo.

“I’m excited to buy, but I think it’s a little overpriced,” said Nelson Ma, 36, a worker at an export company who had just put down a deposit on a HK$3.4 million, 650 square foot, two-bedroom apartment. “I think there is a bit of a bubble but I’m not too worried as I will be living in the apartment rather than buying it as an investment.”

Sun Hung Kai estimates about 80 percent of the purchasers intend to live in the apartments, with the remainder acquiring the properties as an investment, company spokeswoman Vivian Kwok said.

About 40 units were immediately advertised for resale at asking prices of as much as 20 percent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.

“The property market in Hong Kong is still hot, especially for new properties,” said Ng Sinwa, an estate agent at Midland Realty, who joined the crowds queuing to view the show homes. “People are still keen to buy.”

‘Go Pop’

Not all prospective buyers were sold on the properties available. “It’s so expensive,” Ivy Sze said, looking at the show homes on display. “It’s a bubble. We just don’t know whether prices will go up more, or just go ‘pop.’ We want somewhere to live so we just have to keep looking.”

The number of private homes completed in Hong Kong last year fell 18 percent to 7,200 units, the lowest since 1997, the government said in a report Jan. 22.

The city’s government is holding its first land auction of the year today in the Tseung Kwan O area to try to ease the shortage of supply, with price estimates for the site ranging from HK$2.6 billion to HK$3.4 billion.

The city’s home sales more than doubled in value in January from a year earlier to HK$36.2 billion, according to figures released by the government’s land registry. Sales gained 4.1 percent last month from December, the agency said.

The authority, Hong Kong’s de facto central bank, raised deposit levels for luxury apartments in October to try to cool lending. The government also plans to raise stamp duty, or transaction tax, on homes selling for more than HK$20 million to 4.5 percent from 3.75 percent in a bid to rein in the property market, the Chinese-language Sing Tao Daily said Feb. 11.

‘Still Affordable’

“Government intervention could lead to higher interest rates, but I can’t see mortgages rates much above 2.5 percent this year, which is unlikely to deter some buyers,” said Midland Holdings’ Lau.

Some buyers’ confidence that property values will rise is underpinned by the city’s economic recovery, Centaline’s Wong said.

“There’s talk of maybe 2 percent growth in GDP this year and there’s a feeling that the economy is improving,” he said. “People seem able to spend more than ever before on property.”

Prices may rise as much as 15 percent in the first quarter, Wong said. Hong Kong’s Chamber of Commerce forecasts the city’s economy may grow between 3 percent and 4 percent this year.

Higher interest rates and more speculators moving into the market are among the risks that may lead to a decline in prices, or drive them to unrealistically high levels, according to Lau at Midland Holdings.

“This could lead to a bubble in the property market,” he said. “But if a bubble means people are now paying prices for property they can’t afford, then we’re not in one,” he said. ‘Property is still affordable. People still seem confident in the market.”

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The U.S. Department of Health and Human Services announced Thursday that the temporary boost is part of the American Recovery and Reinvestment Act of 2009. It comes in the form of an increase in the federal medical assistance percentage payments or, FMAP, given to Hawaii and other states.

The money essentially lowers the total amount that states must pay the federal government in so-called clawback payments meant to help cover the costs of their Medicaid programs — specifically the Part D prescription drug program for low-income seniors.

Because Medicaid is funded by states and the federal government, which adds matching dollars, the money reduces the state’s share of the cost burden.

“We believe today’s action will help states as they struggle to maintain Medicaid and other budget priorities in these difficult economic times,” said U.S. Health and Human Services Secretary Kathleen Sebelius in a prepared statement. “This relief will help states continue to provide critical health-care services to the nearly 60 million beneficiaries who depend upon it.”

The federal government said it will apply the increased FMAP to the clawback payments, which states are required to pay monthly to the federal government under the Medicare Prescription Drug Improvement and Modernization Act of 2003.

Hawaii would have owed the federal government $60,409,856 in clawback payments, federal officials said.

But under the new formula announced Thursday, that amount will be reduced to $43,814,638 for the period beginning Oct. 31, 2008, and ending Dec. 31, 2010.

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The debt is slated for sale on Feb. 23.

The outlook is stable.

Fitch cites the county’s broad, diverse economic base, solid reserve levels and debt policies business card.

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The high court’s decision requires a trial judge to examine allegations of prejudicial remarks made by one or more jury members and, upon finding said allegations to be true, grant a defendant’s motion for a new trial.

“This court finds that if a juror makes statements evincing ethnic or religious bias or prejudice during jury deliberations, the parties are deprived of their right to a fair and impartial jury and equal protection of the law,” this week’s ruling said.

The landmark ruling makes the state of Missouri one of a handful of states whose courts have addressed the issue of juror bias. There are no state or federal laws that prohibit the expression of prejudicial remarks during jury deliberations.

In 2007, a St. Louis County jury awarded $95,000 in punitive damages and $30,000 in actual damages to Michelle Fleshner, who claimed she was fired in 2003 from Pepose Vision, which was started by Dr. Jay Pepose, because she had helped the U paydayloans.S. Department of Labor investigation of the company’s payment of overtime.

At the end of deliberations, a juror approached defense counsel to report repeated anti-Semitic comments during deliberations, saying another juror described Pepose’s wife as a “Jewish witch” and a “penny-pinching Jew.”

With the state Supreme Court’s ruling, the trial judge must now evaluate these allegations of bias and make a determination about their truthfulness. Should the judge find them to be true, a new trial must be ordered.

“This ruling is a great victory for all of the people of Missouri. It says that our justice system will not tolerate bigotry,” Jay Pepose said. “It was a painful, costly process for us, but we knew we could not walk away and leave it to others to fight for social justice.”

Armstrong Teasdale represented Pepose Vision. An amicus brief was also submitted by Bryan Cave on behalf of the Anti-Defamation League of St. Louis.

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Rule No. 1: Repairs get the biggest returns

The smartest money now goes into "undeferring" needed maintenance. That’s because while buyers might appreciate enhancements like Jacuzzis and Sub-Zeros, they won’t tolerate a house with a leaky roof or antiquated plumbing. "If a property is known to have issues, today’s buyers won’t even look at it," says Austin real estate appraiser Jim Amorin.

And trying to keep problems a secret can cost you big-time. If buyers discover them during inspection, it’s now common practice to ask sellers not only to pick up the tab for the repair but also to pay a penalty to compensate the buyer for the inconvenience of having work done.

So the $20,000 you saved by putting off a roof repair, say, could turn into a $30,000 credit to the buyers at closing, says Amorin.

Rule No. 2: Remodeling beats adding on

McMansions have gone the way of the SUV — and large additions don’t pay off either. "There’s been a fundamental shift toward quality over quantity," says Warwick, R.I., real estate agent Ron Phipps.

Having a big, formal living room plus an everyday family room is less desirable than having one multi-use common space. So rather than adding on, you’re better off repurposing existing square footage by reconfiguring the floor plan or capturing unused basement or attic space.

Want an eat-in kitchen? Knock down the wall between the kitchen and dining room ($2,000 to $8,000, depending on whether it’s load-bearing or contains plumbing). That will instantly create a large eat-in kitchen and give the whole house a more open feel — without a huge investment to make up at resale.

Rule No. 3: Eco-friendly upgrades can save cash

Some green improvements pay you back long before you sell your house. Install energy-efficient features, such as EnergyStar appliances and extra wall insulation, and you’ll see lower energy bills every month.

Add in the federal tax credit of up to $1,500 that lasts through 2010, plus many local rebates and tax incentives (see dsireusa.org), and the work may pay for itself in just five years. Green features are also increasingly a selling point, says Phipps. "Most people in the market right now are first-time homebuyers in their thirties, and they’ve been raised to care about carbon footprints and being ecofriendly," he says.

The best way to go green is with a while-you’re-at-it job: When it’s time to replace your furnace, for example, upgrading to super-efficiency might add only $500 (after tax credits), compared with standard new equipment, but it will save you — and your buyers someday — $150 or more in annual heating costs.

Rule No. 4: Tech infrastructure trumps cool gadgets

Home electronics seem like a deal, since prices have fallen about 50% over the past three years and continue to drop, according to Stephen Baker, president of industry analysis at NPD Group, a market research firm.

Still, that doesn’t change the fundamental problem with expensive built-in technology: Put in a $10,000-plus dedicated home theater today, and something better will come along tomorrow and make your system look as if it’s from the Mesozoic Era. With buyers seeking any excuse to low-ball their offers, they’re not going to reward you for an out-of-date system.

Tech infrastructure is different, however. Anytime you’re opening up walls for a construction project, have cabling and Ethernet ports installed. At about $80 a room, it’s a low-cost way to provide the capability for whatever technologies come along.

Rule No. 5: Let the Joneses be your guide

During the boom, you could be the first on your block to have a luxury kitchen, spa bathroom, or in-ground pool and count on others following suit. And even if the neighbors never took your lead, there was plenty of equity growth to cover your costs.

Nowadays that fudge factor is gone. "You really have to keep your house’s amenities in line with the neighborhood now," says Kermit Baker, director of the remodeling futures program at Harvard University’s Joint Center for Housing Studies.

If other houses on the block have real marble countertops, by all means add one to your house, but if everyone still has faux blue-marble Formica from the ’70s, you’re not getting your money back.

Also, keep your projects design-neutral so they’ll appeal to the greatest number of people. Choose neutral colors and traditional electrical and plumbing fixtures unless your house has a modern architectural style.

Rule No. 6: The new payback time is five years

As with any volatile investment, the longer your time frame, the lower the risk. Don’t take on a big project if you’re likely to move in less than three to five years. There’s just too much chance that any money you put in — aside from necessary repairs or superficial cosmetic work — could be lost while the housing market continues to meander.

But if you plan to stay awhile, don’t delay starting a project. Home improvements are a bargain right now, with contractors bidding 10%, 20%, even 40% lower for the same work than just a year or two ago, says Bernie Markstein, senior economist for the National Association of Home Builders.

Grab them while they’re hungry for work and make it clear that you’ll be getting multiple bids so they’ll be motivated to undercut one another’s prices. You’ll fulfill the first rule of investing: Buy low. Then hope that when you’re ready to move, you can sell high.  

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