Your Cousin the Sea Squirt

An adult tunicate or sea squirt. Drawing by Anna Epelbaum.

You may not have seen a tunicate unless you’re an avid tide pooler, a scuba diver, or you spend a lot of time checking out growth below the water line on docks, rocks, and pier pilings. Tunicates, or sea squirts, as they are commonly called, live as solitary or colonial organisms. There are about 90 native tunicates species from Alaska to California; however, I am more interested in those that are introduced to Alaska and are invasive.
First, let’s explore what a tunicate is. You might be surprised that tunicates are actually the closest relative to humans compared to other invertebrate animals. Tunicates are members of the phylum Urochordata, which is closely related to the phylum Chordata which includes all vertebrates. Tunicates and vertebrates share characteristics such as a dorsal nerve cord (spinal cord in humans), a skeletal rod underneath which supports the nerve chord, called a notochord (a spine in our case), and a pharnyx that develops gill slits.

As adults tunicates appear in many bright colors, almost sponge-like with an incurrent siphon and an excurrent siphon. Larval forms are very different from adults as they are shaped like tiny tadpoles with a notochord in their tails. They also have a hollow dorsal nerve chord and pharyngial gill slits. Since only the pharyngial gill slits are retained after the animal undergoes metamorphosis from the larval form to the adult, these organisms are classified as Urochordates. Nevertheless, all of the organ systems of higher vertebrates are present, including specialized sensory organs such as eyespots to detect light and an otolith to sense gravity. Okay, so maybe your cousin just acts like sea squirt.
The name “tunicate” comes from the firm but flexible body covering called a tunic, which the organism makes by secreting a thick covering of a substance similar to cellulose. A tunicate is shaped somewhat like a barrel. Most tunicates live with the lower end of the barrel attached firmly to a fixed object and its two siphons projecting from the upper end. Adult sea squirts are generally benthic (live on the bottom of the ocean) and sessile (attached or non-moving) marine filter-feeders.
Tunicates subsist on plankton. They draw seawater in through the oral siphon, passing it through a sieve-like structure called the branchial basket where the gill slits filter food particles and oxygen, after which the water is expelled through the atrial siphon along with bodily wastes.
I’m interested in tunicates that were brought to Alaska waters in ballast water or as hitchhikers on the hulls of ships. The non-native tunicates that have been found in Southeast Alaska are colonial Botryllid tunicates. So far they’ve been detected in marine environments around Metlakatla, Ketchikan and Sitka. Botryllid tunicates can be mistaken for other sessile, encrusting marine animals such as sponges. Look closer and you can see tiny, individual openings (siphons) indicating separate organisms, each one is known as a zooid. The entire tunicate colony shares a common tunic. Like many invertebrates, colonial tunicates practice sexual reproduction; they can also multiply by cloning from a single sexually produced individual, called budding. This type of reproduction can produce viable new colonies that can drift away from the colony and easily spread across the sea floor. You can see why colonial tunicates are considered a greater fouling challenge than solitary tunicates.

The orange organisms on the left are a colony of Botrylloides tunicates.

Non-native tunicates are considered invasive because they have potentially irreversible impacts on marine ecosystems. The World Conservation Union rates aquatic invasive species as one of the four greatest threats to the world’s oceans. As fouling organisms, tunicates grow in large mat-like colonies on hard substrates such as rock, boulders and gravel, and on artificial substrates such as boat hulls, docks, and aquaculture gear. They can outcompete and suffocate filter feeding bivalves such as mussels, clams and oysters, and have very few natural predators.
The two Botryllid tunicates found in Sitka are the orange sheath tunicate (Botrylloides violaceus) and the golden star tunicate (Botryllus schlosseri). Both are colonial.
In order to better understand the population of tunicates that have been detected in waters around Sitka, the Alaska Department of Fish and Game (ADF&G), National Marine Fisheries Service, the Smithsonian Environmental Research Center (SERC), San Francisco State University (SFSU), Sitka Tribe, Sitka Science Center and University of Alaska, Southeast, among others organizations, will join volunteers from the area for a BioBlitz the weekend of June 11- 13, 2010. We’ll join forces to scout out tunicates in Sitka harbors and along the coast where accessible by the road system.
Individuals will be asked to hit the beaches and shoreline during low tide, to walk the docks and piers, and scope out any area where these tunicates might be found. The goal is to learn about the distribution of the tunicates and to take samples wherever they are found so they can be genetically identified. Experts in the field of tunicates, Linda McCann of SERC and Sarah Cohen of SFSU, will be helping with the effort. Along with Greg Ruiz, the Director of SERC’s Marine Invasions Research Lab, McCann and Cohen have been looking for tunicates in Alaska for ten years. The Sitka BioBlitz will be the first focused effort to describe the distribution of tunicates in an Alaska community. Troy Tydingco, ADF&G, and other local volunteer scuba divers will be offering their skills to scan the seafloor.

A Botrylloides tunicate colony on a shell.

Presently, most of the surveying for tunicates is done by volunteer citizen scientists who hang PVC plates attached to bricks from harbor floats, piers, or any place tunicates might have dropped from the hull of a fouled vessel. If present in the area, the tunicates will tend to collect on the PVC plates that dangle one meter from the surface of the water. This summer 14 sites from Ketchikan to Dutch Harbor will be monitored by teachers and students, or interested “citizen scientists” for invasive tunicate populations.
If you’re interested in joining us in Sitka, or in participating in citizen monitoring, please call Tammy Davis on the invasive species reporting hotline: 1-877-INVASIV (1-877-468-2748).
Tammy Davis is the Invasive Species Program Project Leader for the ADF&G Sport Fish Division

By Tammy Davis

Managing Black Bears on Prince of Wales

The author, biologist Steve Bethune, with an immobilized and collared black bear on Prince of Wales Island in southern Southeast Alaska.

Unlike many areas of the state where black bears are numerous and ADF&G wildlife managers are trying to reduce their numbers to bolster moose and caribou populations, managers of black bears on Prince of Wales Island (POW) are seriously concerned about apparent declines.
Historically, hunters harvested an average of 225 black bears annually from this large island in southern southeast Alaska. Word got out that POW was a consistent producer of trophy class black bears and beginning in the late 1990s harvests began to dramatically increase, peaking at nearly 500 animals in 2005. Since then the harvest has steadily decreased every year. During the 2008 regulatory year hunters reported harvesting 292 black bears from Unit 2.
Along with declining harvests, managers noted declines in average skull sizes and ages of harvested bears (in certain locations), all indicators of a struggling population. But it’s not just biologists who are concerned. Local residents, hunting guides, tour operators, transporters, local hunters and other members of the public are increasingly concerned about chronic low bear numbers compared to just 10-15 years ago.
To address this problem, managers studied harvest records and discerned a striking difference in the black bear take between the spring and fall seasons. In the spring, 85-90 percent of the black bears harvested are males. In contrast, fall hunters take an average of 50 percent females.
There are several reasons for this disparity. In the spring, the two most popular hunting methods are 1) using a skiff to search tidal flats, and 2) using bait to attract a bear. Both methods give the hunter an opportunity to view multiple animals and time to size up a bear before shooting. In the fall, hunters converge on salmon streams where bears are concentrated foraging on salmon. By September, when hunting season starts, we suspect many mature bears have moved off the streams allowing more females and young bears to use this food resource. Hunting along salmon streams can be a close-quarters affair and hunters may not have time to adequately judge a bear or observe it long enough to detect cubs. The potential for wounding loss is high, because bears that are shot can quickly escape into the thick forest adjacent to salmon streams, making it difficult for the hunters to recover them. When all these factors are combined it is easy to see that fall hunting has the potential to seriously impact the female segment of the black bear population.

A hair snare with an attractant. A bear drawn to the scent lure will leave hair on the barbed wire, undisturbed and unaware it has just been sampled. The hair (specifically the hair follicle) provides a wealth of information for biologists.

In an effort to curb the apparent population decline, managers have addressed the fall harvest in an attempt to reduce the loss of female bears. A number of options were considered, but the selected tool was to establish a controlled use area encompassing Game Management Units 2 and 3. The use of motorized vehicles for bear hunting is restricted in this area during September, beginning in 2009. It appears to be working. By severely limiting access to salmon streams, the female portion and overall fall harvest is down about 40 percent. Only time will tell if this trend will continue and if a positive corresponding trend to the overall population will develop.
Unfortunately it’s nearly impossible to determine population size of bears in southeast’s coastal rainforest habitat. Until the 2009 season only hunters that actually killed a bear were required to report to ADFG, providing no information about the number of hunters visiting POW or their success rates. Biologists are currently working on a number of projects to learn as much as they can about POW’s bears.
In one study, hair snares have been deployed across the island to collect DNA samples. By comparing DNA collected in the field with DNA from harvested bears, a harvest rate can be calculated. This can then be converted to arrive at a rough population estimate.
In another study biologists are collaring bears with VHF and GPS equipped collars, allowing them to track and learn about their habitat use, den sites, reproduction, survival and movement patterns.
Finally, a graduate student sponsored by ADFG will be collaring deer fawns on POW beginning this spring. Biologists are hopeful the multi-year project will yield valuable information on the role of black bears on deer predation.
Across southern Southeast Alaska, black bears are attracting a lot of attention - everyone from hunting guides and transporters to non-resident and resident hunters, lodge owners, tourists, travelers, local residents, and especially biologists. Whether you are on Prince of Wales Island, Kuiu Island, or anywhere from Ketchikan to Petersburg to Juneau, black bears are a common presence. In recent years however, biologists with the Alaska Department of Fish and Game have detected declines in harvest in certain areas that have them concerned enough that learning more about this species has become paramount.

The author removes a hair sample from the snare. Hair snares are one of several tools biologists are using to learn more about black bears.

A big step was taken during the fall 2008 Board of Game meeting when ADF&G sponsored a proposal to require the use of a harvest ticket and report for all black bear hunting in Southeast Alaska beginning in July 2009. This requirement allows the Department to gather data not only on successful hunters as in the past, but also on hunters who are unsuccessful. This will allow biologists to begin compiling data on black bear hunter effort and success.
Along with this, the Department may also use the database from harvest tickets and contact hunters for additional information if needed. The Department is presently drafting a black bear newsletter that will be sent to hunters, guides, other agencies, and be available to the public on-line as well as at ADF&G offices. This newsletter is the first stage of an information sharing and gathering exercise by the Department to help guide black bear management into the future.

Steve Bethune is the Assistant Area Management Biologist for the Ketchikan area and lives and works on POW
By Steve Bethune

A history of violations at Upper Big Branch mine

Michael Henninger/Post-Gazette

West Virginia State Police officers direct traffic in front of an entrance to Massey Energy's Upper Big Branch mine in Raleigh County after an explosion there killed at least 25 people, Monday.

The Upper Big Branch coal mine, where an explosion Monday killed 25 miners, has a history of serious violations that at points were five times more extensive than the national average, according to federal records.
The mine in Raleigh County, near Beckley, W.Va., was cited for 458 safety violations last year, with 50 of them listed as unwarrantable failures to comply -- citations reserved under federal mining regulations for instances of willful or gross negligence.
Nationwide, an average of 2 percent of safety violations are unwarrantable failures. Slightly more than 10 percent of Upper Big Branch mine's violations last year were unwarrantable failures.
Cecil-based coal producer Consol Energy Inc. rushed three teams to West Virginia Monday to assist at the mine.
Massey Energy Chairman and CEO Don Blankenship said in a statement at 8:30 p.m. Monday:
"Our prayers go out to the families of the miners. We want to assure the families of all the miners we are taking every action possible to locate and rescue those still missing."
The Upper Big Branch mine is owned by Massey Energy, a Virginia-based firm that faced a then-record $1.5 million fine after a fire at its Aracoma Coal Mine in Logan County, W.Va., in which two men became lost amid a wash of smoke because of missing safety walls.
The company later settled a lawsuit by the miners' families. Aracoma, a Massey subsidiary, later pleaded guilty to criminal charges brought against it by the federal government.
At the time of Monday's explosion, Upper Big Branch mine was facing more than $150,000 in fines for pending safety violations, after routine scheduled inspections resulted in more than 100 citations three times in a 12-month period.
Since July 2008, seven regularly scheduled safety inspections -- inspections planned ahead of time and not the surprise or "spot" inspections also carried out by federal inspectors -- turned up 614 safety violations, according to records of the federal Mine Safety and Health Administration.
In the past year, the mine has been cited multiple times for an accumulation of potentially volatile coal dust, poor pre-shift inspections and problems with its ventilation and escape route plans.
As recently as March, the company had been cited for inadequate escapeway plans for its miners and accumulations of coal dust. In January, the mine amassed nearly $150,000 in proposed fines from MSHA after safety inspectors cited them for failure to maintain adequate air ventilation or escape route maps, allowing too much coal dust to accumulate and failure to provide adequate and clearly marked escape routes in the event of emergencies.
Internal MSHA records made available to the Post-Gazette Monday night also indicated that in 2006, Upper Big Branch released more than 1 million cubic feet of of flammable methane gas in a 24-hour period. Under federal safety regulations, that amount of methane discharge would have required a federal safety inspection for methane levels once every five days.
In the 1990s, the mine experienced one methane ignition incident that caused burns to a miner.
One former MSHA inspector with experience at Massey facilities last night said the accumulated violations racked up by Upper Big Branch suggested a failure in the entire system.
"It's just a combination of stuff that had to catch up with them sometime," said Minness Justice, who was the inspector at Massey's Aracoma mine in the months before a fire there killed two workers.
Mr. Justice, who left MSHA after a bitter dispute in which the agency sought to discipline him over the Aracoma incident, pointed to a March 2009 citation and proposed $29,000 fine for an unwarrantable failure in its ventilation system. The ventilation system in a mine is crucial to removing dust and methane and providing a continuous flow of fresh air to the working face.
He said in the first quarter of 2010, the mine was cited 25 times for ventilation violations but 21 of them were listed as "not serious and substantial," meaning they resulted in nominal fines.
"Inspectors have written it and written it and written it, but they didn't write it with any authority," Mr. Justice said.

By Dennis B. Roddy and Vivian Nereim, Pittsburgh Post-Gazette

Upper Big Branch had stepped up production for its 'gassy' coal

 Production at Massey Energy's Upper Big Branch mine that claimed the lives of at least 25 miners in a Monday explosion had kicked into overdrive in the past several months, as the company strove to keep up with increasing demand for the mine's valuable type of coal, which is used to make steel. 

Although Massey chief executive Don Blankenship said last week that increased production did not lead to shortcuts on safety, the southern West Virginia mine produces coal that miners call "gassy" -- shot through with potentially dangerous methane gas.
In the fourth quarter of last year, coal production at Upper Big Branch almost doubled from the previous three months, surging from 263,319 tons mined in the third quarter to 525,207 tons in the fourth quarter, according to federal data. The mine's metallurgical coal is valued at $91 a ton, according to an SEC document Massey filed Friday. Massey sells its thermal coal, which is used by power plants that generate electricity, for $57 a ton, Citi analysts said.
The higher-profit metallurgical coal makes up about 25 percent of Massey's output, J.P. Morgan analysts said last month, making the company more dependent on the kind of coal mined at Upper Big Branch than other mining companies. Massey is the nation's sixth-largest coal company. Upper Big Branch produced 1.2 million tons last year, or about 3 percent of the company's output.
Massey acquired the land that became the Upper Big Branch mine as part of a package of property, mines and coal preparation plants from rival Peabody Coal in October 1994 for an undisclosed amount. Peabody never mined the area now known as Upper Big Branch, a Peabody spokeswoman said. In its SEC filing from the time, Massey estimated that the Peabody acquisition contained 146 million tons of coal, or decades of output. Upper Big Branch was an immediate hit.
Upper Big Branch is owned by Massey subsidiary Performance Coal, which ramped up production at Upper Big Branch quickly, going from just more than 1 million tons of coal in 1995 to 3 million tons the next year. Production peaked in 1998, when the mine produced 5.7 million tons of coal, making it one of the larger mines in West Virginia.
Tonnage started going down and rapidly fell off after 2005. The mine failed to produce 1 million tons of coal again until last year, when it churned out 1.2 million tons. Employment peaked in 2001, with 239 people working the mine.
A Massey spokesman declined to answer questions on Friday about the mine's production drop-off.
"That's good-quality coal so I don't see a reason for the drop-off," said Christopher Bise, chairman of West Virginia University's College of Engineering and Mineral Resources, pointing out that the downturn came well before the recession.
Miners have described Upper Big Branch and the mines around the area as "gassy," meaning they are rich in methane, an odorless, colorless gas.
Methane lives in the cracks and natural fractures between coal, and it chemically clings to coal molecules.
"Methane has an affinity to coal," said Mitch Blake, with the West Virginia Geological and Economic Survey. "It's stuck to it like magnets."
Blake, who has spent years mapping most of the coal fields around the Upper Big Branch mine, has seen methane bubbling up through groundwater and has heard it escaping from the coal when he's been underground. 
"It sounds like bees buzzing," he said.
Blake said any spark will cause a methane explosion in a mine if the gas concentration is between 5 and 15 percent of the atmosphere.
"Down here, they were talking about it being 5.4 percent" in the Upper Big Branch mine. "You don't want that."
Bise pointed out that Monday's accident was a "really violent explosion," which made him wonder whether it was caused by methane alone. Bise said that very fine coal dust, suspended in poorly ventilated air, can explode. Of the 129 federal violations issued to Upper Big Branch since the beginning of the year, 32 have related to dust, ventilation or combustible materials, according to data from the Mine Safety & Health Administration.
Upper Big Branch is a drift mine. Unlike a shaft mine, where a vertical tunnel is drilled down into the earth, or a surface mine, where the coal is reached by stripping off the rock and soil above it, a drift mine has its entrance on a hillside, typically, where the coal outcrops. Miners dig into the mountain on the horizontal to open chambers inside the mountain that accommodate mining machinery and conveyors to carry out the coal.
Massey uses longwall mining technology to remove much of Upper Big Branch's coal. A powerful drum-shaped cutting head -- several feet in diameter and fitted with cutting bits -- rotates rapidly along a coal seam that can be up to 1,500 feet in length and a few feet high. The cutting head thunders back and forth along the seam at a speed of up to 45 feet per minute, essentially gouging out the coal, which drops onto a conveyer and is transported to the surface. The ceiling over the longwall cutting machine is temporarily held up by hydraulic roof supports as the mining gets underway. The supports are removed as the operation cuts through the seam, allowing the roof to collapse behind.

 

By Frank Ahrens

Washington Post Staff Writer
Saturday, April 10, 2010

Zenyatta Faces Only Four in Apple Blossom

By Jason Shandler

 

There is no getting around it: Compared to what it was supposed to look like, the field for the April 9 Apple Blossom Invitational Handicap (gr. I) is a major disappointment.
A field of only five, led by undefeated two-time champion Zenyatta, was drawn for the nine-furlong Apple Blossom at Oaklawn Park. The race was supposed to have been a showdown between Zenyatta and Horse of the Year Rachel Alexandrauntil the owner of the latter announced last month that she would not be racing. Had the two sensational females met in the Apple Blossom, the purse would have been $5 million, the field likely would have included 10, and it would have been one of the most anticipated races in many years.

As it is now, the purse will carry $500,000 with Zenyatta the only horse having a grade I or grade II win on her résumé. Post time is set for 6:25 p.m. CST.

Owned by Jerry and Ann Moss, and trained by John Shirreffs, Zenyatta arrived by plane from California  to Hot Springs, Ark., April 6 and was greeted by hundreds of fans at the airport before receiving a police escort to Oaklawn.

The 6-year-old daughter of Street Cry, perfect in 15 starts and with earnings of more than $5.6 million, has worked twice since beginning her season with a victory in the March 13 Santa Margarita Invitational Handicap (gr. I). Her last breeze came April 2 at Hollywood Park when clocked at 1:13.40 for six furlongs under regular rider Mike Smith.

Winner of the $5 million Breeders’ Cup Classic (gr. I) against males last November at Santa Anita, Zenyatta will be making her second start outside of California. Not coincidentally, it will be in the Apple Blossom, a race she won by 4 1/2 lengths in 2008 in her fourth career start. It was the last race in which Zenyatta did not go off as the favorite. She was the 9-5 second choice that time, with champion Ginger Punch finishing third as the 2-5 favorite.

Zenyatta drew post 4 with Smith in the irons once again. She will carry top weight of 123 pounds, four less than she did in her last start, and was installed as the 3-5 favorite.

The only other multiple graded stakes winner in the field is Larry and Cindy Jones’ Just Jenda (3-1). The 4-year-old daughter of Menifee won the 2009 Honeybee (gr. III) at Oaklawn and scored the Monmouth Oaks (gr. III) later that summer in New Jersey. That was Just Jenda’s last trip to the winner’s circle, as she has lost three in a row coming into this race including a well-beaten fourth in the Azeri (gr. III) March 6 at Oaklawn.

A winner of six of 13 starts for earnings of $480,680, Just Jenda will be ridden by Terry Thompson.

Though Rachel Alexandra will not be competing, trainer Steve Asmussen will have a starter in the form of Winchell Thoroughbreds’ War Echo. The 4-year-old Tapit   filly won the Silverbulletday Stakes (gr. III) at Fair Grounds as a sophomore and later that winter romped in the DRF Distaff over the same course. But she comes off a fifth-place finish in the Azeri and is winless in both starts this season. Shaun Bridgmohan will have the mount.

The other starters are Westrock Stables’ Be Fair, and Wayne Sanders and Larry Hirsch’s Taptam. Be Fair enters out of an allowance victory at Oaklawn March 4, her first trip to the winner’s circle since taking an off-the-turf renewal of the Lake George Stakes (gr. III) at Saratoga last summer. Be Fair, trained by D. Wayne Lukas, was fourth to Rachel Alexandra in the Kentucky Oaks (gr. I) and has not hit the board in any of her five grade I efforts. Calvin Borel will ride.

Texas-bred Taptam was ninth in the Azeri—her graded stakes debut—after consecutive wins to start her 5-year-old season. The Bret Calhoun-trained mare will be stretching out to nine furlongs for the first time.

Zenyatta improves to 16-0 with Apple Blossom win

Fri Apr 9, 2010 7:44 PM EDT

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Zenyatta and jockey Mike Smith parade in front of the crowd after winning the $500,000 Apple Blossom Invitational horse race at Oaklawn Park in Hot Springs, Ark., Friday, April 9, 2010. (AP Photo/Danny Johnston)

— Zenyatta came to Oaklawn Park as visiting royalty. After romping to her 16th consecutive victory in the Apple Blossom Invitational, racing's queen stood before her adoring public and bowed her head twice.

At times more human than horse, Zenyatta high-stepped her way to the starting gate Friday in her distinctive Radio City Rockette style. She lagged behind early as usual before making a sweeping move through the stretch turn on her way to a 4 1/4-length victory.
"It's kind of hard to say if she's getting better and better because she's so good," said Hall of Fame jockey Mike Smith, who never had to use his whip. "I was looking at the big screen in the stretch, to be honest, because at that point we'd already hit the front really easy."
The 6-year-old mare tied the modern mark shared by 1948 Triple Crown winner Citation and 1995-96 Horse of the Year Cigar in unrestricted races. Peppers Pride, who retired last year with a 19-for-19 record, and Hallowed Dreams, who won 16 straight, achieved some of their success in statebred stakes.
"We're just thrilled and delighted that she's won 16 in a row," said Jerry Moss, who owns Zenyatta with wife Ann. "So many people have thanked us personally for bringing the horse here. I think wherever we go, people will be happy to see Zenyatta."
She beat four horses in the 1 1-8-mile race that didn't include racing's other female superstar, Rachel Alexandra. Her owner passed on a chance to participate in what would have been a dream matchup worth $5 million if both horses had shown up.
Without Rachel Alexandra, the Apple Blossom purse reverted to $500,000, with Zenyatta earning $300,000.
Still, track president Charles Cella came out ahead. Instead of costing him $5 million, he lost $172,753 because of minus win and place pools. The rare negative win pool alone was $27,275.
Sent off at 1-20 odds, Zenyatta went four-wide leaving the final turn on her way to the front. She drew clear down the stretch to extend the streak that began 2 1/2 years ago. She's won all her races by a total of 33 3/4 lengths.
"The whole race she was really on," Smith said.
Zenyatta ran the distance in 1:50.71 and paid $2.10 and $2.10, rewarding holders of $2 win tickets with a 10-cent profit. There was no show wagering.
"The winner ran like who we thought she is," said D. Wayne Lukas, who trains third-place Be Fair. "This was great for racing. The good guys won."
Taptam returned $6.40, with jockey Cliff Berry saying, "She's intimidating. When I saw her coming, I started riding for second."
Be Fair was ridden by Rachel Alexandra's jockey Calvin Borel. Just Jenda was fourth and War Echo, trained by Steve Asmussen who oversees Rachel Alexandra, was last.
"That was incredible," Asmussen said. "We were no match."
After crossing the finish line, Smith guided Zenyatta back to the grandstand, patting her neck in between waving to the crowd of 44,973. He stopped her in front of them and raised his helmet to the sky as Zenyatta bowed to the cheers.
"It's priceless," said Dottie Ingordo Shirreffs, racing manager for the Mosses and wife of trainer John Shirreffs.
Zenyatta's triumph occurred a day after Personal Ensign was found dead at age 26 in Paris, Ky. Personal Ensign won all 13 of her career starts, including the 1988 Breeders' Cup Distaff in which she came from behind to beat Kentucky Derby winner Winning Colors by a nose.
"She was a great mare, and we were obviously complimented to be even thought of in her realm," Moss said.
Zenyatta won the Apple Blossom two years ago in her dirt debut, beating defending champion Ginger Punch.
Her other 14 wins have come on synthetic surfaces on her home circuit in Southern California, highlighted by beating the boys in the $5 million Breeders' Cup Classic in November.
Asked if dirt is her best surface, John Shirreffs replied, "Without a doubt. We've always said that, not everybody always listened."
Zenyatta overcame traffic in the stretch to win the Santa Margarita Handicap at Santa Anita in her first start this year.
She had no such trouble this time.
Zenyatta was last away from the starting gate, with Borel and Be Fair breaking from the No. 1 post and staying on the rail in his customary riding style. She began closing ground on the leaders around the far turn.
Down the stretch, Zenyatta loped along in a gallop with Smith merely holding on as the grandstand erupted in cheers.
"Going around the far turn, I kind of poked her out to get her ready for a run and she lengthened her stride, which she does every time," he said. "Riding her is a lot of fun."
(This version CORRECTS SUBS 18th graf to correct information on Personal Ensign's death; UPDATES final odds on Zenyatta; ADDS details on track losing money.)

Zenyatta on target for Apple Blossom

ZENYATTA WINNING BC CLASSIC

Benoit & Associates photo

by Mike Curry
The defection of Horse of the Year Rachel Alexandra from the “Race for the Ages” did not leave Oaklawn Park completely high and dry as unbeaten two-time champion Zenyatta will continue to prepare for the Apple Blossom Invitational Stakes (G1) on April 9.
The six-year-old Street Cry (Ire) mare extended her unbeaten record to 15 on Saturday with a visually impressive victory in the Santa Margarita Invitational Handicap (G1). Trained by John Shirreffs, Zenyatta won by 1 1/4 lengths despite conceding from 11 to 16 pounds to seven challengers and traffic trouble in the stretch.
“We’re disappointed that we’re not going to be able to face each other in the Apple Blossom,” said Jerry Moss, co-owner of Zenyatta with his wife, Ann. “Hopefully, we can meet down the line. We respect both [trainer] Steve [Asmussen] and [majority owner] Jackson as horsemen, and they’re going to do what’s right for their horse. That’s all anybody could ask for.
“We’ll go on to the Apple Blossom as planned.”
Rachel Alexandra finished second in her first start in more than six months to the Shirreffs-trained Zardana (Brz) in the New Orleans Ladies Stakes. Asmussen and Jackson said on Sunday that Rachel Alexandra will not be ready for the Apple Blossom.
Zenyatta also made her season debut off a layoff of more than four months, but she dazzled with a sparkling return that will make her the overwhelming favorite for the Apple Blossom, a race she won in 2008 in her only previous start on a dirt track.
"I thought she'd come back and run like she did, but she actually ran better than I expected," regular rider Mike Smith said Sunday. "I thought she had plenty of chance [at the quarter pole]. I just didn't want to run over anybody."
Trapped in traffic in early stretch, Zenyatta looked like she might be in trouble. But after she found running room along the rail, Zenyatta closed with ground-devouring strides to take charge emphatically. Pacesetter Dance to My Heart finished second for trainer Jerry Hollendorfer, who continues to be amazed by Zenyatta.
"It's hard to beat a champion like her," Hollendorfer said. "Kind of everything went wrong for her, and she still won; so you've got to hand it to her, and she carried 127 [pounds]. Zenyatta's a true champion."

Mike Curry is a Thoroughbred Times TODAY editor

Greek debt crisis flares anew EU bailout likelihood looms larger

The Greek debt crisis broke out anew in recent days amid worries that Greece will not be able to overcome public opposition to deep budget cuts while support from the European Union remains wobbly and depositors appear to be staging a run on Greek banks.
The renewed crisis makes it likelier that Greece will need a bailout from the EU within weeks, analysts said, posing the first major test of the trading bloc's resolve to maintain unity in the face of immense fiscal problems in Greece and a long list of other member countries.
Greece's borrowing costs soared Thursday to a record 4.63 percentage points over the rates on German bonds, raising questions about whether Greece will be able to reduce its sky-high budget deficits even if it adheres strictly to deep budget cuts that have sent Greek citizens and labor unions into the streets in protest for weeks on end.
The beleaguered nation was pushed further against the ropes by an exodus of depositors from Greek banks in January and February and other bank funding problems that forced the country to exhaust funds it had set aside to shore up the banking system - leaving Greece with little wherewithal to address any further assaults on its teetering financial system.
Adding to Greece's woes, divisions reopened between Germany and other EU nations in recent days over the terms of aid they had pledged to provide Greece last month. Germany continued to insist that any loans to Greece should carry interest rates close to market levels, to discourage Greece from seeking a bailout, while France and other EU members favored providing subsidies to reduce the financial strain. Other questions surfaced about the concessions Greece would have to make in return for an International Monetary Fund (IMF) contribution to the backup financing plan.
"It's another Greek blowout," said Mark Frey, an analyst at Custom House, a Canadian foreign exchange firm, noting that the drama and complications surrounding the Greek financial tragedy are getting more tangled and histrionic by the day.
"The much-ballyhooed EU and IMF partnership cobbled together seemingly at the last minute in order to provide a backstop to Greece and lower the heavily indebted nations borrowing costs is unraveling, with more than a few eyebrows being raised at how we got to this point," he said.
"If a workable financing arrangement cannot be realized, the world is ultimately relying on Greece to enact painful fiscal austerity measures in an environment where the populace has been completely unwilling to accept that there is a significant problem to begin with," he said.
"Furthermore, going the IMF route is likely to have spending restrictions that equate to political suicide and, as such, Greek politicians will want to avoid the IMF. So, by no means have Greeces debt woes been resolved."
The EU/IMF backstop plan was originally designed last month to try to help stabilize Greek markets, thereby enabling Greece to keep borrowing on its own and addressing its own budget problems without a bailout.
"Unfortunately, the eurozone bailout plan has failed to have the positive impact expected," said Diego Iscaro, an analyst at IHS Global Insight. "The situation in Greece continues to be extremely worrying."
Given the intransigence of the Greek problems - and the EU's inability thus far to convincingly address them - the crisis is beginning to spread again after a hiatus of several weeks, driving up the borrowing rates for similarly debt-strapped European countries such as Portugal, Ireland, Italy and Spain.
As in previous episodes, Greece's renewed woes drove down the euro Thursday close to its lowest point against the U.S. dollar this year. Meanwhile, the value of the dollar and prices on U.S. Treasury bonds, where investors often stow funds during financial emergencies, increased. The heightened support for U.S. assets enabled the U.S. Treasury to enjoy a successful auction of a heavy slate of securities this week.
"With attention having turned to the Greek-yield explosion, we saw a flight to quality bid in Treasuries," and heavy buying of Treasuries by foreigners, said John Rocket Spinello, chief technical strategist at Jefferies Inc. He expects the "ongoing Greek saga" to keep driving investment into U.S. markets while hurting the European currency and markets.
Adarsh Sinha, an analyst at Barclays Capital Research, said the threat to stability from a run on Greek banks may have been exaggerated. Greek depositors, he said, may have decided that they can earn more by putting their money in Greek government bonds offering interest rates of more than 7 percent.
"It might be that these deposits are being moved to foreign banks, but it could also be that they are being put to work in some way," he said. "Clearly, such deposit-flight stories can be self-fulfilling." And in any case, Greek banks likely are offsetting flows of deposits into Greek government bonds by cashing in some of their own Greek bond investments to pay off the depositors.
"Fears about a vicious circle developing will likely remain alive," and ultimately may force Greece into the arms of the EU and IMF, he said. But the cost of IMF involvement will no doubt be high.
"Previous experience suggests that the IMF would prefer a larger upfront fiscal adjustment from Greece - in exchange for large upfront financing - that could include concrete commitments on such contentious areas as pension reform," he said. Barclays estimates that Greece will need a three-year joint IMF/EU package totaling 40 to 45 billion euros as the "minimum needed" to "calm markets sufficiently" so that Greece can continue to slowly overcome its budget and financial problems.

By Patrice Hill

Three-way poker in Greek debt crisis

ATHENS (Reuters) - The man at the center of Greece's debt crisis is surviving on 4-5 hours sleep a night and could not get to his office last week because it was blockaded by striking employees.

Crisis in Credit

"We know we don't have a blank check," Finance Minister George Papaconstantinou told Reuters in an interview at a temporary refuge in a tax and customs administration building.
"We have public support as long as people feel everyone is bearing the burden equally."
Papaconstantinou is trying to make the most of a weak hand in a three-way poker game involving Greece, its European Union partners and the financial markets.
Greece needs to borrow or refinance 53 billion euros ($71.52 billion) this year, including 20 billion in April and May.
"We want to be able to borrow on the same terms as other countries in the euro zone," Prime Minister George Papandreou told a conference in London last Friday.
But investors anxious at the risk that Athens may be overwhelmed by its debts, projected to hit 120 percent of gross domestic product this year, are charging a steep premium to buy Greek bonds rather than benchmark German bunds.
The government needs to slash a huge budget deficit fast to assuage angry European partners and restore credibility in the bond markets, without squeezing voters so hard that it triggers a social revolt in a famously rebellious country.
Papaconstantinou is looking for clearer EU support to help escape a vicious circle of rising borrowing costs, harsher austerity measures, prolonged recession and diminished revenue.
Having owned up to a massive under reporting of its deficit and promised swift corrective action, Greece's negotiating leverage with its EU partners is mostly negative.
It can dramatize the risks for the entire euro zone if its debt woes get worse, it can point to the danger of social unrest if the EU forces too harsh austerity on Greeks, and it can threaten to go to the International Monetary Fund.
The government is doing a little of each while stressing its utter determination to meet steep deficit reduction targets.
"COLORADO DOESN'T GO TO THE IMF"
"The real threat, which they may eventually have to use, is not default, or leaving the euro zone, but going to the IMF," said Loukas Tsoukalis, a former top policy adviser to European Commission President Jose Manuel Barroso.
"That would look serious for the euro zone because we share a common currency. After all, Colorado doesn't go to the IMF," said Tsoukalis, president of Athens' Eliamep policy think-tank.
Euro zone heavyweights France and Germany have insisted that the Greek problem should be handled within the European family.
After EU leaders declared their support on February 11 for Athens' deficit-cutting program and vowed coordinated action, if needed, to safeguard stability in the euro zone, markets were looking for a clear signal of how Europe would help Greece.
It didn't come. Debt spreads, which fell on expectations of an EU rescue package, have crept up again as markets see the public backlash in Germany and question Berlin's willingness to make any financial commitment to Greece.
These doubts come just as Athens is hoping to go back to the market with its next 10-year bond issue.
After talks with EU colleagues last week, Papaconstantinou said in the interview: "We need to give the assurance to markets that we are actually working toward a potential instrument of "xyz" type, so that we'll never have to use it."
He did not rule out seeking IMF assistance but he said there were no negotiations with the global lender now.
Seen from Brussels and Berlin, it is too early to ease pressure on Athens by spreading out a European safety net that would be deeply unpopular with German, Dutch and Finnish voters.
EU ministers reckon Greece should take more drastic steps quickly to cut its public wage bill, raise value added tax and further increase fuel tax to achieve a promised deficit reduction this year of 4 percent of GDP.
The government is waiting until after a one-day general strike by the two main trade unions this week against its public sector wage freeze, tax hikes and welfare cuts before deciding on any further measures.
Papaconstantinou hopes that by April, Greece will have impressed markets with the initial execution of its fiscal adjustment, won further approval from Brussels and secured a clearer EU guarantee to back its borrowing.
"My only choice is to accelerate what we are doing here, be as public about it as we can, grit our teeth until things quieten down and pay the higher cost," the minister said.

by Paul Taylor - Analysis

ATHENS

Questions and answers on Europe's debt crisis

 

Troubling news about the debt of some eurozone countries has hurt the euro currency.

LONDON (AP) — European and U.S. stock markets have taken a hit recently as investors worry about the debt crisis enveloping Europe, particularly in Greece. Here are some questions and answers on the debt crisis.

Q: Why is Greece in financial trouble?

A: The Greek government has spent too much for years. Markets became concerned about this in November after the newly elected Socialist government revealed that last year's budget deficit was more than three times as large as previously estimated. The EU says Greece's financial figures have been fudged for years.

With debt piling up to 113% of the economy, investors fear Greece won't pay its debts, in the form of government bonds — or will need a lifeline from other EU countries to meet its 54 billion euro ($74 billion) borrowing needs this year.

Q: How does that affect stocks and the wider economy?

A: Greece's debt crisis has global implications because it's the most visible example of the massive build-up in public deficits around the world after governments loosened the purse strings to mitigate the global credit crunch.

That means governments have to cut spending, raise taxes and divert revenues to pay off interest on their debts.

Furthermore, because of the worries that Greece may default, investors are demanding higher interest payments before they will lend any more money. The risk premium raises rates on assets, such as corporate bonds — meaning companies themselves find it more expensive to borrow.

Q: What is being done?

A: Greek Prime Minister George Papandreou has proposed deep budget cuts, a freeze on public sector wages, pension reforms, increases in fuel taxes and renewed efforts to rein in the rampant tax evasion in Greece.

The markets, however, are skeptical about the Greek government's ability to deliver, partly because the austerity measures could be met by mounting social and political discontent.

Q: And if that doesn't work?

A: Analysts think if Greece needs a bailout, it will get one. The recently signed Lisbon Treaty specifically allows EU countries to use EU money to bailout a troubled member but does not explain how. The International Monetary Fund says it's ready to help, although EU officials have ruled that out.

Q: Who else is in trouble?

A: Portugal and Spain are now also in the spotlight because their public finances have deteriorated badly during the last couple of years. Italy, Ireland and Belgium are also on the radar, while Britain, which doesn't use the euro but is a member of the European Union, has been warned it may lose its triple A credit rating if it doesn't introduce measures to bring its massive budget deficit down.

Q: What does this tell us about the euro?

A: This is the toughest test for the single euro currency since it was introduced in 11 countries in 1999. It is now used in 16 European nations.

Skeptics of the euro said there would come a time when the European Central Bank's one-size-fits-all interest rate would not work for the eurozone's 16 different countries with 330 million people. They argue that the last thing a country like Spain needs now, with its near 20% unemployment rate, is the government slashing spending to meet the euro's requirements that public debt be no more than 3% of GDP.

Believers in the euro think that countries like Greece are already benefiting just by being in the currency bloc — saving it from a painful currency devaluation.

Most economists think that a break-up of the eurozone is only a remote possibility. But European governments will be under pressure to come up with a better crisis management framework.

By Bertrand Langlois, AFP/Getty Images

Greece debt crisis: Greeks resigned to day of reckoning

Polls show that nearly two-thirds of Greeks support austerity measures to deal with the Greece debt crisis. But taxi drivers, facing new gas taxes, went on strike Thursday.

• 

Protesters hold a banner which reads in Greek 'we are struggling to live' at a protest in central Athens on Wednesday.

But as Greece’s eurozone partners prepare to bail the country out of its current debt crisis, the mood on the streets is as resigned as it is angry. Many Greeks say they know a day of reckoning has come.
“I’ve had this store for 40 years and business is worse now then it’s ever been,” said George Ziazios, who owns a flower shop in central Athens. “The government has to stop the tax evaders and cut the civil servants. They have to take action.”
For decades, Greek governments of every political stripe have caved to union and worker demands, meeting protests with promises of handouts. But the country’s current government, under pressure to cut spending, has pledged to break that cycle.

Tighten your belts

A year ago, when farmers blocked roads with their tractors, Greece’s government -- then controlled by the center-right New Democracy party -- gave them half a billion euros, more than $635 million, in loans and compensation for destroyed crops. This year, the four-month-old Socialist administration of George Papandreou held firm against similar demands. The government’s repeated message: There’s no more money in state coffers and all Greeks must tighten their belts.
Polls show that nearly two-thirds of Greeks recognize the seriousness of the problem and support the need for austerity measures. But the question is whether that support will hold as the measures begin to bite.
Taxi drivers are one of the first groups to feel the impact of the fiscal crisis. Facing new gas taxes and a change in the way their income tax is calculated they went on strike Thursday, leaving many Athens commuters struggling to get to work.
Stathis Dokoros says he usually brings in about €110, or $150, during each 12-hour shift, but that higher gas taxes will force him to put €20 of that back into the tank. The economic crisis has also cut the number of passengers by 10 percent.
“It’s hard work and little money, and it’s getting worse,” he says He joined the strike and turned out for the protest, but he acknowledged too that he wasn’t the only one hurting.
“We know we have to help, but it shouldn’t be just us,” he says. “They need to take the money from the rich people too and the ones who stole money, like the ministers.”

Leaders must sacrifice, too

That’s a frequent refrain here. Greeks say they’re willing to make sacrifices, but want to know their leaders aren't reaping the benefits. The government is trying to prove the pain is being shared equally and has announced caps for the salaries of chief executives at state-controlled companies and a 90 percent tax on bankers’ bonuses.
Greece’s government feared, and unions hoped, that Wednesday’s protest and nationwide strike by civil servants would launch a wave of popular resistance against the proposed austerity measures. But although another major strike is scheduled for Feb. 24, there’s no sense that public anger is about to boil over as it did in December 2008, when the Athens was hit by weeks of riots.
There is widespread acknowledgment that this mess is of Greece’s making. Most Greeks, especially older ones, credit the European Union and the euro with bringing political and economic stability to the country after decades of war and dictatorship. It’s their leaders they blame.
“It’s more expensive now, but if you have euros, you know what you have. With drachmas, you were never sure,” says Dimitris Psihogios, another taxi driver. “The European Union has been good for us.”

Mood could shift if cuts deepen

But the mood could shift if the cuts become deeper. Many analysts predict that any European bailout will come with harsh conditions and include demands for further cuts to public spending. George Pagoulatos, an associate professor at the Athens University of Economics and Business, thinks that would be a mistake.
“I think it would be wiser to focus on succeeding in implementing these reforms, rather than seeking further wage cuts and harsher measures which risk alienating society,” he says. “There’s another risk there -- that society will turn anti-European if these reforms are seen as being imposed by the European Union.”

By Nicole Itano, Correspondent

Greece debt crisis unfolds

LONDON: The markets are in a funk about the public-debt crisis in Greece. The country was clearly not ready for euro membership and now faces some hard choices: make savage budget cuts and plunge into a deep recession; default on its debts and lose its credit rating for a generation; plead for a bailout from its European Union partners; or quit the euro. But, hey, there might be money to be made from this Greek tragedy. The way to do it is by swapping Hungarian bonds for Greek ones, selling the euro, ditching Spanish and Portuguese assets, and shorting the Athens stock market. The Greek crisis is accelerating all the time. Last week, Greek bonds plunged as the markets took a look at government plans to cut a budget deficit running at 12.7 per cent of gross domestic product. Traders decided the numbers didn't add up. There was speculation that a bailout was being organised by the European Central Bank, or the EU. Greece's troubles seeped into the currency markets, dragging down the euro. Other euroarea bond markets, in Spain and Portugal in particular, took a tumble. One wild story had Greece selling bonds to China to ease the budget crisis. The markets are demanding answers, and in the next few weeks they may get them. Greece is in the spotlight, and it will have to come up with a credible plan. The trouble is none of the options is very appealing. If the country gets serious about curbing its deficit, most of the growth of the last decade will turn out to have been illusory. If Greece begs its euro-area partners for a bailout, it will be humiliated. If it starts printing some "new drachma" to pay back bondholders, it will be almost impossible to borrow more. Greece will do what most of us would when faced with such a terrible range of choices: prevaricate, delay, postpone and hope something turns up. Until the crisis is resolved, though, there will be plenty of opportunities to make money. Here are five places to start: One: Buy every Greek bond you can lay your hands on. Greek 10-year bonds yield 6.6 percent, compared with 3.2 percent for German debt. That is a huge difference for what is essentially the same product: a government bond denominated in euros. So long as default is avoided, and Greece stays in the euro area, your Greek bonds will soar in price. Two: Sell Hungarian and Polish government bonds. Both countries are in respectable shape economically, even if they have been hit hard by the global recession. Both aim to join the euro area at some point in the coming decade, at which point interest rates would fall in line with the ECB benchmark, and bond prices would soar. But after Greece's woes, do you think Poland and Hungary will be allowed into the euro area anytime soon? Not likely. Short those bond markets as soon as you can. Three: Sell the euro. Every day, EU and ECB officials line up to declare that the Greeks won't get any help. Officially, that might be true. There are plenty of ways to help out on the sly. Greece could be allowed to issue bonds jointly with other countries; the ECB could extend measures that allow it to accept Greek bonds as collateral for loans; or the EU could find a way of increasing "structural" subsidies for the Greek government. The markets will smell a bailout, however, even if it comes packaged in some fancy label. The credibility of the euro and the ECB will be badly damaged. Investors will ditch the currency, and switch back to the dollar and the yen.

How Greece's Debt Crisis Affects America

Earlier this week, Greek Prime Minister George Papandreou traveled to the United States to promote a message: We're in this together. The debt crisis that has threatened the Greek economy and the stability of the European Union's monetary policies "very much involves America's interests," Papandreou stated in a speech at the Brookings Institution in Washington.

The prime minister—who was born in St. Paul, Minn.—even connected the current crisis to the Great Depression as well as the Great Recession. "If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago," he said.
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But the path from a Greek crisis to a U.S. crisis is not a direct one. The European Union is hoping it can contain Greece's debt crisis before the problems spread across the continent—threatening the stability of all countries that use the euro, or the euro zone—and then over the Atlantic.
The crisis began shortly after the election last fall of the new socialist government led by Papandreou. State officials revealed that Greece's budget deficit was at 14 percent of GDP—almost twice what the official Greek government statistics had reported. Two months later, Moody's downgraded Greece's debt to A2, raising the possibility of Greece defaulting on its debt.
If Greece defaults, "it risks exacerbating the economic downturns and could even reignite an acute financial crisis" through higher interest rates, Marc Chandler, global head of currency strategy at investment firm Brown Brothers Harriman, wrote in a report.
A Greek default would hit Americans hard in one major area: exports. According to the Economic Report of the President by the White House's Council of Economic Advisers, in order to "fill the gaps left in demand" by the recession, "net exports need to rise." President Obama announced in his State of the Union address a goal of doubling exports over the next five years. That goal might be hard to reach if Greece's debt crisis is not contained. "Under the scenario where things get much worse in Europe, the dollar would get strengthened relative to the euro, and that would create a policy headache for the Obama administration," says Steve Hanke, an economist at Johns Hopkins University. A stronger dollar would make U.S. exports more expensive. In addition, as interest rates in Europe soar and the euro falls in value in response to the credit crunch, Europeans would be unable to buy as many U.S. products.
The likelihood of that scenario depends partially on what the European Union decides to do about Greece. In reaction to this panic in Greece, much of the rest of Europe became frustrated over Greece's ability to hurt the rest of the continent economically but with little accountability owing to the fact that Greece is an independent state. Because Greece uses the euro, its fiscal problems can weaken the currency and lead to higher interest rates for all Europeans. A February poll found that a majority of Germans want Greece out of the euro zone.
Greek officials have received reassuring signs from Europe's leaders that the European Union will bail out the country in some way to assure creditors that it will not default on its debt. José Manuel Barroso, president of the European Commission, also announced this week that whatever mechanisms the EU uses to help Greece will be in line with the laws of the EU—assuaging fears that a bailout would violate the Maastricht Treaty, the agreement that created the euro.
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But it is not guaranteed that bailing out Greece will save it and, by extension, the euro zone. Hanke worries that even with a bailout, wealthy Greeks and foreign investors will not stop withdrawing their money from Greek banks, from which they have already pulled out billions of euros. In order to get the rest of Europe's support for a bailout, Greece has had to promise to fill in its budget with more tax revenue. But paradoxically, those taxes might cause even more people to flee the Greek financial system, says Hanke. "In effect, with bank runs coupled with capital flights, you would get a collapse in credit in Greece," he says.
Such a collapse would have two major potential effects. First, a credit crunch would spread to other European countries that have vulnerable economies. For example, "if you had a lot of capital flight out of Greece, all of a sudden people in Spain say, 'We're going to be next,' " says Hanke.
Second, the credit crunch would increase the likelihood of Greece defaulting on its debt. In such a scenario, Greece could temporarily leave the euro zone and return to its former currency, the drachma, which would be heavily devalued against the euro.
There are still several signs that Greece can use the market to navigate out of the crisis without a default. Last week, Athens sold 10 billion euros of 10-year sovereign bonds to foreign investors. But an amount of 23 billion euros is needed to meet government obligations through May. And Greece has only begun to implement changes to its budget that will bring it out of a fiscal hole. Earlier this month, the government announced a plan of cuts to wages of government employees, tax hikes on tobacco and alcohol, and other measures expected to raise 4.8 billion euros. But these steps will reduce Greece's budget deficit by only 2 percent of GDP. It now stands at 12.7 percent of GDP, well above the European Union's target of 3 percent. Even the changes so far have not been easy politically. Several of the country's labor unions are striking in protest of the spending cuts and tax increases.
Perhaps, however, Greece can breathe its biggest sigh of relief over the fact that the international investors who recoiled in horror over the country's fiscal problems just a few months ago appear now to be softening their stance. Investors trade credit-default swaps on Greek sovereign debts, which are contracts that function as a kind of insurance on the chance the government will default. According to credit-default-swap prices from financial information company Markit, the annual cost to insure a five-year government bond for Greece hit a high of $425,000 on February 4. That was a 67 percent increase from the previous three months. But as of March 9, the cost had fallen to $289,000, down to the levels of December.

By Matthew Bandyk

Greek Debt Crisis How Goldman Sachs Helped Greece to Mask its True Debt

dpa

Greek Finance Minister George Papaconstantinou speaking at a conference in January.

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent. The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.
Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.
Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.
Fictional Exchange Rates
Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.
This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent. At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.
The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.

By Beat Balzli