The writer is chief economic adviser to Allianz and chair of US President Barack Obama’s Global Development Council
Sensing that this could be “history in the making” for Greece and for Europe, I decided a few weeks ago to keep physical copies of the FT (yes, I still get a physical copy!). While the inside of the paper contained rich reporting and comprehensive analysis, the headlines on the front page ended up providing a great feel for what transpired in this horrific tragedy. Read more
We’ll be slamming up the best of our collective inbox on matters Greece as and when the good stuff pours in.
Catching up on the last few hours, here’s JP Morgan’s Greg Fuzesi:
In light of the deepening crisis in Greece, a key question is how the ECB will respond to any signs of contagion to the rest of the Euro area. At the end of today’s policy statement about the ELA decision, the ECB said that “the Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area.” The ECB added that “the Governing Council is determined to use all the instruments available within its mandate.”
In this guest post, former IMF staffer Peter Doyle argues that in pushing for pensions, VAT and labour reforms, creditors are only stoking the latent explosiveness of Greece…
Troika-Greek negotiations are reportedly down to the wire over early-retirement pensions, VAT, and labor reforms: the IMF says all are non-negotiable; Tsipras, perhaps inadvertently echoing Mrs. Thatcher, has, so far, responded “No! No! No!”
These three issues converge on those at the upper end of their working lives, the 50-74 year old cohort, and are reflected in its participation and unemployment behavior. So it is worth considering data on those and the associated implications for the negotiations. Doing so suggests that these creditor red lines lack foundation. Read more
This guest contribution, from Giles Wilkes, sprung from a fierce internal debate amongst the FT’s leader writing team on Wednesday…
The standoff between the Greeks and their European creditors has often been compared to a Prisoner’s dilemma. This foundational scenario for game theory – famously, the expert discipline of Yanis Varoufakis, the Greek finance minister – concerns two prisoners accused of a crime who are handled separately by the police. Each are given the choice either of ratting on their accomplice, or staying silent. Should just one of the prisoners choose to rat on the other, he will walk free with a reward while his mate languishes in jail. If both hold firm, they each walk free unrewarded, while if they each betray their friend, then both are thrown into jail. Read more
It’s from Michael Hartnett, of BoA Merrill Lynch, but you probably would have guessed that if asked.
My Big, Fat Greek Dreading (and other risks)
To the upside: concerns over Greece prove misplaced, investors over-hedge Fed risks, passage of TPP boost investor & corporate confidence, tech’s creative disruption = higher PE, lower CPI. To the downside: inflation surprises to upside.
Hartnett doesn’t have much to add specifically on Greece, other than this intriguing chart. Read more
Spoiler alert. In this guest post, former IMF staffer Peter Doyle, argues that some participants in the on-going Greek crisis might be suffering from anosmia…
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A flurry of fresh headlines: Greek stocks pummelled; “Air of unreality” as IMF quits talks. A seemingly credible report from Germany’s Bild saying Angela has resigned herself to possible Grexit.
There was that aggressive Giavazzi op-ed in the FT.
Oh, and 10,000 Greeks have taken their own lives over the past five years of crisis, according to Theodoros Giannaros, a public hospital governor, whose own son committed suicide after losing his job.
Maybe this is the end, end game. Read more
Greece’s creditors tabled their alleged take-it-or-leave-it proposals on Wednesday evening, but Greece has now also come up with its own final proposals. Thanks to leaks through the Greek press on Thursday afternoon, you can now compare the two draft proposals side-by-side.
The Troika stuff comes in two parts, policy commitments and prior actions, courtesy of Tovima. Click the images tow read: Read more
A post-dated cheque without the drawing rights, that is.
As Tsipras and co stagger towards the next IMF payment deadline on Friday, all the while spitting furiously about the supposed abolition of democracy in Europe, it seems extraordinary that Greece has made it thus far without an event. Consider the payment schedule so far, from JP Morgan, published at the beginning of March… Read more
We should probably view Ireland’s decision to exit its bailout sans precautionary credit line more like a scarf dance than a total strip show…
Ireland has evidently decided that the cost of not having a pre-arranged ECCL exceeds the cost of negotiating an ECCL under duress. The characterisation of ECCL/no ECCL = OMT/no OMT is too simplistic. The reality is a matter of degree. Not having an ECCL does not rule out OMT, it merely slows the ECB response down as an ECCL would have to be negotiated and approved first.
It’s bad enough having the most expensive bank bailout around. But not getting official recognition for it? Unbearable!
Luckily for Ireland, there’s a concerted effort underway to right that wrong… (h/t Nama Wine Lake) Read more
So, we’re going to the wire once again in the now traditional dance between Greece and the troika. As the FT reported on Thursday:
Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
First a reminder about this coming Monday, October 29th.
Andy Haldane, the Bank of England’s executive director for financial stability, will be giving a talk at Friends House, right across the road from Euston station. FT Alphaville is very happy to be chairing. Kickoff is 6pm.
While the event is free, you do have to reserve a seat. Click here to do so. Read more
Spotted on Tuesday — a market getting itself in a lather as soon as the Spanish prime minister denies that a bailout is ‘inminente’. (Via Google Finance)
The trauma and cost of a public rescue must surely teach the bank management concerned to behave in a more prudent manner, right?
Wrong, according to a recent Bank of International Settlements paper. Read more
Then and now the key to the door of the eurozone’s
success survival, especially given the currency union’s propensity for contagion.
There may be a relief rally because of utterances by European Central Bank President Mario Draghi, but speaking on behalf of investors: it’s hard not to feel a bit let down lately (understatement). Read more
Spanish prime minister Mariano Rajoy on Wednesday:
We can’t finance at current prices for too long. There are many institutions and financial entities that have no market access. It’s happening in Spain, it’s happening in Italy and in other countries, that’s why this is a crucial issue. Read more
Spain on the left and Cyprus on the right. Click the images for the full documents:
This had been a long while coming… Flashes from Reuters at pixel time:
16:57 – CYPRUS APPLIES FOR EU BAILOUT - GOVERNMENT STATEMENT Read more
(Alternate title: Fitch junks incoming EU president.)
Fitch has cut Cyprus’ credit rating to ‘BB+’ from ‘BBB-’. That’s a junking and, shockingly, it’s down to the banks. From Fitch (with our emphasis): Read more
This has been widely pre-announced on Twitter. But, according to Trade Web figures, Spain’s borrowing costs on10 year paper spiked up through 7 per cent at 9.55, London time…
Was this part of the plan? Italian 10 year at 6.20 per cent on Tuesday, and rising?
ECB data published on Monday showed that it once again resisted intervening in government bond markets last week, taking its non-interventionist run to 13 weeks. Read more
On Monday morning, a relief rally took place in markets around the open-half of the globe as investors digested the bailout of Spain’s banks, as announced by the Eurogroup.
The move was, of course, recognition of what was known for a long time — that Spain could not backstop its ailing bank sector alone. It would seem, however, that Monday’s rally might already be losing steam. Read more