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
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
In the light of the foregoing considerations, the Commission’s preliminary view is that the tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute State aid according to Article 107(1) TFEU. The Commission has doubts about the compatibility of such State aid with the internal market. The Commission has therefore decided to initiate the procedure laid down in Article 108(2) TFEU with respect to the measures in question.
Click for the full document laying out the case.
Stress tests in Europe maybe aren’t the mugging by reality they used to be… they’re putting up a little bit more of a fight this time. Though how much?
Here’s Citi cruelly putting the European Banking Authority’s recently released methodology against the US’s CCAR:
In the EU, the proposed adverse scenario leads to an overall cumulative deviation of EU GDP from its baseline level by 7.0% over the 3-year period to end-2016, with EU unemployment deviating by 2.9% versus the baseline scenario. This would imply a cumulative real GDP decline of -2.1% over 3-years, notably less than the stress applied in the US CCAR (a -4.75% decline over 15 months) and a peak unemployment rate of 13.0% versus US CCAR 11.25%. Equity prices are expected to decline by 19% relative to the baseline (US CCAR -50% decline), residential house prices by -21% (US CCAR -25%) and commercial property prices by -15% (US CCAR -35%).
Also, no deflation in the EU adverse scenario? Read more
This guest post on the Ukraine crisis is from Jorge Mariscal and Alejo Czerwonko, emerging markets chief investment officer and emerging markets economist, respectively, at UBS Wealth Management.
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Here’s an essay published by the Bruegel think tank, penned by Ashoka Mody, currently a visiting professor at Princeton. He argues that if Europe wants to move forward in terms of integration, it first needs to stop. Click to read.
Listening to the comments of the various European leaders this morning, you’d be forgiven for thinking that they were attending different summits yesterday.
Francois Hollande, as quoted by the FT (emphasis ours):
The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision.
Here’s the Liikanen Report. Click to view.
Just when you had had enough of Grexits, Greuros and Drachmageddons, here’s another irritating term to add to the eurozone crisis lexicon: Brixit. Yes, the genius fusion of the words Britain and exit to describe another gloomy scenario.
The word was coined by The Economist’s Bagehot column this week (although apparently it is also the name of a Swedish shop that sells Lego) to describe an event that it argues no British political party wants but is nevertheless likely to happen. (The story of the euro crisis, surely?) Read more
Click the image for the full document:
This had been a long while coming… Flashes from Reuters at pixel time:
16:57 – CYPRUS APPLIES FOR EU BAILOUT – GOVERNMENT STATEMENT Read more
It’s all political at this point.
The goal going forward is to bring Europe into a state of sustainability. Only politicians can do that. So writes Nomura analyst Jens Nordvig. Read more
What can Europe do? SocGen has a handy little chart:
Tonight’s text on Greece from the EU summit. Not much, to be honest.
(Click to image for full doc – more/less from Van Rompuy, here)
Sensational “news” via the Daily Express, which for the avoidance of doubt is a British national newspaper.
Can it really be true that advisers to Glencore and Xstrata did not envisage a referral to the competition authorities in Brussels when planning their
$90bn $80bn merger?
Seems so… Read more
Here’s a graphic designed to give one a headache (click to embiggen)…