After years of failed attempts to stabilise the Greek economy, the Greek government finally got debt relief in 2012. As we explained in our previous post, interest payments fell by more than half between 2011 and 2013. Since the 2012 modifications, Greece’s sovereign debt service costs have been significantly smaller as a share of total output than in Italy or Portugal.
Yet it hasn’t helped much. The economy continues to contract and Greece’s depression since 2008 is among the absolute worst of any country in the world since 1980. Investment spending had already plunged by 60 per cent in real terms between the peak in 2007 and the end of 2011. Since then, it’s dropped another 13 per cent. Overall, Greece has had no economic growth since the beginning of 2013:
Part of the reason: the debt modifications failed to convince private investors to return to Greece, despite having “solved” the problem of government debt service costs. 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.”
For the latest on the ECB’s liquidity position on Greece, see our post here.
Meanwhile, here’s some instant analysis by way of the FT Alphaville collective inbox:
UPDATE: Capital controls and a bank holiday now confirmed; full research pack from Buiter, Barr and others available in the usual place. Read more
This guest post is from Peter Doyle, an economist and former IMF staffer
In an otherwise sound critique of Mr. Varoufakis’ list of proposals for Greek government policies last week, Mme. Lagarde’s letter to Mr. Dijsselbloem contains an additional, unremarked, but revealing element. After saying that, in the IMF’s view, the Greek list was sufficiently comprehensive to be a valid starting point for a successful conclusion of the review, she added:
… but a determination in this regard should of course rest primarily on an assessment by Member States themselves and by the relevant European institutions.
Given the pressure on Vani et al, this cash requirement schedule might be useful….
H/T Malcom Barr at JP Morgan. Read more
From Deutsche (click to enlarge):
As Deutsche say, beyond the preferences of the Eurogroup and how/ whether Greece chooses to extend the current program or apply for a new one, the binding dates for Greece have become more apparent: Read more
Still time (at pixel) to listen to Eurogroup chief Jeroen Dijsselbloem defend the Cyprus bailout in front of some unimpressed European MPs on Tuesday. Click the pic for the feed. (Or here) Read more
Tonight’s extra dollop of mind-bleach, fresh from the Eurogroup. Read more
…and it’s really about time it cost you your job.**
The Eurogroup head was in triumphalist form on Monday, claiming direct credit for having sent Cyprus into a parallel eurozone (capital controls, economy obliterated). Clock the direct quotes in this interview with the FT’s Peter Spiegel and Reuters’ Luke Baker: Read more
Much has been made of the buyback announced as part of the latest Greek debt reduction deal. Mainly because more than half of total debt savings agreed are expected to come from the buyback, according to this leaked doc.
The details of how the scheme is might actually work are pretty thin on the ground, but we know from the leak that the plan is to spend €10.2bn (from the EFSF most likely) buying back and retiring bonds. It is expected that this will lead to a reduction of 11 per cent of GDP by 2020. Read more
The IMF’s desired target of a 120 per cent debt-to-GDP ratio by 2020 has been replaced by 124 per cent by the same date — thanks in large part to official creditors taking a lower interest rate on repayments from the original bailout. A lot also seems to hinge on the Greek debt ‘buyback boondoggle’, which is now well and truly on the table. Read more
Hat-tip to the FT’s Brussels blog…
Click t0 enlarge — a Eurogroup chart guide on how to cut Greece’s official debt levels (a buyback boondoggle included): Read more
The Eurogroup meets on Monday for the third time in as many weeks to discuss Greece’s finances. Maybe third time’s the charm?
The focus remains on getting an agreement on the country’s medium-term debt sustainability. The reason for that is two-fold. First, it’s necessary to appease the IMF given its insistence on a haircut (which is politically very difficult for many of the member countries). Second, with the German elections taking place next September, it’s seen as best for all concerned to agree some sort of solution that will allow the question of Greece’s longer-term sustainability to be ignored until late 2013. Read more
About that meeting of eurozone finance ministers, ECB and IMF officials that collapsed in the early hours of this morning (at least, until Monday) for ‘further technical work’…
First: looks like our bold call was correct. Um, yay?
Second, Reuters says it has the document prepared for the meeting and circulated among the ministers. Read more
There are so many aspects surrounding Greece’s ongoing refinancing needs still up in the air, it should come as no surprise that the agenda for Tuesday’s meeting of European finance ministers has reportedly been shrunk to addressing how an immediate €15bn gap can be bridged through to 2014. A further €17.6bn seemingly required to take the country through to 2016 can be discussed later. Read more
Spain on the left and Cyprus on the right. Click the images for the full documents:
Monday’s very late statement from the Eurogroup.
Monday’s (very early) statement from the Eurogroup.
Quick summary. We’ve done our bit (or will have by early July), now it’s your turn. Read more
The price action in the euro on Thursday afternoon.
The Portuguese rescue mission is progressing quicker than we thought.
The Eurogroup and ECOFIN ministers outlined the three pillars of the bailout package on Friday and notably it included an “ambitious” privatisation programme. Read more
It’s the event of the week — the European finance ministers’ meeting in Brussels.
Snip, snip, snip.
Merkel gets her way on burden-sharing. Read more
Another Sunday night special from Brussels.
Kick off at 18.00 (GMT).
Statement released by the Eurogroup and ECOFIN Ministers on Sunday evening:
Note: the financial assistance is being financed from European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF), as well as direct loans from the UK and err, Sweden. Read more
It starts pleasantly enough (emphasis ours):
The Eurogroup welcomes the significant efforts of Ireland to deal with the challenges it faces in the budgetary, competitiveness and financial sector areas. Read more