So, a plurality of the Finnish public may just agree with FT Alphaville.
Click to enlarge. That’s a Gallup poll by Helsingin Sanomat on the Finnish government’s Greek ‘collateral’. Read more
The International Monetary Fund’s “ex post evaluation” of its involvement in the Greek bailout continues to generate debate over the weaknesses revealed. Gabriel Sterne, a senior economist at Exotix with two decades of public sector experience including at the IMF, argues that the issues for the fund go much deeper.
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Like other Europe-focused strategists, William Porter at Credit Suisse has had some fun scrolling through the IMF’s mea culpa on Greece.
He notes that the IMF now admits that its actions were affected by a fear of market contagion, a misunderstanding of how to do a restructuring within a currency union and, most importantly perhaps, a dysfunctional dynamic within the Troika itself. Read more
The short answer, when it comes to eurozone adjustment post-crisis, is No. David Mackie and team at JP Morgan reckon we are maybe halfway there.
The bank has a fresh tome out presenting the progress so far as a set of journeys for each EZ member — covering sovereign deleveraging, competitiveness adjustments, household deleveraging, bank deleveraging, structural reform, and national-level political reform. Read more
Quite a lot to ponder really. Members of the IMF’s executive board were set to meet on Wednesday to discuss whether to approve lending to Cyprus, more or less behind closed doors.
But maybe not so much this time. It looks like Stockwatch in Cyprus has obtained a copy of the members’ comments on the Cypriot bailout — a rather high-level internal document to find its way to the public… and it makes for fascinating reading. Read more
A telling chart (which you can click to enlarge) from BNP Paribas’ Ricardo Santos and Michelle Lam. As they note — after a break particularly in the second half of 2012, there’s recently been a marked increase in banks’ holdings of sovereign debt… especially in Italy, France, Portugal and Spain. Read more
Hans-Werner Sinn — he of Target2 imbalance fame — had a piece on Project Syndicate last week in which he stood firm against George Soros and his demands for Germany to leave the euro if it continues to block the introduction of Eurobonds.
Though not because he thinks Germany is wrong to oppose Eurobonds, but rather because he believes there is no legal basis for such demands. Article 125 of the Treaty on the Functioning of the European Union, he says, expressly forbids the mutualization of debt. Read more
There’s been some thought-provoking revisionism floating around about Cyprus lately.
The gist seems to be this: Why not push bank bail-in policy in the eurozone much harder, right into uninsured depositors if need be, if Cyprus has not (yet?) budged most gauges of bank funding from their current calm. And more importantly, when there is a vicious circle to resolve. Read more
The figures provided in this report incorporate the best judgement available at this time. Nonetheless, caveats remain. The data for Cyprus appear not to be comparable with those for other euro area countries in a number of dimensions and should therefore be interpreted with caution. However, once the above mentioned factors are accounted for, the net wealth figures for Cyprus appear less of an outlier…
Possibly because of headlines like this, landing after the German-financed bailout of Cyprus: Read more
Kinda strange that markets should get all a-jitter just as the Cyprus crisis is moving towards a resolution.
Simon Derrick of BNY Mellon asked on Friday: “The red pill or the blue pill.” The answer — choose reality — seems pretty obvious, but let’s first run through Derrick’s handy re-cap…
What’s the problem?
That’s the result of Cypriot MPs’ vote on the current version of the bank deposit levy, rejecting it as a condition of the island’s bailout. Note that the ruling party abstained. Still, that is the first no, after all these years and the bailouts, to the Troika. Read more
To be perfectly honest, trying to second-guess Cyprus isn’t gonnna get us anywhere. The situation at pixel time was moving too fast at too great a distance. While we wait for a tiny bit of clarity — whether this evening’s vote on the bailout will go ahead is till unclear, let alone what the outcome will be — a question being asked by Credit Suisse’s William Porter and team seems apropos: What if they’re not “stupid”? Read more
The Cyprus bail-in is qualified good news, in the eyes of Citi’s chief economist Willem Buiter.
Sure, it would be better if insured depositors on the island had been spared and it would have been nice if losses of uninsured depositors had reflected the recapitalisation needs of each individual bank. But first and foremost Buiter sees this as a decisive step in restructuring excessive debt across Europe, which is a necessity if the euro area wants to grow again. Read more
Famous last words and all, but it is hard to see the fear flowing from Cyprus to the average depositor in a Spanish or Italian bank. Not in the short term. As for Lehman II, well, come off it.
After all, that’s probably partly why this inequitable tax on small depositors across Cypriot banks could be put on the Eurogroup negotiating table on Friday. The systemic danger is absent. Read more
A couple of years back, when Carmen Reinhart and Belen Sbrancia updated the concept whereby governments might deal with a problematic mountain of debt by confiscating the savings of their subjects, the discussion was all about the subtle, sleight of hand solutions that might be employed.
Artificially cheap rates of interest might be forced on the embattled sovereign’s debt, local banks might be obliged to buy mis-priced government paper, exchange controls may be erected, and so on. Ordinary people, it seemed, could be financially repressed without realising they were in fact the victims.
There was no discussion back then of outright expropriation or a “tax”, as insured (and uninsured) depositors at Cypriot banks are now being forced to bear. Read more
Mario’s presentation to EU leaders from Thursday night. Msg: ‘Mind the gap’…
William Porter at Credit Suisse has been mulling the market’s muted reaction to the Italian elections. Increased stress is no longer finding its way into widening spreads, thanks to the Draghi “put”.
This credit strategist is concerned. A dampened signaling mechanism increases the risk of something going badly wrong — a market crash, even. Read more
Let’s take a moment for a high level overview of public debt-to-GDP ratios in the eurozone. If that’s not your idea of fun, well, you probably wouldn’t be reading FT Alphaville.
Courtesy of a note by Lasse Holboell W. Nielsen of the Economics Research team at Goldman Sachs (we may have added some kittens)… Read more
Go on, pretend you’re on the governing council. Here are the data points you have to try to steer monetary policy with:
(Click to expand) Read more
Shortly after the new year, the Economics Research team over at Goldman Sachs published their outlook for growth in the euro area. Frankly, it doesn’t look all that hopeful, especially in the periphery (surprise!). We hope you weren’t holding out for something better than the growth rates associated with a “muddle through” strategy…
But hey, at least it’s several rungs higher on the ladder of economic happiness than the collapse of the currency union, eh? Read more