From Barc as, per the FT, hopes fade ” that Greece and its creditors would strike a definitive deal on Monday to unlock €7.2bn of desperately needed bailout funds and save the country from default.”
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
It really is crunch time folks. Or at least, it’s a crunch time. We’re sure another could be arranged. Related question: how many ‘extraordinary meetings’ would it take to make the phrase redundant?
From JPM’s always excellent Flows & Liquidity team…
Purchases of offshore money market funds by Greek citizens, our proxy of Greek bank deposit outflows [the purchases of offshore money market funds by Greek citizens shown in Fig 1], points to a large €6bn deposit outflow this [being, last] week, bringing the cumulative deposit outflow since last December to €44bn.
Conventional wisdom holds that it would be an unmitigated disaster for Greece if it left the euro. This is, after all, why the country has continued to cling to the single currency despite the catastrophic decline in employment and output. But what if those costs have been grossly overstated?
An intriguing new note from Gabriel Sterne at Oxford Economics argues that, judging by the historical record, things really can’t get that much worse. According to Sterne, staying in the euro promises only years of stagnation and crushing joblessness, while leaving offers a chance, even at this late date, of rapid growth and the end of the depression that began seven years ago. In particular, he argues that leaving the euro would provide a fillip to the private sector’s balance sheet, boost trade competitiveness, and, perhaps most importantly, end the uncertainty over default and devaluation that has been choking off credit and investment. Read more
The governments change, the debts change. The rhetoric, on the other hand…
In light of the Greek prime minister’s recent ‘humiliation’ speech and the rather heated reaction it’s had among official creditors (and private bondholders) – we thought we heard some historical echoes. So we took a quick look through the archives. 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
Officially, Syriza wants Greece to remain in the euro area — but the strength of this desire obviously depends on the circumstances. There is no point in avoiding the costs of exit if staying in the single currency only guarantees years of stagnation, perhaps with the added pain of unhelpful “structural reforms” imposed for ideological reasons.
The question, then, is whether circumstances favour Greece staying in the monetary union, or striking out on its own. A fascinating set of notes from Oxford Economics suggests that you would be unwise to underestimate the chance that the Greek leadership voluntarily chooses to leave the euro area. 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
In this guest post, Gabriel Sterne, head of global macro research, Oxford Economics, looks at previous large drawdowns in Greek bond prices for clues about the future.
Greek Prime Minister George Papandreou “asked our partners to contribute decisively in order to give Greece a safe harbour” five years ago this week.
Since then, Greek government bond (GGB) prices have plunged by 37 per cent — or more! — four separate times, with one amazing long rally in between: Read more
Here’s former IMF staffer Peter Doyle , with some bold advice from the wings of the IMF Spring meetings…
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With Greek sovereign yields blowing wider on Thursday (and pretty much staying there), it’s worth revisiting what exactly might happen if, say, May 1 arrives and Greece fails to pay the €200m due to the IMF that day.
Received wisdom has it that the ECB will withdraw the ELA — emergency liquidity assistance — currently propping up the Greek banking system, which will promptly collapse; Tsipras and Co would then be forced to bring back the Drachma (or similar) and Greece would exit the eurozone.
But what do the “rules” here say? In the case of the ELA they run to all of two pages. Click the image to read in full. Read more
Bond Vigilantes reminds us of this:
Greece has raised €3bn in a five-year bond deal after attracting in excess of €20bn in orders for its eagerly anticipated return to the bond market. The yield on the deal was confirmed at 4.95 per cent – much lower than most analysts expected. 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
We think this means the ECB doesn’t want Greece to end up defaulting.