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.”
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
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
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
He walked into my office and threw the manuscript on my desk with a thud.
“It’s called Thankful For Zombies. A zombie story where…”
“Nope,” I said.
His face deflated like a balloon. “But I didn’t even…”
“Zombies are overdone,” I said.
“But this is a zombie story with a twist!”
“Zombie stories with twists are super overdone.”
– Scott Alexander, Dec 7
And he has a point. BUT he didn’t mention the French corporate sector. A large mistake exposed by BofAML’s Gilles Moec, who revels in the narrative freedom that mistake implies. Read more
Eric Dor of the IESEG School of Management in Lille has a handy table. Click to enlarge…
So, the Greek government has left this latest, very long, round of eurozone marriage counselling to head into, well, predictable domestic acrimony with headlines like “Crucial Test for Greek Coalition” trailing in its wake. From the ekathimerini:
“We did everything we could. We achieved significant improvements,” noting that Greece would remain in the euro if the package was passed and otherwise risked “descending into chaos.” “It is now down to the sense of responsibility of all political parties and each individual MP,” Samaras said.
Democratic Left issued a rejection within minutes, saying it does not agree with the outcome of negotiations with troika and repeating its objection to labor reforms.
JP Morgan’s Alex White points out that the next few weeks are going to be critical and that this one is likely going to the wire… again. Read more
Here’s a chart from Nomura:
Citi are pushing that fateful day back:
We have held the view, since May 2012, that a Greek exit from the euro area (“Grexit”) in the next 12 to 18 months is a high-probability event (90%) which we assume, for the sake of argument, would happen on January 1 2013. We are now cutting the probability of Grexit over the next 12-18 months to 60% and judge that this event will probably happen later than we previously thought, most likely in 1H 2014.
A cynic might suggest they were getting the jitters as deadline approached but lets hear them out (our emphasis). Read more
Apparently that Greek shortfall is even bigger than the even bigger figure reported in the German press on Monday.
From Eurointelligence: Read more
That’s a couple of the examples of preparations that US companies are making for a Greek eurozone exit, according to the New York Times.
Here’s the trucks: Read more
If you hit your head hard enough, you’re bound to start forgetting things.
We can’t get enough of these — predictions for the format that the ECB’s new, “convertibility risk”-focused bond-buying programme might take.
This one’s from Citi’s Global Economic Outlook for August, which dubs the expected ECB operation the “Conditional Government Bond Purchase Programme” (snappy!). Citi forecasts that the ‘CGBPP’ will concentrate on buying T-bills. These are usually protected from losses during a sovereign debt restructuring: Read more
The drum beat of Euro grandees hinting that Greece should just get out of the Eurozone is getting louder once more. Here’s former Bundesbanker Otmar Issing discussing the matter in simple language for the audience of CNBC…
Click to view. Read more
We asked, and you answered by completing FT Alphaville’s (wholly unscientific) survey on Tuesday.
hastily put together intricately designed poll reveals that 41 per cent of finance professionals, students, developers, and random people* think that Greece will exit the euro within the next year. Read more
The recent utterings from Europe’s political elite regarding a Greek exit from the euro and reports that the IMF is ready to walk away have been hard to read. To what extent are these warnings pure postulation? The timing is rather suspicious, given that they have coincided with the Troika delegation’s visit to Athens to assess how the austerity programme is coming along.
On the other hand, if they reflect the mood among the policymakers, there is reason to be worried, especially given how freely and eagerly they are now discussing a potential exit. Read more