The IMF has picked its week to publish another paper on changing its sovereign debt restructuring policy…
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A tick up in sovereign bond yields has followed Friday’s late announcement by the Portuguese Constitutional Court that some budget austerity measures are a no-no, for violating principles of equality and proportionality.
Benchmark 10-year yields rose 7 basis points to 3.72 percent, according to Reuters, with weakness also seen in other euro zone peripheral government bonds.
There was no bald supervillain stroking a white cat, but other than that the City of London hosted a conspiracy theorists’ perfect scenario yesterday: a meeting organised by the Rothschilds, sponsored by the Rockefellers and with managers of $30tn, or more than a tenth of all financial assets worldwide, in the room. Even the British royal family was represented, essential for any decent conspiracy, although usually Prince Philip is preferred to the Prince of Wales.
Perhaps there were shape-shifting reptilians present, as per David Icke. But if so, they were keeping their heads down: rather than discussing how to rule the world, the focus was on “inclusive capitalism”. Read more
The currency devaluation and official borrowing (to help finance a still-wide government deficit) are expected to push public sector debt up to 57 percent of GDP…
– IMF announcement of $17bn loan programme for Ukraine
Although don’t worry — that’s a whole 3 per cent before a unique debt threshold clause conceivably allows the Russian government to convert $3bn of Ukrainian bonds, which it owns, into demand money. Read more
This year’s IMF-World Bank Spring Meeting is likely to include discussion of proposals to change the fund’s policy on sovereign debt restructuring. Gabriel Sterne, senior economist at Exotix with IMF experience, and Charles Blitzer, Principal at Blitzer Consulting and a former IMF staff member, argue in favour of a case-by-case approach.
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In her role as Deputy Governor for Markets and Banking, Dr Shafik will be responsible for reshaping the Bank’s operations and balance sheet, including ensuring robust risk management practices and helping to lead the design and execution of an eventual exit from quantitative easing by the MPC. She will also oversee the implementation of reforms to the Bank’s Sterling Monetary Framework, lead the Bank’s work to build fair, efficient and effective financial markets, and review and strengthen the Bank’s Markets and Banking areas, including a comprehensive review of the Bank’s essential market intelligence function.
Those rascal short sellers are at it again, daring to ask awkward questions of the European project. This time the manifesto comes from New York based Tortus, who have a plan to “rehabilitate” Portugal. (H/T @Pawelmorski and @IyerC).
Before rehabilitation, however, there must come acceptance, and Tortus is short “certain Portugese sovereign bonds” because it does not think the status quo is sustainable. Read more
Sign of the times perhaps, though in any case easy to overlook (as we did)…
That’s a box on “one-off capital levies” — or wealth taxes — burrowed away on page 49 of the IMF’s latest Fiscal Monitor. Click to enlarge. Hat-tip to Societe Generale’s rates strategists.
The IMF has released to the public an earlier policy paper that includes an extended section about the reassessment of fiscal policy as a macroeconomic stabilisation tool.
The fund’s change of mind on post-crisis fiscal policy in recent years is already widely known, but we thought this paper worth passing along for its comprehensive parsing of the latest research. 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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Click for the IMF’s “ex post evaluation” of its role in the Greek bailout. Its mea culpa.
And if you thought we were being harsh here, parts of the real thing are excoriating.
This is even though the report decides Greece’s exceptional access to IMF lending was justified (generally), and it still says much fiscal adjustment could not be avoided. Policies were “broadly correct”. But it does strongly suggest that debt restructuring should have come sooner.
So, the International Monetary Fund (effectively) wishes to apologise to all concerned for that little thing where it turned into Dominique Strauss-Kahn’s presidential election campaign a few years back.
Sorry if a country got broken along the way: 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
Yes the IMF calls for common eurozone deposit insurance, in this new banking union paper. But also look at what they suggest on emergency liquidity assistance:
Lender of last resort. The lender of last resort makes liquidity support available to solvent yet illiquid banks. Centralizing all LOLR functions at the ECB would in the steady state eliminate bank-sovereign linkages present in the current ELA scheme (see Box 1). This would require changes to the ECB’s collateral policy, as by definition euro area banks that tap ELA cannot access Eurosystem liquidity owing to collateral constraints. Until such time as all banks are brought under the ECB’s supervisory oversight, ELA would be sourced through both the ECB (for banks brought under its purview) as well as national central banks (for banks that remain under national supervision, albeit with adjustments made to the national ELA limits).
Which would be nothing short of a revolution. Read more
Yep, China again.
Here’s a table from a fresh IMF paper pondering the country’s Lewis Turning Point, the moment when people streaming into cities from farms will be fully absorbed, industrial wages will take off, and — an estimated 350m jobs later after it began — the era of cheap Chinese labour will end. Click to enlarge. Read more
You’re just not cool these days if you aren’t operating some sort of circular mechanism to reduce your debt levels in the eyes of the outside world. And it appears that Greece, sick of being bullied by the circular crew, is looking to get in on the act.
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
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?
20 November 2012
Statement by the Eurogroup President, Jean-Claude Juncker
The Eurogroup welcomed the staff-level agreement reached between the Troika and the Greek authorities on updated programme conditionality, including a wide range of far reaching measures in the areas of fiscal consolidation, structural reforms, privatisation and financial sector stabilisation.
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
So, we’re going to the wire once again in the now traditional dance between Greece and the troika. As the FT reported on Thursday:
Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
Greece’s new budget was announced on Wednesday. With it came projections for the country’s economic health. The patient is not well. Even before the government’s own-self assessment of conditions, revisions by the IMF alone revealed the deterioration, as Exotix’s Gabriel Sterne points out in a note on Thursday. More of his analysis further down, but first this from the FT on the Greek government’s figures: Read more
Christine Lagarde has urged countries to put a brake on austerity measures amid signs that the IMF is becoming increasingly concerned about the impact of government cutbacks on growth. Ms Lagarde, IMF managing director, cautioned against countries front-loading spending cuts and tax increases. “It’s sometimes better to have a bit more time,” she said at the annual meetings of the IMF and the World Bank on Thursday.
The fund warned earlier this week that governments around the world had systematically underestimated the damage done to growth by austerity. Read more