Posts tagged 'IMF'

Eurogroup meets for third go at kicking can down the road

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

Those ‘technical’ issues that broke up last night’s Eurogroup meeting

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

Eurogroup meeting, interrupted


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.

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Bold AV call on Eurogroup discussion on Greece: No decision

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

A €5bn Greek bond imminently falling due? Did we mention we have deckchairs by this abyss?

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.

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Greek government acquires more realistic crystal ball

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 figuresRead more

The IMF game changer

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

It’s (austerity) Multiplier Failure

The IMF (among others) seriously misjudged the effect of austerity measures on growth. The fund says that the “fiscal multiplier” used by many countries has been a mere 0.5, when in reality the effect over the past few years has been 0.9 to 1.7. So, why did everyone get it so wrong? Read more

Prepare for probable disappointment, IMF

The IMF’s latest global growth forecasts are, unsurprisingly, lower than their last set of forecasts. Which were in turn lower than their previous set of forecasts. And that’s as far as we want to go back, thankyouverymuch. And even with the reduced forecasts, there are caveats. Big, ugly caveats…  Read more

German domino theory and book-cooking

There are two fairly important bits to this story in Der Spiegel.

One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality. Read more

Hysteresis in the UK

The U.K. economy has been flat for nearly two years. This stagnation has left output per capita a staggering 14 percent below its precrisis trend and 6 percent below its pre-crisis level. Weak growth has kept unemployment high at 8.1 percent, with youth unemployment an alarming 22 percent.

The effects of a persistently weak economy and high long-term unemployment can reverberate through a country’s economy long into the future—commonly referred to by economists as hysteresis. Read more

Eurozone seniority, needling du jour

A one-liner, but from one preferred creditor to another…

Directors agreed that the ECB will have to continue to play a role in the crisis response, including through liquidity provision and securities purchases. A few Directors also noted that clarifying the seniority status of sovereign debt holdings by the ECB would help address market concerns. Read more

The IMF, raining on Britain

The IMF’s cut its growth forecast for the UK by 0.6 percentage points for both 2012 and 2013 compared to previous estimates… Click through the pic to get the full IMF World Economic Update doc:

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A note on the COFER data

If there was ever an expression of the fight facing the Bank of Japan in a risk-off world if it wishes to keep the yen down, then the IMF’s latest round of Currency Composition of Official Foreign Exchange Reserves (COFER) data out last week is it.

The COFER data remains the best snapshot of what is going on in one of the most important elements of the FX market. Admittedly China is annoyingly missing from the allocated reserve data, but with 55 per cent of reserves are reported, it remains an indicative dataset. Read more

Spain, seniority, and survivor bias

Update (0445am UK time) — Well, well, well… eurozone leaders did indeed promise not to subordinate Spanish bondholders at the summit, as we assumed they would below. Seniority was “renounced” in the case of Spain.

That phrase suggests a reversion to the original status of official eurozone bilateral and EFSF loans – of being at least pari passu with bondholders. (Though at times the loans have even been subordinated on some points, such as restructuring interest rates. The status is a political football subject to constant change, you could say.) Read more

Seniority in Spain — *good news* for bondholders?

As we all wait for an actual Spanish bailout loan doc, and what it might say about that ESM seniority

Here’s some seriously intriguing, counter-intuitive food for thought from Barclays’ Piero Ghezzi. From a Tuesday note: Read more

Four questions and a subordination

1) How do holders of Spanish bonds react to ESM subordination?

The cat’s out of the bag now, isn’t it. On the one hand Spain borrows up to €100bn for the bank recapitalisation which everyone knew was coming, but at a lower rate than everyone had priced into Spanish bond yields. Bond yield relief, maybe. Read more

Flat-line Britain

What headline factoid to use?

Hands-Off policy fails UK Read more

Greece – don’t call it a backtrack…

Real games of chicken are about fundamentally misaligned incentives.

So, at the weekend’s G8, Europe’s voice was heard, and it muttered something under its breath about Greece ‘respecting the commitments that were made’ to its second bailout’s terms. No renegotiation. We also all know what Alexis Tsipras thinks of pretty much any terms applying to a bailout. Cue the Grexit fear cycle, terror of a retaliatory funding shock, etc. Read more

Normalising subordination, in Portugal

Something you will never ever read in an IMF report on Greece…

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Eurozone credit contagion, in 8 easy steps

As well as warning that eastern Europe has the most exposure to a eurozone credit freeze, the IMF has given us a handy, visual guide to eurozone contagion (click to enlarge):

Market linkages diagram -- source: IMF  Read more

IMF to ECB: see you after the easing

The ECB has some room to further lower the policy rate, given that inflation is projected to fall appreciably below the ECB’s “close to but below” 2 percent inflation target over the medium term and that risks of second-round effects from high oil prices or tax and administrative price hikes appear small––WEO projections see headline consumer price index inflation falling to about 1½ percent by 2013, below the ECB’s target. Low levels of domestic inflation can hinder much-needed improvement in debtors’ balance sheets and stand in the way of much-needed adjustments in competitiveness. The ECB’s unconventional policies need to continue to ensure orderly conditions in funding markets and thereby facilitate the pass-through of monetary policy to the real economy.

Plus: “The Bank of England can further ease its monetary policy stance,” according to the Fund. Read more

Is the Aussie dollar becoming a reserve currency?

The IMF’s latest quarterly update on the currency composition of official foreign exchange reserves (COOFER) is out. One person excited by the numbers is Simon Derrick at BNY Mellon.

But not with respect to what they say about the share of global US dollar reserves, but rather what they say about the world’s “other” non-dollar denominated reserves, as well as reserve growth in general. Read more

Now you see the headline fiscal deficit, now you don’t

So, in case you missed it, the IMF released an excellent, pithy staff note on ‘Accounting Devices and Fiscal Illusions’ this week – all about book-cooking of sovereign debt stats.

It touches on almost any accounting trick you can think of, where the effect is that ‘this year’s reported deficit is reduced, but only at the expense of future deficits,’ as the IMF note says. ’The result is that the reported deficit loses some of its accuracy as a fiscal indicator,’ it drily adds. Read more

The Fund, arrears, and Greek holdouts

So it turns out that we won’t know, for a little while longer, who the holdouts are in Greece’s foreign law bonds – a remaining pimple on the bottom of its debt workout.

Greece has pushed back the deadline for foreign law bondholders to agree to a debt restructuring to April 4, as IFR reported on March 23. The deadline was meant to be March 23. Read more

It’s Mostly Fiscal (Transfer)

Our Brussels Blog colleague Peter Spiegel has penned a great piece on the latest IMF report into Greece, covering the Hellenic Republic’s ‘Request’ for the second bailout.

Even at more than 200 pages, the report’s worth reading. Read more

Greek parties agree €3.3bn austerity cuts

Greece’s political leaders ended weeks of market-rattling brinkmanship on Thursday by agreeing to €3.3bn in budget cuts that they hoped would clear the way for a second multibillion euro bail-out to avert a sovereign default, reports the FT. No sooner was the deal sealed in Athens, however, than a potentially more fractious debate began in Brussels, where eurozone finance ministers were poised to work late into the night to structure a bail-out package with the target of cutting Greece’s debt to 120 per cent of economic output by 2020. Hopes for an agreement were raised by Mario Draghi, president of the European Central Bank, who indicated that he was willing to forgo profits on the bank’s €40bn in Greek bonds, a move that could wipe up to €15bn off of the Athens’ €350bn debt load. Without the ECB’s co-operation, the International Monetary Fund has determined that it will be impossible to reduce Greece’s debt sufficiently through the restructuring of private debt alone. Private bondholders have agreed to take a €100bn writedown on the €200bn in Greek debt they hold.

IMF warns China on eurozone fallout

Economic growth in China could drop by half this year in the event of a sharp recession in Europe, the IMF predicted on Monday in a report that underscored the importance of global trade to the world’s second largest economy. “The risks to China from Europe are both large and tangible,” and “China would be highly exposed through trade linkages,” said the report, which was published by the IMF’s resident representative office in China. The FT reports that the IMF’s forecast for China’s annual growth in 2012 has already been lowered to 8.2 per cent from a previous forecast of 9 per cent but if Europe’s performance is worse than expected then China’s export-driven economy would be badly hit.

The preferred, puzzling, ESM

Eurozone states signed the final version of the treaty establishing the European Stabilisation Mechanism on February 2.

(Click the image for the full document) Read more