Posts tagged 'IMF'

Cyprus is a small island, they DSA things differently there

Now that Cypriots have elected the guy who’ll have to negotiate how to pay for the costliest bank bailout in history (relative to the size of the economy on the world’s 81st-biggest island)…

He (and they) could do worse than look at these charts, courtesy of Gabriel Sterne at Exotix: Read more

Exorcising eurozone ELA as we know it

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

Banks vs babies

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

It’s Mostly Fiscal (Transfer), all over again

We saw this coming from the IMF all the way back in March 2012 — when Greece’s PSI was just over, and vague notions of OSI were already in the air. Read more

In defence of Latvia

It’s fair to say that Latvia’s post-crisis economic trajectory divides opinion. Some see its ultra-austerity approach as a triumph, others as deeply regressive. But it’s hard to argue with the notion that the country has taken a lot of pain and that things are gradually improving. Read more

Greece joins cool circle

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.

We’re talking about the Greek debt buyback, which should be completed on Friday if deadline talk is to be believed. Read more

A ‘broader concept of debt sustainability’ for Greece (feat. OSI-lite)

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

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

Statement:

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