Even without fully grasping the situation in Greece right now, it’s difficult to read the list of austerity measures being imposed on it without feeling shocked. Public workers like teachers must return wages, because the debt deal is backdated to November. The government must cut €300m from public pensions, leaving people in and approaching retirement destitute. Greece must auction its €110 billion gold reserves in the event it fails to meet targets, removing the absolute last means of funding itself when all others are exhausted. For its pains, in all likelihood Greece will be forced to return to Brussels in 12 months to request more funds, because these same demands are pushing it … [Read more...] about Is Spain set to follow Greece?
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Euro stumbles as Greece ups its brinkmanship
On Wednesday, Greek Finance Minister Evangelos Venizelos accused German Finance Minister Wolfgang Schaeuble of more or less plotting to push Greece out of the euro, while Schaeuble in turn said he is tired of dumping money into a black hole. This has delayed the dispatch of the second Greek bailout, bringing Greece closer to the March deadline before it defaults. For me, the dispute raises an interesting point about who is to blame per se for this continuing Greece debacle. Reading around, it seems to me the EU is getting a bad rep here, with Germany especially being painted as a dictatorial monster. Is this the case? I mean - I concede that the EU is a bureaucratic nightmare, but is … [Read more...] about Euro stumbles as Greece ups its brinkmanship
How much more can Greece take?
The euro has enjoyed an optimistic week. In particular, reports that the coalition in Greece has agreed a debt reduction plan with its creditors following eight long months of negotiations have boosted sentiment. From here on, Greece’s creditors will accept a 70.0% loss in the value of their existing government bonds, while receiving just 4.0% interest on the new ones. (This is a little like going into a negotiating room and not only coming out with no gains, but losing your trousers and shirt in addition. It is astonishing bondholders accepted these terms, and must reflect incredible pressure from the EU.) Of course, this is but one side of the coin. In return, Greece must implement … [Read more...] about How much more can Greece take?
UK to dodge the recession bullet?
(In case you don't know, the UK services PMI is a monthly measure of productivity in the UK services industry. It accounts for two thirds of economic output in Britain, and so is crucial in determining UK growth.) This month UK services took market forecasts, chopped them into small chunks with onions and carrots, fried them, and ate them for dinner. The PMI hit 56.0 (releases above 50.0 mean growth and the higher the better.) This compares to 54.0 the month before, and expectations of a slowdown to 53.5. It’s a 10 month high for UK services, and the biggest single jump on record. Great! Of course, before this, economists thought Britain would soon be re-entering recession. The economy … [Read more...] about UK to dodge the recession bullet?
Is Greece poised to give the euro a boost?
For almost eight months, bureaucrats in Athens have been negotiating to convince investors to take a voluntary loss on their bonds, arguing this is the only way Greece can get its debt onto a sustainable footing. Until just the last day or so bondholders have refused, for the good reason that volunteering to take a loss is like opening your wallet to strangers in the street! Somehow or other though EU officials have managed the impossible, and investors stand poised to accept a 50.0% loss on their existing Greek bonds, while accepting an interest rate of just 3.75% on replacements. How then might this help the euro? Because if Greek officials and bondholders had not reached agreement, … [Read more...] about Is Greece poised to give the euro a boost?