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Greece: Greenspan predicts exit from euro inevitable
Greece: Greenspan predicts exit from euro inevitable
The former head of the US central bank, Alan Greenspan, has predicted that Greece will have to leave the eurozone.
He told the BBC he could not see who would be willing to put up more loans to bolster Greece’s struggling economy.
Greece wants to re-negotiate its bailout, but Mr Greenspan said “I don’t think it will be resolved without Greece leaving the eurozone”.
Earlier, UK Chancellor George Osborne said a Greek exit would cause “deep ructions” for Britain.
Mr Greenspan, chairman of the Federal Reserve from 1987 to 2006, said: “I believe [Greece] will eventually leave. I don’t think it helps them or the rest of the eurozone – it is just a matter of time before everyone recognises that parting is the best strategy.
“The problem is that there there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated – actually even just fiscally integrated won’t do it.”
Following the election in Greece of the anti-austerity Syriza party, Greek ministers have been touring European capitals trying to drum up support for a re-negotiation of its bailout terms.
However, there appears little willingness in Berlin, or at the European Central Bank, to alter the terms of its €240bn (£182bn) bailout.
Why the Beautiful New Greek Government Is Screwed
Why the Beautiful New Greek Government Is Screwed
Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, often in a good-cop-bad-cop manner, have been cruising through the media, lobbing a mix of admirable rhetoric, verbal hand grenades, and down-to-earth explanations. And they have become white-hot media darlings.
So Varoufakis was in Germany to meet with his counterpart, Wolfgang Schäuble, and they didn’t “even agree to disagree,” he said. He urged Germany to help end the “gross indignity” of the Greek debt crisis. The Troika’s austerity program had wasted “too much time, hopes, lives,” he said.
But it’s all about other people’s money.
They’d come to power with a pledge to wipe out half of Greece’s insurmountable pile of debt. Debt restructuring, debt exchange, more haircuts for bondholders, exit from the Eurozone… these are the kind of terms that Syriza party officials have bandied about before and after the election victory.
To show that this isn’t just talk, that the Greeks mean business, the government hired Lazard’s government advisory arm, headed by Matthieu Pigasse, master of sovereign-debt restructurings. And they made sure the media picked it up.
Syriza is also running a highly effective charm offensive. Not just words and smiles – but actions, or at least symbolic actions. It wants to show that it’s different from the prior succession of corrupt, self-serving governments.
…click on the above link to read the rest of the article…
Greece Exposes The Global Economy’s Achilles Heel
Greece Exposes The Global Economy’s Achilles Heel
Countries that can’t repay their debts — won’t
The new Greek political party, known as Syriza, the Coalition of the Radical Left, has done the unthinkable: they’ve dared to speak the truth.
In this case, the truth is perfectly captured by the blunt assessment by the new Greek finance minister, Yanis Varoufakis, who recently declared “I’m the finance minister of a bankrupt country.”
Such honest assessments are not supposed to be uttered in politics, no matter how true they may be. And so, as you can imagine, the machinery of the defenders of the status quo is in quite a lather over the whole affair. And it’s doing everything it can to minimize and marginalize the new Greek government.
One editorial in the Financial Times summed up the establishment view quite well, I thought, putting its contempt for those who dare to simply state what is true right on the table:
Athens plots a daring escape from the troika
Feb 2, 2015
Syriza is as radical as any party to take power within the eurozone. Hardly any of Greece’s new cabinet have experience of government; predictably, its first week was studded with chaotic interventions, including a clumsy blunder into EU-Russian relations. Syriza’s rhetoric is still more suited to a university seminar than a serious programme of government.
(Source)
To summarize, the European establishment considers Syriza to consist of radicals with no experience in government who are acting chaotically as they blunder about brandishing immature rhetoric more suited to young students than the serious business of governing.
…click on the above link to read the rest of the article…
Greek and German finance ministers clash at debt relief talks
No agreement to disagree on Athens’ debts as Varoufakis brings up spectre of Greek nazism and Schäuble offers 500 German tax collectors
Greece’s radical Syriza government remained locked in a bitter standoff with its German paymasters, as finance minister Yanis Varoufakis issued a stark warning of the rise of nazism in his country if the eurozone fails to heed the democratic voice of Greek voters.
As Varoufakis completed the last leg of a whistle-stop round-Europe tour to seek support for Syriza’s plans to halt austerity and renegotiate the country’s debts, he told a tetchy press conference on Thursday in Berlin that Greece had a proud record in fighting Nazis, but ignoring the clear message from Greek electors could feed far-right forces.
“No one understands better than the people of this land how a severely depressed economy, combined with a ritual national humiliation and unending hopelessness, can hatch the serpent’s egg within its society. When I return home tonight, I will find a country where the third-largest party is not a neo-nazi party, but a nazi party,” he said, referring to the far-right Golden Dawn. “We need the people of Germany on our side.”
…click on the above link to read the rest of the article…
Greeks Spooked by Debt Clashes Put Cash Under Bathroom Tiles
Greeks Spooked by Debt Clashes Put Cash Under Bathroom Tiles
(Bloomberg) — Georgios Karavelas drives a taxi in Athens and for the past month has been a silent witness to what ordinary Greeks are doing with their cash.
One passenger, he said, told someone on his mobile phone that he’d withdrawn 25,000 euros from the bank, taken it home, worked loose a tile in the bathroom and stashed the money there. Another took the cash to his village and buried it in the garden. Yet another fashioned a small safe box in the air-conditioning unit on his balcony.
“I can’t fault these people,” said Karavelas, 37. “They were obviously people who had worked hard for their money, with families and jobs, not oligarchs.”
Withdrawals from Greek banks may have exceeded 15 billion euros ($17.2 billion) in the run-up to the elections that catapulted Alexis Tsipras and his anti-austerity Syriza party to power, including at least 11 billion euros in January, according to four bankers citing preliminary data. Tensions between the new government, which won on a platform of debt relief, and Greece’s creditors, including Germany, may keep up the pressure.
“Talks with the creditors is going to be a protracted process so you can’t rule out more pressure on deposits,” said Wolfango Piccoli, managing director at Teneo Intelligence in London. “There is plenty of uncertainty and that can make depositors nervous again.”
…click on the above link to read the rest of the article…
Greece and the EU – Nothing But Political Theater?
Greece and the EU – Nothing But Political Theater?
Varoufakis’ Tour of Europe
Greece’s new finance minister Yanis Varoufakis has toured Europe, trying to drum up support for – actually, we’re not quite sure what for exactly, as the precise nature of the Greek government’s demands is currently in flux (this is a parallel to Syriza’s ever-changing pre-election statements). Essentially, he seems to be gauging what they can get away with.
Not surprisingly, France’s political leadership has announced its support for a “debt deal” in principle(whatever that means), as the spendthrift French government is so to speak an ideological partner-in-crime of Syriza. However, the French government stopped short of supporting a partial write-down of Greece’s debt (Michel Sapin: “No we will not annul, we can discuss, we can delay, we can reduce its weight, but not annul”). Similar noises have issued from Berlin and Madrid.
We have argued all along that no EU government can afford to accept such a write-down, as then the guarantees issued for Greek debt would come due and the losses would become “real” – and appear on everybody else’s budget. We imagine that every EU leader Mr. Varoufakis has spoken to so far has impressed the political necessity of “extend and pretend” on him in no uncertain terms; details may well be up for debate though.
…click on the above link to read the rest of the article…
Huge Madrid march in support of anti-austerity party
Tens of thousands take to the streets of Spanish capital in support of Podemos.
Tens of thousands of people have marched in Madrid in support for anti-austerity party Podemos, whose surging popularity and policies have drawn comparisons with Greece’s new Syriza rulers.
On Saturday, protesters chanted “Yes we can!” as they made their way from Madrid city hall to the central Puerta del Sol square. Podemos and its anti-austerity message have been surging in polls ahead of local, regional and national elections this year.
Podemos (“We Can”) was formed just a year ago, but produced a major shock by winning five seats in elections for the European Parliament in May.
“People are fed up with the political class,” said Antonia Fernandez, a 69-year-old pensioner from Madrid who had come to the demonstration with her family.
One protester, Fernandez, who lives with her husband on a 700-euros-a-month combined pension cheque said she used to vote for the Socialist party but had lost faith in it because of its handling of the economic crisis and its austerity policies.
“If we want to have a future, we need jobs,” she said.
Greek leftist leader Alexis Tsipras promised that five years of austerity, “humiliation and suffering” imposed by international creditors were over after his Syriza party swept to victory in a snap election on January 25.
…click on the above link to read the rest of the article…
Greek election: It’s really up to the ECB and EU now
Greek election: It’s really up to the ECB and EU now
The result was worse than expected whatever the final outcome – the anti-austerity vote is massive, but it could be an empty gesture as Greece in reality has little choice: Comply with the Troika or leave the EUR. I doubt the later will happen with the same vote as the Greeks are tired of austerity but not off being European.
EUR/USD is down 55 ticks as I write, at 1.1145. I expect Greek stock market will be down 5% tomorrow and that Europe overall could be down 2% unless Germany, the ECB and EU comes out supporting a move towards some compromise (which is unlikely this week)
Game theory dictates that some solution will be found which is sub-optimal for all parties, but the risk it will take longer than market have nerves for.
Syriza did better than expected – making negative reaction more likely
Syriza did better than even the polls suggested – the gap to ND is 10% as I write this, and for the market this is a close call as Syriza may get a mandate to rule alone. (Greek election: Syriza Party set to take power – Source Sky)
It’s a disaster for “austerity” and common sense, but at the end of day, Greece did what we expected them to do: Desperation forced the voters into the arms of a left-wing government who’s rhetoric reminds me of my youth (many decades ago) in the the 1970s: Comrades, capitalism, imperialism is some of the words I heard on TV interview this evening. It makes makes one smile: “What goes around, comes around”.
…click on the above link to read the rest of the article…
Syriza Leads In 6 Polls; Leader Tsipras Shuns Merkel, Says “Won’t Honor Commitments”
Syriza Leads In 6 Polls; Leader Tsipras Shuns Merkel, Says “Won’t Honor Commitments”
With the leads in at least six polls (of between 4% and 10%), Syriza leader Alexis Tsipras has come out swining for the anti-EU vote this morning:
- *TSIPRAS SAYS ONLY SYRIZA CAN END GREECE’S CATASTROPHIC COURSE
- *TSIPRAS SAYS WON’T HONOR COMMITMENTS MADE BY PREVIOUS GOVT
- *TSIPRAS SAYS WILL NEGOTIATE WITH EUROPEAN PEERS NOT WITH MERKEL
For now Greek assets remain bid on the glorious awesomeness of Draghi but we suspect – though The ECB gave themn room to negotiate and Djisselblom mentioned the possibility of ‘working’ with Greece – that if things go as the polls suggest Monday could see more bloodletting in EURUSD (and bank runs in Greece).
As Bloomberg reports, Tsipras had a lot more to say…
Greeks called on Jan. 25 to decide whether to continue with the tragedy of catastrophic austerity or whether to return to growth, democracyMany Greeks turning to Syriza not because of ideology but out of need
Tax burden needs to be eased for middle class, Syriza would abolish property tax, introduce levy for large real estate holdings
ECB QE decision was “historic”, pleased by turn away from austerity to measures aimed at boosting growth
Syriza knows obligation arising from membership in European institutions, austerity wasn’t part of EU’s founding treaty
Syriza doesn’t recognize commitments made by previous govt that will bind new administration
As Keep Talking Greece blog reports, 2 days before the election, Syriza leads in six polls:
…click on the above link to read the rest of the article…
Oh, Greece!
Oh, Greece!
Greece’s bailout program is not working. After receiving hundreds of billions of Euros in new loans to stave off a sovereign default, Greeks are on the verge of electing a new government that may throw Eurozone politics into turmoil.
From the outset, this was always going to be a tricky one for European bureaucrats and lenders. Restoring the solvency of a state which historically had great difficulties in collecting taxes from its citizens was not going to be easy. Moreover, the crash exposed fundamental flaws in the Greek economy, which at the time turned out to be a leading indicator for other Southern Eurozone countries.
With the world still reeling from the Great Recession, in 2010 Greece applied for a rescue program as its funding costs soared once the fragility of its finances could no longer remain hidden.
It can be argued that if debt balances had been restructured there and then to levels where they could actually be paid off over an extended period of time, together with unpleasant but sensible fiscal policies – as we shall see, taking into account important differentiators of the Greek economy – the cost of the bailout could have been much more manageable.
…click on the above link to read the rest of the article…
Macro Digest: Endgame for central bankers
Macro Digest: Endgame for central bankers
The Swiss National Bank’s removal of the franc’s peg to the euro last week had far-reaching consequences because we were all taken by surprise. The fact that it would (and should) happen eventually was not lost on the market, but the SNB was as late as last week end talking tough and telling the market that the floor was an integral part of Swiss monetary policy – until it suddenly wasn’t any more.
I fully understand the rationale for the move (Jakobsen: SNB move is rationality itself) but like most of the market I’m extremely disappointed in the SNB’s communication and handling of the issue, but that’s the bigger lesson: Why is it most people trust or bother to listen to central banks?
Major central banks claim to be independent, but they are totally under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s all well and good in principle until the economy spins out of control – at zero-bound growth and rates central banks and politicians becomes one in a survival mode where rules are broken and bent to fit an agenda of buying more time.
Just looks to the Eurozone crisis over the past eight years – if not in the letter of law, then in spirit, every single criterion of the EU treaty has been violated by the need to “keep the show on the road”. No, the conclusion has to that there are no independent central banks anywhere! There are some who pretend to be, but not a single one operates in true independence.
…click on the above link to read the rest of the article…
Swiss National Bank scraps euro cap
Swiss National Bank scraps euro cap
(Reuters) – The Swiss National Bank unexpectedly scrapped its cap on the franc on Thursday, sending the safe-haven currency crashing through the 1.20 per euro limit it set more than three years ago.
Minutes after the announcement the franc had soared by almost 30 percent in value against the euro. SNB vice-chairman Jean-Pierre Danthine had said as recently as Monday that the cap would remain the cornerstone of its monetary policy.
“This is a very risky move. You can see that in the market reaction that is extreme,” Sarasin economist Alessandro Bee said.
In its second surprise announcement in as many months, the SNB said it would discontinue the cap it introduced on Sept. 6, 2011 to fight recession and deflation threats after investors fleeing the euro zone crisis pushed the franc to record highs.
“This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate,” the SNB said in a one-page statement.
…click on the above link to read the rest of the article…
Low inflation should not be feared, says George Osborne
Low inflation should not be feared, says George Osborne
The sharp fall in the UK inflation rate should not be feared, Chancellor George Osborne will say in a speech later.
“We should not confuse this welcome news with the threat of damaging deflation that we see in the eurozone,” he will say in a speech.
The speech comes a day after official figures showed the UK inflation rate had fallen to 0.5% in December – its lowest rate since May 2000.
Economists have warned the fall means an outright drop in prices is possible.
But in extracts from the speech released by the Treasury, Mr Osborne tries to distance the UK from the scenario playing out in the eurozone, where deflation has become a problem for policymakers.
He says the sharp drop in the Consumer Prices Index is “almost entirely driven by external factors such as the oil price”, which has more than halved since June, and is “much more welcome than in the eurozone”, where inflation has fallen to -0.2%.
‘Self-reinforcing spiral’
Mr Osborne will say that the UK could experience “a few months of very low or even negative inflation” without any significant risk to the economy.
…click on the above link to read the rest of the article…
Deflation and the eurozone: why falling prices aren’t always good news
Deflation and the eurozone: why falling prices aren’t always good news
As oil prices continue to fall, a strange phenomenon is making its presence felt across Europe: deflation. Familiar in Japan since the 1990s, consistently falling prices for the goods we buy are almost unheard of in Europe, not seen since the grim years of the 1930s. But according to figures released in December, prices inside the eurozone are now falling by 0.2% a year.
You might think this is good news. After all, as wages and salaries stagnate, declining prices means an increase in people’s real purchasing power. Each euro in your pocket stretches, on average, just a little bit further than before. And in the short term, the decline in the price of oil alone has fed into some improvements in real living standards – or, at the very least, set a floor to their decline.
If the price falls were confined to just falling costs of energy and transport, this positive argument could hold. In the mid-1980s, a sharp fall in the price of oil led to briefly falling prices in Germany and other European countries without further consequences.
The reality of falling prices
But should declining prices spread and persist, there are two serious causes for concern. First – if you know that the price of anything you buy will be less in the future, why not wait until the future to buy it? A general expectation that prices will fall rather than rise creates a major disincentive to buy. Demand falls, less is sold, the recession worsens.
…click on the above link to read the rest of the article…
And That Successfully Concludes “Big Brother 101”
And That Successfully Concludes “Big Brother 101”
Desperate to spin Europe’s deflation, pardon “negative inflation” pardon the lack of impulse to go ahead and spend money you don’t have right here right now, into a good, if only for Keynesians, thing? Don’t worry – we’ve got you covered. Below is a sampling of perfectly contradictory Reuters headlines all posted within a spin of 10 minutes, which should send you well on your way to propaganda nirvana.
And that successfully concludes Big Brother 101.
Source Reuters, Reuters, and… Reuters
h/t @RudyHavenstein
