Get ready for the Spanish bailout

May 14, 2012 2 Comments

No one can pretend to know whether Spain is illiquid or insolvent without gauging the size of the black hole that is the country’s banking sector. The Spanish government is finally starting to do this: Bankia and other banks are reportedly set to receive a capital injection from Madrid. With the Spanish economy contracting sharply and with unemployment soaring, it was inevitable that the government had to bail out the banks. But this only deals with one piece of the puzzle. Without growth, the Spanish sovereign will need a bailout as well. Read more of this post

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Greek Politics: A Step Towards the Exit

May 9, 2012 26 Comments

All eyes were on France going into the weekend of May 6th, but it turns out the Greek elections have much bigger potential implications for the future of the eurozone (EZ). Last Sunday marked a seismic shift in Greek politics, in which the two main political parties—New Democracy (ND) and Pasok—together failed to win an absolute majority for the first time since the collapse of the military dictatorship in the 1970′s. The path forward for Greece is unclear, but even the best possible scenario doesn’t look good. Read more of this post

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Spain Following in Ireland’s Footsteps

April 23, 2012 8 Comments

Watching developments in Spain since the beginning of April has been source of non-stop déjà vu for anyone who spent 2010 watching events unfold in Ireland. There are a number of striking similarities between the position in which the Spanish government now finds itself and the Irish government’s situation in November 2010, just before it was forced into an EU/IMF bailout programme. Based on Ireland’s experience, a bailout for Spain seems inevitable. Read more of this post

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Why Spain Won’t Regain Market Confidence

April 15, 2012 15 Comments

Spain is back in the limelight in the EZ crisis, where it has always belonged based on its fiscal, financial and economic fundamentals. Throughout this crisis, the liquidity or solvency of various sovereigns has been determined to a large degree by market sentiment. For Spain’s borrowing costs to recede again to sustainable levels, Spain needs to regain investor confidence. Looking ahead at the calendar of events in Spain and the EZ over the next few months, from where is the good news going to come? The answer isn’t at all obvious. Read more of this post

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EZ break-up stands to benefit the core

April 2, 2012 8 Comments

I’ve argued elsewhere on this blog that the weaker countries in the EZ stand to benefit from abandoning the euro. Rather than undergo an endless process of retrenchment inside the single currency, they could grow much faster following a nominal devaluation outside the euro area. This would not just benefit the peripheral countries, however. The core countries stand to gain from weaker countries abandoning the common currency as well. Read more of this post

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Media round-up: March 2012

April 2, 2012 Leave a comment

March 1, 2012, Foreign Policy, Is Greece a Failed State
March 11, 2012, Bloomberg, Greece Will Suffer Less If It Leaves Euro Now
March 12, 2012, Bloomberg Business Week, Spain’s Lost Generation Looks Abroad
March 13, 2012, 4:30pm, RTE Radio 1, Drivetime, Spain’s fiscal target
March 13, 2012, TV XS, Greece
March 14, 2012, Wall Street Journal, Dual China, Europe Slowdown May Trap Both In Currency Skirmish
March 14, 2012, Open Europe, panel discussion, Will the euro survive 2012 and beyond?
March 14, 2012, CMC Markets , Market Update on Greece, LTRO, Spain and the fiscal compact
March 16, 2012, Institutional Investors, Investment opportunities in the Euro Zone crisis
March 16, 2012, Time Magazine, Greece prospects
March 20, 2012, BBC Newsnight with Jeremy Paxman, UK Budget 2012
March 21, 2012, CME OpenMarkets , In the Eye of the Storm
March 22, 2012, Bloomberg Radio, Greece, Italy and Spain
March 23, 2012, Globe and Mail, Ain’t over till it’s over: Euro fears persist amid high yields
March 26, 2012, CNBC Closing Bell, Spain
March 27, 2012, Bloomberg Business Week, Europe’s Austerity Push Breaks Mother’s Promise of Social Model
March 27, 2012, Roubini Global Economics, EZ – Fewer Headlines, Just as Many Problems
March 28, 2012, Wall Street Journal, LTRO Euphoria ‘Overdone’
March 30, 2012, World Affairs Council 2012 San Francisco, Future of the EZ, (Presenter)

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Eurozone Crisis: In the Eye of the Storm

March 23, 2012 12 Comments

The Eurozone crisis has been in retreat since the introduction of the European Central Bank’s (ECB) three-year long-term refinancing operations (LTROs) in late December 2011. At the European Council Meeting in early March, journalists who cover the crisis fretted that boredom loomed. The current lull does not indicate that the Eurozone is in the clear, but rather it is simply in the eye of the storm, and more drama inevitably awaits. Read more of this post

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Why Greece could be better off outside the EZ

March 6, 2012 14 Comments

Last week I wrote about the difficulty of doing business in Greece, and the role that the government plays in perpetuating the bureaucracy. Does all of this mean that Greece is doomed? Not necessarily. Returning to the drachma would be ignominious for Greece, but it need not decimate the country and may be the only realistic way of spurring the kinds of structural reforms that are essential if Greece is to make a sustainable recovery. Read more of this post

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Media round-up: February 2012

March 1, 2012 Leave a comment

2 February, 2012, Linkiesta, No time for Mr Monti: Italy will have to restructure its debt
9 February, 2012, BBC Radio 4, Greek PSI
9 February, 2012, Barclays Capital, Investing in Turbulent Times Seminar (Presenter)
11 February, 2012, Barron’s, Greece Likely to Exit the Euro
13 February, 2012, 12 noon, BBC Newshour radio, Greek 2nd bailout
14 February, 2012, 10:30pm, BBC Newsnight with Gavin Esler, UK economy
15 February, 2012, 8:05am, BBC 5Live radio, Greece prospects austerity the best policy?
16 February, 2012, Economist Conferences – Debating on Europe’s future (Cyprus), Debating on Europe and its currency (Presenter)
16 February, 2012, Gold Magazine (Cyprus), Greece’s prospects
16 February, 2012, Phileleftheros Newspaper, Greece and Cyprus’ prospects
17 February, 2012, Danish Embassy in Athens, Round Table on Greece and the Euro Zone (Presenter)
19 February, 2012, 3:15pm, Sky News, Greece 2nd bailout
22 February, 2012, Bloomberg On the Economy, Greece and the Euro Zone
24 February, 2012, CNBC Investing Edge, Preparing for LTRO 2
26 February, 2012, Real News, Greece and the Euro Zone
28 February, 2012, Globe and Mail, A deeply troubled Ireland raises risk with referendum
28 February, 2012, Wall Street Journal, Greece, Euro Moving On After Expensive Divorce?
29 February, 2012, Globe and Mail, What are Europe’s banks doing with their ECB loans?

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Note from Athens: Feeling on the ground has palpably changed

February 27, 2012 63 Comments

I travel to Athens about once every six months and speak with as many contacts as I can, including top policymakers, bankers, journalists, economists and academics. On my most recent trip in mid-February, the feeling on the ground had palpably changed in a number of ways that have supported my view that Greece will eventually default and exit the eurozone, but probably not before late 2013. Read more of this post

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