Germany Should End Austerity, Not Ireland

April 28, 2013 Leave a comment

Anti-austerity fever is sweeping Europe as policy makers decide the way to get from crisis to growth involves higher spending. Well, not so fast.

The fever has already spread to the highest levels. At the International Monetary Fund’s recent spring meetings in Washington, IMF Managing Director Christine Lagarde and her deputy, David Lipton, repeatedly urged euro-area countries to focus on investment rather than budget cuts. Read more of this post

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More Risk From Portugal

April 4, 2013 Leave a comment

The euro area has had a rough few weeks: Cyprus agreed a bailout program that will decimate its economy, Italy’s Pier Luigi Bersani, the Democratic Party leader, failed to put together a government, borrowing costs for businesses in the peripheral countries continue to rise, unemployment reached record highs, and purchasing manager indices across the region greatly underperformed expectations.

There may be one more piece of bad news to add to the pile before the week is out: Portugal’s budget for 2013 may fall apart, and with it the Portuguese government. Read more of this post

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Fancy Footwear and Austerity Won’t Save Portugal

March 7, 2013 5 Comments

Anyone still in need of proof that austerity isn’t fixing the euro area’s debt crisis should visit Portugal. 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 17 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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Greece will get the next tranche of funding

September 22, 2011 7 Comments

The troika is threatening to deny Greece more funding unless the country meets the terms of its bailout programme, protestors are gathering in Syntagma Square and Greek prime minister George Papandreou faces significant opposition within his ruling party.

It feels like June all over again.

Everyone is waiting with baited breath to see if the Greek government can pass and implement enough reforms to appease the troika over the next few weeks. However, it is in no one’s best interest for Greece to default next month. Unless domestic political wrangling in Greece precludes the government from passing any further austerity measures, Greece will get more funding in October and disaster will be averted until December.

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Italy sucked into the crisis one way or another

July 11, 2011 4 Comments

Italy has quickly been drawn into the euro crisis over the past few days as prime minister Silvio Berlusconi and minister of finance Giulio Tremonti have openly fought over the austerity package put before parliament. Ten year Italian government bond spreads over the comparable German bunds hit a record high of 236 basis points last Friday and the FTSE MIB index fell sharply. The eurogroup has decided to hold an emergency meeting this morning to discuss, among other things, recent developments in Italy. Is this just short-lived market panic, or could Italy really be in trouble?

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