Europe/Middle East

  • What would the EMU, and Greece, be like without each other?

    The EMU without Greece

    We recognize that this drawn out Greek drama is reaching a climax. By most reckonings, this weekend is decisive. 

    We have argued that Greece will have its debt relief through either default or negotiation with the official creditors.  We have argued that greater hardship is coming to Greek people. 

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  • Another day of capital controls and closed banks in Greece.

    The Syriza Government's Tough Decisions

    The train to a better destination has already left the Greek station.  It can no longer get there from here.  What is at stake now is the kind of pain Greece prefers to bear. Is it the kind of pain and humiliation that comes from succumbing to the demands of its creditors for more austerity? Alternatively, is it the pain associated with a retching of the social fabric amid a further lurch lower in the economy and an additional rise in unemployment?

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  • Greece is sailing into uncharted waters.

    Understanding the Triumph of 'No' in its Proper Context

    The triumph of the “no” vote in the Greek referendum was not a mandate for Grexit, but a new starting-point to talks. However, is there room for a compromise any longer?

    On Sunday, some 62% of Greeks voted against and only 39% for the creditors’ June 25 proposal. It was the official end to austerity policies, which failed the Eurozone in the early 2010s. Unlike Brussels, Washington opted for very different policies – and a very different outcome.

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  • Greece's plight really won't have a desirable ending for most.

    When All Options are a Degree of Bad

    Churchill reportedly once quipped that one can always count on the Americans to do the right thing after they have exhausted the other possibilities. That description fitting for Europe at the moment.

    Greece should not have been allowed to amass such a large debt relative to the size of its economy in the first place.  The debt restructurings were too limited and too small to fundamentally change the underlying debt dynamics.  The weekend referendum in Greece marks the end of the extend-and-pretend strategy.

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  • Greece's real crisis begins now.

    No, the Greek Crisis Won't End Quickly, or Well

    Now that the Greek referendum has produced a decisive No vote, never mind what happened before. The real crisis starts now.

    Recognise that the Greek people faced a difficult choice. The referendum itself was a political gambit by the Syriza government to seek to split the Eurozone governments and obtain a better deal. The politics of defiance has won. It was a major gamble, so will it pay off?

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  • Greece's finance minister is out.

    The Fallout from Varoufakis' Exit

    Greece’s economy is in ruins. It is hard to imagine how things could have gone worse. Banks closed, no liquidity, very high unemployment, businesses closing down or fleeing the country, and the brain drain is accelerating.

    Now the Greek people have voted No in a referendum that some cast as being about whether they would remain in the Eurozone – though many were unclear about what exactly the vote meant. What it certainly means is that the Greek people are deeply wounded by the prolonged recession of the last six years.

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  • Does Greece expose Eurozone design flaws?

    How Much of Greece's Problem is the Eurozone?

    We are approaching the end game in the conflict between Greece and its creditors. How likely is it that Greece will leave the euro? It is much more likely now than ever before. Brinksmanship is a national sport in the EU, but we are now at the limits of what is negotiable.

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  • Draghi notes that some countries have been slow to enact reforms.

    Draghi's 'Whatever It Takes' Pledge Turns Three Years Old and Comes with New Warnings

    Three years ago this month, ECB President Draghi issued his now-famous pledge to do "whatever it takes" to save the euro.  Indeed, it has done its part.  The ECB has a negative deposit rate, something that even with a protracted fight against deflation, the Bank of Japan never tried.  The Federal Reserve is said to have considered it but obviously chose not to do it.

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  • Greece is formally in arrears with the IMF.

    The IMF to Greece: Where's Our Money?

    Greece has formally fallen into arrears with the IMF, and the second aid package has expired.  The markets have taken it in stride.  The euro briefly pushed below $1.1100 but snapped back quickly amid reports that Greece is willing to accept most of creditors’ conditions.   The euro bounced almost three-quarters of a cent on the headlines, but it likely reflects more about short-term market positioning than a serious new development. 

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  • Deadlines and commitments for Greece.

    Growing Nightmare For Greece

    Greece is facing its nightmares: a complete shutdown for a week for its banks. What remained open were the ATMs as people rushed in to withdraw as much cash as possible. But the bigger news is around Greek referendum, which will be a decisive factor for Greece’s destiny. Greece was the first Eurozone country in need of bailouts in 2010 and the years that followed. While it was obvious that many rules in the Eurozone were bent for Greece, the money it needed always remained insufficient for its complete revival.

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