Europe/Middle East

  • Debt repayment is such a small part of Greece's road to recovery.

    Economic Confidence Building in Greece Could Take Far Longer than Debt Repayment

    One of the main issues dominating the G7 was the Greek bailout. For the seven leaders attending the Bavarian summit, resolving the debt crisis in a way that is acceptable to Greece and its international creditors remains at an impasse. Both Barack Obama and Angela Merkel called on the Greek government to implement economic reforms.

    While securing a new deal is important, much of the focus has been on how to deal with Greece’s debt. Ultimately, however, Greek debt will not be tackled by cutting government spending alone.

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  • Greece could follow Spain's lead with a few alterations.

    Greek Creditors Would Actually Like to See a Successful Greece

    The losses the US dollar suffered yesterday extended into Asia today.  The dollar stabilized in Europe.  Short-term technical indicators warn against expecting a deep retracement today.  Support for the euro is near $1.12.  A break of $1.5260 could see another half a cent decline for sterling.  Dollar support is against the yen is JPY123.60-80.

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  • The EU has criticized Germany's trade surplus.

    Germany's Export Nation: We're #2! (behind China)

    China is the world's largest exporter.  Yet with the exception of the distortions caused by the timing of the Lunar New Year holiday, China's exports have been falling on a year-over-year basis each month this year (save for February).  Earlier today, it reported exports in May were 2.5% lower than a year ago.   

    It does look like Chinese exports are bottoming out.  Export volumes appear to have risen in May, but competitive price cuts lowered the value of its foreign shipments.

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  • How much of Greece's woes are theirs and how much is their creditors?

    Greece's Reserve Fund at the IMF Likely Won't Help This Time

    The euro is steady after pulling back from yesterday's high near $1.1380.  German bund yields are slightly firmer today, but also off the 1.00% level approached yesterday.  Against the other major currencies, the dollar is slightly firmer, as the participants turn cautious ahead of the US jobs data. 

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  • It's not all doom and gloom for those actually living in the EU.

    You've Got to Have Faith (In the EU)

    The media often depicts a European Union that is unraveling.  The financial crisis, high unemployment, and demands for austerity for as far as the eye can see have undermined confident in the European project.  Syriza and Podemos from the Left and the likes of the National Front and the Northern League on the right are squeezing the center in a pincer movement.

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  • Greece has an opportunity it should seize to make its next payment.

    Greece's Best Opportunity to Pay the ECB Comes with Onerous Conditions

    The US dollar is recouping some of yesterday's outsized losses.  The euro was unable to extend yesterday's push toward $1.12, perhaps with the help of some fragile stability in the German bund after yesterday's dramatic slide.  Disappointing UK service PMI saw sterling slide after briefly and narrowly taking out yesterday's high.  The dollar found a base near JPY123.80, from which has returned to the JPY124.40 area.  The yen's performance seems to be more a function of cross activity today. 

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  • Even the US did not begin as a well-integrated union and currency zone.

    Greater Integration Through Crisis

    The pre-Socratic Heraclitus was the philosopher of change.  He wrote, "no man steps in the same river twice; for it is not the same river and he is not the same man."  Truth that.

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  • Could Greece's financial troubles lead to a humanitarian crisis?

    Another Day, Another Greek Debt Payment is Due

    Greece is back in the news (has it ever left?) with a new debt payment looming and the ruling Syriza Party increasingly marked by internal tensions. The call from some in the party to “rupture now with the lenders” is in response to new rounds of payments due to service the loans absorbed by the Troika of the IMF, European Central Bank and European Commission. It is clear that even if the Greek government could cobble together the current instalment, the next debt payment, due at the end of June, cannot be met.

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  • Gauging the corporate response to the U.K. leaving the EU.

    The Corporate Response to a 'Brexit' is Complicated

    The die is cast: British people have voted for a government that has promised to hold a referendum on the UK’s EU membership by 2017. This week, business has intervened to liven up the debate. The country’s main industry lobby group wants its members to make a decisive contribution to the pro-EU campaign, but what has become clear in recent days is that there will be a far more complex picture of the corporate response than we might have anticipated.

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  • It's unlikely that the UK deflation will resemble Japan's.

    The Last Round of UK Deflation was Pre-Beatles

    The rate of inflation has turned negative for the first time in 55 years in the UK. The phenomenon of deflation in economic jargon means consumers will see a drop in prices, with essentials like petrol and food cheaper than this time a year ago. Crucially, deflation constitutes a fall in prices over a sustained period. This can be a very serious economic problem and one that is not easy to cure. So should the UK be worried?

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