Europe/Middle East

  • Greece's creditors are impatient, and for good reasons.

    Greece is Running out of Options and Time

    The US dollar, which traded heavily throughout last week, turned better bid today.  However, with no significant data, and the renewed pressure on European bonds, the greenback's firmer tone looks fragile. 

    Core, European bond yields are 3-4 bp higher, including German bunds.  Peripheral bonds yields are up 8-11 bp, with Greek 10-year yields up 25 bp. 

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  • The UK's Osborne has his work cut out for him.

    Is the New Conservative Government Prepared to Tackle the UK's Many Challenges?

    The state of the UK economy featured heavily in the election campaign, but the deficit overwhelmed the discussion. Over the next five years, however, the new government will have to confront a range of economic challenges. Predicting how these will develop is notoriously difficult (although opinion pollsters may now have a worse reputation than economists for forecasting), but several key areas can be identified – and restoring growth to the UK economy is of paramount importance.

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  • Counting Greece's gains and losses so far.

    Greece and the EU: Winners and Losers, Successes and Failures

    Concerns over Greece’s ability to pay the debt it owes to the European Commission, European Central Bank and IMF continue unabated. While a great deal of coverage is given to Greece’s ability to meet the conditions set by its creditors, there is another underlying dynamic of the crisis – who is responsible for it and who it is affecting.

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  • Despite all efforts, the low probability of a Greek EU exit exists.

    What if a 'Grexit' Becomes a Self-fulfilling Prophecy?

    As Greece moves from one repayment deadline to another, you can be forgiven for thinking that the country’s main daily challenge is finding the money to pay its public sector workers and meet its debt servicing obligations. While this remains an important challenge, the greatest risk for Greece emanates from the deteriorating liquidity situation of its banks. It is precisely this risk, which could unintentionally trigger the nightmare scenario of a ‘Grexit’.  This is the accident that all of the key players in the unfolding Greek drama are working hard to avoid.

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  • The IMF is inefficiently combining protecting creditors and helping Greece.

    IMF Missteps and Mixed Priorities are Costing Greece

    When the European phase of the debt crisis erupted, involving the IMF was controversial. However, its money, expertise, and credibility carried the day.  It became integral to the aid efforts within the monetary union.  It has reportedly signaled it does not want to participate in additional efforts to assist Greece. 

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  • Armenian corruption reforms move ahead despite much criticism.

    Armenia: Doubts Abound on Anti-Corruption Initiative

    The Armenian government is pressing ahead with a new effort to contain corruption. But some critics question the integrity of those in charge of the initiative, citing possible conflicts of interest.

    Armenia’s cabinet decided to revamp a state Anti-Corruption Council on February 19, one month after the European Union announced plans to allocate 21 million euros (nearly $23.3 million) to Yerevan. The EU money would be designed to promote anti-corruption programs and civil service reform.

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  • Reaching back to the Marshall Plan as a way to save the EU.

    Breaking the EU's Crisis to Crisis Cycle

    Just months since taking power in January, Greek’s Syriza coalition faces obstacles at every turn, from an intransigent European Central Bank to an unyielding European Council.  The ECB in particular has rejected Greek proposals for short-term bridge financing to allow more time to negotiate medium- to longer-term structural reforms.  So once again, we are on the cusp of crisis as Greece and its creditors struggle to find a deal before an upcoming June deadline, with the country’s exit from the Eurozone a genuine possibility.

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  • Greece's current EU membership may save its exit.

    Is it Cheaper to Keep Greece in the EU than to Kick it Out?

    The change in the Greek negotiating team appears to have helped reinvigorate the talks with the official creditors.  However, insufficient progress has been made that would allow a resumption of aid payments.  Aid has been cut off since the middle of last year, six months before Syriza's election. 

    The official creditors have three demands for conditions for resuming assistance.  The Greek government's proposals must be 1) fiscally sustainable, 2) facilitate financial sector stability, and 3) not undermine competitiveness. 

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  • Some believe that a UK-less EU would be a good thing.

    An EU without a UK?

    “We would be substantially better off not being in the EU because the opportunity cost of us not being able to make our own trade deals with the emerging economies of the world is holding back British business. In terms of trade, the EU is now a millstone around our neck.” - Nigel Farage, UKIP leader, on the BBC Radio 4’s World at One on May 4.

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  • Italy's latest government's idea of a "bad bank" is controversial.

    Is a "bad bank" Italy's Answer to Economic Reform?

    Italy's third successive unelected Prime Minister is pushing through electoral reforms that make for stronger government's going forward.  There are two elements of the reform. 

    Previously, Italy was proud of its "perfect bicameralism", where Chamber of Deputies and the Senate shared power to initiate and block legislation.  The political interests of the last elected Prime Minister, Berlusconi, shaped the format.  Current Prime Minister Renzi seeks to emasculate the Senate, cutting its power to obstruct. 

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