This post was originally written for Credit Writedowns Pro on 12 Jun before Greece defaulted on loans to the IMF. The situation in Greece is not about Greece at all. It is about enforcing an economic framework onto all Eurozone countries. And because the policy goal is primarily about enforcing this economic framework everywhere in the eurozone, there is less policy space available […]
Author: Edward Harrison
There are a lot of competing narratives going around as to why Greece is in such trouble relative to the rest of the eurozone. A lot of this centers on whether Greek fiscal profligacy or poor credit controls by foreign banks was the main cause of the Greek debt crisis. Let me throw my hat into this ring with a few comments. What I say below will generally shade toward the problem being one of fiscal profligacy worsened by an ECB monetary policy that was inappropriate for the eurozone periphery as a whole and Greece in particular.
The rumour making the rounds today is that these two paragraphs in a recent Ambrose Evans-Pritchard piece in the Telegraph are what were the final straw for Syriza that cost Yanis Varoufakis his job. I don’t know whether there is any basis to these rumours. However, I do know that Syriza want Greece to remain in the eurozone and that recent decisions by the ECB make it difficult for Greece. So the questions of government IOUs have to asked.
Now that Greece has defaulted on its payments to the IMF, I am going to take this article from behind the paywall. The views in it regarding the impact of default and Grexit are still very much operative four months later. I believe that, short of Grexit, Greece’s impact on the rest of Europe and European asset markets is now limited and that contagion risk is really redenomination risk and only materializes in great measure if Greece leaves the eurozone. The original post from 10 Mar 2015 is below.
When I was discussing the Greek economic crisis last night with my colleague Ameera David, she asked me who I blame for the mess we are in. I told her I blame the euro because the euro is a monetary union created for political reasons without political union. It is a failure and the Greek crisis shows us one reason why. But I have a catalogue of other reasons. So I have decided to write them down and explain my thinking to you in greater detail.
This post, originally written at Credit Writedown Pro on 27 Apr 2015, is now available here as well. After the meeting in Riga, it is more clear than ever that the gap between Greece and the Eurogroup finance ministers is wide. Default looks likely and so we have to start thinking about what this means for Greece and for Europe. […]
At this point, default within the eurozone is the best case scenario for Greece. Grexit is still a distinct possibility. All potential best case scenarios are out the window. Below is my assessment on how we got here.
This post was originally written for Credit Writedowns Pro on 11 Mar. Two things I have written recently stand out as I contemplate what will happen in Greece. The first is that the institutions formerly known as the Troika had accepted Greece’s reform list sooner than I expected and that was positive. The second is that Greece could default before […]
Written this morning for Credit Writedowns Pro The biggest takeaway from the latest Federal Reserve Open Market Committee meeting was the reduction in the ‘normal’ rate of unemployment from the 5.2-5.5% range to a 5.0-5.2% range. While the Fed did remove its ‘patient’ language regarding rate hikes, the lower unemployment levels give the Fed more room to stay accommodative. Some […]
Edward here. I wrote the following post with the anodyne title, “The Swiss National Bank turns to negative rates” for Credit Writedowns Pro on 18 Dec 2014, almost three months ago.. But I am now putting it on the blog site because the Fed is poised to reveal tomorrow whether or not they actually will move to a full-on tightening […]
When the Greek bailout extension deal got done, I mentioned that in the press conference that followed, German Finance Minister Wolfgang Schäuble made it clear he was looking to ‘sell’ the deal to the German parliament. And while he has been successful in doing so, recent evidence suggests that indeed he did have to work to make the deal viable. For me, this highlights the political constraints we are working under and reinforces my view that writedowns are not politically viable in Germany.
In the last post at Credit Writedowns Pro on the jobs number, I promised to talk about currency issues but I didn’t! Here are two issues then: the increasing current account surplus in Germany and the strong dollar’s effect on China. On Germany, it’s notable that merchandise trade as a share of GDP in Germany was 70.8% for the years […]