Tag: Greece

Eurozone winners and losers

Eurozone winners and losers

The eurozone is fully recovered from the sovereign debt crisis. And that’s been true since early in 2016. But it’s only now that big growth is kicking into high gear as the synchronized global upturn takes hold. But who are the winners and who are the losers here?

The negotiations over Greece aren’t about Greece

Earlier today, I was listening to an interview with IMF head Christine Lagarde dance around the issue of the unsustainability of Greece’s debt load. And she said something very telling. She said that debt haircuts were not on the table but that maturity extensions and interest rate reductions were, but only AFTER Greece implemented reforms demanded by the Troika.

Europe’s delusional economic policies

Europe’s delusional economic policies

Yesterday three big things happened in three different eurozone economies that I think are interrelated. And I am going to tell you what I believe they mean for the European political economy by tying them together in this post under the somewhat provocative banner of “Europe’s delusional economic policies”. The reason for the title is that what I see happening is an anti-growth economic framework which is having political consequences by fomenting nationalism and anti-EU sentiment.

Black Swan Investing and the breakup of Europe

This isn’t going to be a thematic post on how to profit from Europe’s breakup, despite the sinister title. Instead, it’s a potpourri post – a mashup of different ideas I have right now and want to run by you to organize my thinking about them. I used to do this a lot more in the past – and I found it useful; I hope you did too. So for lack of a coherent theme, I chose the title above. Here goes.

Jensen: How long bonds could actually outperform equities

Jensen: How long bonds could actually outperform equities

The equity markets that have fallen the least so far are the U.S. and the Japanese markets. If my prediction that we are looking into a more difficult period in the U.S. (and the euro zone), U.S. equities look particularly vulnerable, so maybe Jeremy Grantham will be proven right after all. If you add to that the rather lofty earnings expectations for next year in the U.S. (chart 10), the situation only gets trickier.

Despite not exactly being dirt cheap at current valuation levels, I am therefore going to stick my neck out and suggest that long bonds could actually prove a better investment than equities – at least until we approach the bottom of this economic cycle.

Did lending by foreign banks really cause the Greek debt crisis?

Did lending by foreign banks really cause the Greek debt crisis?

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.

Variable geometry and the choice of default within the eurozone or Grexit revisited

Variable geometry and the choice of default within the eurozone or Grexit revisited

I am hoping to move away from Greece with this post that sums up my view on the situation. I have always believed Greece would eventually have to exit the eurozone due to the economic strictures imposed upon it. However, until the coming to power of Syriza and the latest crisis, I believed this would occur as a result of a mutual agreement in a controled fashion. Now however, I see an uncontrolled Grexit as the base case and believe this will have negative consequences for Europe. Thoughts below

The coming Greek bank nationalization, bail-in and privatization

The coming Greek bank nationalization, bail-in and privatization

The existence of capital controls eliminates contagion and makes it possible to bail-in deposits that would normally be considered to have systemic consequences. The more I look at it, the less benign this bailout deal appears. Indeed it looks to me as if it was set up to do considerable damage to the Greek economy. Once this becomes apparent, Greeks are surely likely to change their minds about staying in the Euro.

Variable geometry bites back: Schäuble’s motives

Variable geometry bites back: Schäuble’s motives

Success of the German-inspired solution for the latest Greek crisis is far from assured. If it fails, the Eurozone may be changed forever. This column argues that the failure would lead to an outcome that has been favoured for decades by Germany’s Finance Minister, Wolfgang Schäuble. Perhaps the package the Eurozone agreed is just a backdoor way of getting to the ‘variable geometry’ and monetary unification for the core that the Maastricht criteria had failed to achieve.

The new European Union

The new European Union

The new bailout deal for Greece was not easy. This column argues that it was also a failure. It will not be enough to recapitalise banks, it asks for structural reform that exceeds Greek capacities, and it raises the Greek debt-to-GDP ratio to unsustainable levels. In a few months or quarters, the programme will fail and the Grexit question will flare up again.