Daily Commentary: Eyes will now turn to Spain and Portugal

This is a bronze level post. These are the links with my daily commentary for 9 Mar 2012 on the Greek PSI deal and the renewed urgency this makes for Spain and Portugal.

Advertisement

Most of what we’re going to hear in the news has to do with Greece and the jobs report. i have written on both in the last two member articles, so you know what my overall analysis is. Let me address a bit more on Greece here.

I read a brief Belgian article in Le Soir saying that Greece exceeded its targets again with the Q4 2011 budget deficit coming in at 7.5% instead of the target of 7% anticipated and announced on 14 February. basically, Greece continues to miss targets, and this is understandable given the policy framework of austerity sucks demand out of an economy, lowers tax receipts and increases social programs. The problem of course is politically this will be seen as another sign that the Greeks just can’t get it done; and so the reluctance to pony up will be that much greater in countries like the Netherlands or Austria, which have their own budgetary difficulties to address. I believe discussion about a euro exit will intensify.

Then you have Portugal (and Ireland). Now that the Greek deal is done. The Portuguese are likely to want to negotiate a debt restructuring as well. Nothing has changed in Greece except for occupation by Troika administrators. There are no new harsh terms for Greece to implement versus before they restructured. So the incentive to restructure is definitely there in Portugal, especially if protests over austerity begin to pick up.

I would handicap two scenarios in the periphery: Portugal’s restructuring and a Spanish crisis. Both are now more likely and both are bearish for periphery sovereign debt.

Subscribe to our newsletter

P.S. – Of particular note on Spain, read the Martin Wolf piece and the Lynn Parramore one.

P.P.S. – I see nothing fundamentally wrong with the artifical constraints that debt to GDP or deficit targets represent. The problem is in making the targets flexible and reasonable. Right now, the EU is assuming zero balance over the course of a business cycle would work. This is too low and doesn’t allow the private sector any room for net savings. If the EU understood this, maybe they could still use targets and not create a deflationary environment.

That’s it. Here are the links

  • Correlations on porn – Marginal Revolution

    found no relationship between being pro the legality of porn, or propensity to watch porn, and pro social behaviors e.g. volunteer work, blood donation, etc. We can dismiss the feminist (and sociological) charges of porn increasing sexual violence and leading to sexism. The USA, Sweden, Germany, Netherlands (2) and Japan were just some of the countries that suddenly went from no legal pornography to quite widespread availability and consumption of it.

  • Drop in UK industrial output reignites recession fears | Business | guardian.co.uk

    Official data deals blow to chancellor George Osborne as he trumpets role of manufacturers in recovery ahead of budget

  • Grèce : au 4e trimestre 2011, la récession a été pire que prévu – lesoir.be

    La récession qui frappe la Grèce depuis 2008 s’est fortement accentuée fin 2011 avec un PIB révisé, qui a plongé de 7,5 % au lieu du recul de 7 % annoncé le 14 février dans une première estimation, a indiqué vendredi l’office des statistiques grec.

  • FT Alphaville » Greek PSI – the implications

    In other words, Greece’s woes are hardly over yet. What’s more, this may be the point that euro exit really gets put on the table. ¡Ay

  • The Best Twitter Client for Android

    We think Twicca deserves the nod for the top spot, thanks to its beautiful UI that looks minimal but hides a wealth of features, color-coded filters and lists, and a built-in image viewer that’s so useful you’ll use it in other applications.

  • Related Posts
    1 of 282
  • FT Alphaville » Those new Greek bond yields…

    We wrote earlier this week that yields like these ones were about where the prices of the old Greek bonds implied. What does it all mean? Well, in the words of the FT, "distressed". Worse than current yields for Portuguese bonds for instance; also quite bad in the ranks of the exit yields experienced by defaulting sovereigns over the years. It’s interesting, as technically these bonds are under English law, co-financed alongside the EFSF loan to Greece, etc. That would make another default tricky.

  • Incompetent People Too Ignorant to Know It | LifesLittleMysteries.com

    "For people at the bottom who are really doing badly – those in the bottom 10th or 15th percentile – they think their work falls in the 60th or 55th percentile, so, above average," Dunning told Life’s Little Mysteries. The same pattern emerges in tests of people’s ability to rate the funniness of jokes, the correctness of grammar, or even their own performance in a game of chess. "People at the bottom still think they’re outperforming other people."

  • German Lawmakers to Review Bundesbank Gold Control, Bild Says – Bloomberg

    German lawmakers will review the Bundesbank’s management of the country’s gold reserves, Bild Zeitung reported, citing unidentified parliamentarians. Parliament’s Budget Committee will assess how the central bank manages its inventory of the metal that is stored in Frankfurt, Paris, London and New York, the newspaper said. The Federal Audit Office has criticized the Bundesbank’s lax inventory controls, Bild said.

  • ‘Integratiebeleid werkt niet meer’ :: nrc.nl

    Het klassieke Nederlandse integratiebeleid, gericht op etnische groepen, werkt niet meer. Migranten verblijven minder lang in steden, die voor hen steeds meer een tijdelijke verblijfplaats worden. Daardoor is het voor gemeenten moeilijker om grip op hen te krijgen. Dat is de belangrijkste conclusie van De staat van de integratie, een groot onderzoek naar integratie in Amsterdam en Rotterdam dat vandaag verschijnt.

  • Puerto Rico is America’s Greece | MuniLand

    On Tuesday, Puerto Rico increased the size of its general-obligation municipal bond sale to $1.7 billion from $1.4 billion, demonstrating the voracious appetite that tax-exempt investors have for higher-yielding bonds. Unlike the debt of the 50 states, Puerto Rico’s municipal bonds are tax exempt for investors all over the U.S. This makes the debt especially attractive to wealthy investors in states with high personal income tax rates (think New York). But you have to wonder how many of these investors took the time to read the offering statement of the deal and run some numbers. If they had done the math, they likely would not be buying maturities that come due too far into the future, because it’s unlikely that Puerto Rico will be solvent enough to repay them.

  • Mike Norman Economics: What if foreigners sell their dollars?

    Here’s question that is often asked: "What if every foreigner in the world sold their dollars?" Well, who would they sell them to?

  • Why an MRI costs $1,080 in America and $280 in France – The Washington Post

    There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher. That may sound obvious. But it is, in fact, key to understanding one of the most pressing problems facing our economy.

  • Modern Monetary Theory and Austrian Economics Walk Into a Bar… – CNBC

    When the central bank sets interest rates "artificially" low, this sends a false signal to the economy. It makes it seem as if savings are rising more than they are. Businesses react as if there will be unconsumed income available for consumption or further investment in the future, so they make investment in the longer-term projects. But it turns out that the unconsumed income needed to make those projects possible in the future just isn’t available.

  • Lynn Parramore: Schools Without Toilet Paper? The Pain in Spain Falls Mainly on the Plain Folks « naked capitalism

    In the long run, it is doubtful that the real crisis has been averted. The economies of the eurozone are still not growing, and the Greek default has probably not been averted. But the bankers and financiers, and the politicians that back them, are feeling good for the moment. Meanwhile, the full brunt of the crisis falls on the ordinary citizens of vulnerable countries like Spain, which has now emerged as the most worrisome of the so-called PIIGS countries (Portugal, Ireland, Italy Greece, Spain).

  • The Great Debate©: Will Dodd-Frank be Effective? | Global Economic Intersection

    The question of whether the 2010 Dodd-Frank Act will be effective in reducing systemic risk in the financial sector was brought into new focus by a a featured article written by Gabriel Sherman last month in New York magazine.

  • Financial Armageddon: Not So Encouraging

    a relatively sharp deceleration in the rate of productivity growth — like we’ve seen recently — has, except on two occasions over the past five decades, preceded or been associated with a slowdown in the pace of hiring.

  • The pain in Spain will test the euro – FT.com

    Germany’s determination to impose a fiscal hair shirt on its eurozone partners did not work in the "stability and growth pact". Is it going to work in the "treaty on stability, co-ordination and governance" agreed last week? I doubt it. The fundamental new rule is that a member’s structural fiscal deficit should not exceed 0.5 per cent of gross domestic product. In effect, this would require countries to run structural surpluses. Moreover, if a country has debt over 60 per cent of GDP, the excess shall be eliminated at an average rate of a 20th of the excess each year. A country such as Italy, with debt at about 120 per cent of GDP, would lower the ratio at a rate of 3 per cent of GDP each year. This framework is the one to which all eurozone members must accede. These rules are to be embedded in law, preferably constitutional law.

  • Fatal Shooting of Ex-Marine by White Plains Police Raises Questions – NYTimes.com

    "He was begging them to leave him alone," she recalls. "He sounded scared." She pulls her shawl about her shoulders and her voice cracks; she is speaking for the first time about what she saw. "I heard my uncle yelling, ‘Officers, officers, why do you have your guns out?’ "

  • Get real time updates directly on you device, subscribe now.

    Do NOT follow this link or you will be banned from the site!