Post Tagged with: "government debt"

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.

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The mess in Portugal is negative for debt sustainability

The mess in Portugal is negative for debt sustainability

Portugal’s election on 4 October was inconclusive, without any party winning an absolute majority of the votes. The President of the country, a former Prime Minister, allowed his own party, led by incumbent Prime Minister Pedro Passos Coelho to form a new minority government as has been done in the past. However, the way he has gone about doing so has created a controversy, which has made Portugal the new focal point of the still virulent European sovereign debt crisis. While I don’t think this is a coup by any stretch, as some are saying, I do think Portugal has a tough road ahead regarding debt sustainability.

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Grexit is much closer than we think

Grexit is much closer than we think

The Greek government has now been boxed in by the “no” referendum vote and is unable to make the kinds of concessions a “yes” vote would have allowed. Meanwhile, the Eurogroup’s thinking about the manageability of Grexit is coalescing around letting Greece go unless it makes major concessions. With only a few days left to come to an agreement before bank nationalization and IOUs are necessary, a deal looks less likely to me. Grexit has become the default scenario.

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More on Greek Tax Anticipation Note IOUs

More on Greek Tax Anticipation Note IOUs

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.

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Institutions’ negotiating stance now untenable

Institutions’ negotiating stance now untenable

In the wake of the decisive “No” referendum vote by the Greek electorate and related events, the negotiating landscape has shifted substantially. The negotiating position of the institutions now looks untenable. But this by no way changes the potential outcomes for the Greek economy, which will still either face further harsh austerity or the turbulence of eurozone exit.

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Greek default and Grexit now increasing in probability

Greek default and Grexit now increasing in probability

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.

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Morality in the Greek Crisis

I know I keep saying that economics is not a morality play. But when it comes to Greece, I can find no other satisfactory explanation for what is going on. I’ve reminded everyone before about Irving Fisher’s famous observation: “The more the debtors pay, the more they owe”. In 2012, Michael Hudson developed this idea further. “Debts that can’t be paid, won’t be”, he said.

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This is the Framework of a Potential Greek Compromise Taking Shape

This is the Framework of a Potential Greek Compromise Taking Shape

By Marc Chandler Through the venomous comments and erosion of trust, the broad framework of what couple prove to be a workable compromise over Greece’s financial crisis may be emerging.   This is not to suggest that the eurozone finance ministers meeting will reach any important decision. Indeed, the Greek Prime Minister has already reduced his finance minister’s role in the […]

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The Greece debt bailout negotiations are really about France, not Greece

The Greece debt bailout negotiations are really about France, not Greece

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 for compromise. It is this fact that makes the Greece government debt bailout negotiations so difficult.

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A parallel currency for Greece: Part II

A parallel currency for Greece: Part II

Introducing a currency in parallel to the euro could help Greece repay its external debt and resume economic activity. This second column in a two-part series evaluates the different options and their effects on aggregate demand and fiscal sustainability. The authors propose a tax credit certificates programme, which they argue could generate new spending capacity and avoid the adoption of new austerity measures.

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A parallel currency for Greece: Part I

To prevent it from defaulting on its debt, the Greek government might need to introduce a new domestic currency, in parallel to the euro. This column, the first in a two-part series, compares the current proposals for a parallel currency and discusses how such a policy instrument could promote economic recovery.

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Is Greece’s Debt Odious?

There is a legal concept called “odious debts.” It can be traced back more than a century. The US helped create a precedent for it by denying Cuba’s responsibility for the debt incurred under Spanish colonial rule. The concept took on added significance in the post-colonial era more broadly. The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired.

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