Category Archives: Europe

Greece Shows the Limits of Austerity in the Eurozone. What Now?

Mario Seccareccia, professor of economics at the University of Ottawa, has been outspoken in his warnings that austerity policies have the potential to smash economies and spread untold human misery. He has challenged deficit hawks and emphasized the need for strong government investment in things like jobs, education, health care, and infrastructure if economies are to prosper. Here he talks about why what happened to Greece was entirely predictable, why the Greeks were right to reject austerity in the recent election, and what challenges the country faces in forging a sustainable path forward with the left-wing Syriza party at the helm.

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Who is Still Exposed to Greece?

Please read past the finger-wagging “private lenders are (barely) starting to come back to Greece, better not spook them” talk. This piece provides a useful overview of how the composition of lenders to Greece has changed over time. You can see how significant banks once were and how they were quiet deliberately displaced by various “official” creditors.

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Mathew D. Rose: Hope for Greece, and Perhaps for Europe Too

Monday morning I encountered a word in a number of newspapers that I have not read regarding the European Union for years: Hope. The occasion was the election in Greece. I suddenly became aware of how long much of this continent has been living in what appears to be a never ending-crisis.

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John Helmer: Russia’s and Greece’s Fraught New Friendship

Yves here. John Helmer points out that while Greece needs all the friends it can get right now, Russia has never been a great ally of Greece. Another big complicating factor is that Russia already has important commitments to Turkey. But the biggest complicating factor is that Greece’s links to Russia are through its oligarchs, which is precisely the class that Syriza has committed to crush. For instance, Yanis Varoufakis in a pre-election interviews put cracking down on oligarchs as a top priority. Similarly, as we noted, that commitment is one of the few reforms that Syriza has proposed that predisposes the Troika towards the new government.

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Is Power8, Sponsor of Everton FC, Fulham FC and RCD Espanyol, a Giant Ponzi?

Yves here. Richard Smith is on the trail of what looks to be his biggest international scam find ever, orders of magnitude larger than the usual below the radar single to low double digit million dollar/pound/euro operation that he has ferreted out in the past. And mind you, even though he focuses on the dubious looking inter-corporate relationships and the often evident lack of normal investors protections and business substance, these companies sell hope and glamour to typically credulous retail investors who lose their money and have no recourse.

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How Much Success is Syriza Likely to Have in Ending Austerity?

While the election results in Greece have sent shockwaves through European technocratic elites and have rattled investors, it is not clear how successful Syriza will be in getting big enough changes implemented in Eurozone policies and its own bailout terms to end the humanitarian crisis, rather than just create the sort of bounce off the bottom growth that analysts like to depict as progress. Indeed, once you walk though the likely bargaining positions of the various parties, there is little reason to be optimistic on Syriza’s behalf.

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The ECB’s QE Decision

The European Central Bank has just launched full-fledged quantitative easing. This column argues that the ECB’s watershed decision highlights both the strengths and the persistent vulnerabilities of the Eurozone. The limited-risk-sharing provision flags the need for greater fiscal union; and governments should use the respite that QE provides to launch much-needed structural reforms.

That’s their story and they’re sticking to it.

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Ilargi: Brussels is a Bunch of Criminals

I was going to start out saying yesterday was the saddest day in Europe in 50 years, or something like that, because of the insane and completely nonsensical largesse the ECB permits itself to launch, aimed at once again saving a banking system, but which will not only not help the European people, it will make things even much worse than they already are. Which is also, lest we overlook that ‘detail’, entirely thanks to the ECB/EU/IMF Troika.

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Poroshenko Makes Battle of Donetsk Airport Precondition for New $50 Billion Bailout – Ukrainians Repelled in the Battle of Davos

The machinations over the next round of funding in Ukraine are wild. No one, particularly the US, wants to fund Ukraine and debt default looks likely, yet Ukrainian President Petro Poroshenko is demanding a huge amount of additional funds. Soros is trying to end run the IMF, albeit with not much success so far.

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Benchmarking the ECB’s QE Program

The ECB is set to announce the details of its QE program tomorrow. Many analysts and investors have been trying to puzzle out how its operations might work, since those details will make a difference in what impact if any it has.

Frankly, we are hugely skeptical of this initiative. The US version, which is bizarrely touted as a success, further zombified the economy. It goosed asset prices, which widened wealth and income inequality. Now respectable economists are decrying the widening gap between rich and poor and the lack of class mobility as a brake on growth, yet they also refused to endorse debt restructuring and much more aggressive fiscal spending. And some experts contend that the reason the Fed decided to end QE last summer was that it came to recognize the costs outweighed what if anything it produced in the way of benefits. Of course, they can never admit that publicly or even privately if true.

In Europe, there is even more reason to be expect QE to be at best ineffective. Unlike the US, where as a matter of policy, a lot of financing takes place through the capital markets (for instance, credit card debt, subprime auto loans, home loans are all securitized to a large degree), in Europe, far more credit is on bank balance sheets, and small to medium sized corporate lending is far more important than in the US. Thus, while as we have repeatedly explained, putting money on sale is unlikely to result in more borrowing unless the cost of money is the biggest cost of running your business (ie, you are a bank or a speculator), in Europe you have the added layer that reducing investment yields is unlikely to change how credit officers view lending to small/medium sized enterprises (assuming they even want to borrow) in a weak, deflationary economy.

This Bruegel post describes the major options that the ECB has in designing its QE program, which will help readers benchmark tomorrow’s announcement. One might politely describe the choices as bad and less bad.

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Bill Black: The Triumph of Radical Right Economics in Greece – At the Hands of “Socialists”

In my January 18, 2015 column, I explained that German Prime Minister Angela Merkel’s sweetest triumph was successfully extorting George Papandreou, Greece’s Prime Minister, head of the Greek Socialist Movemnt (PASOK), and President of the Socialist International, to inflict austerity and a war on workers’ wages on the Greek people.

In this column I explain how radically right-wing the Papandreou Plan was and the completeness with which it embraced rather than resisted the troika’s theoclassical nostrums that forced Greece, Italy, and Spain into gratuitous second Great Depressions. In Greece’s case, the Merkel Great Depression has proven more severe and longer in duration than the Great Depression of 80 years ago. The EC’s Economic Adjustment Programme for Greece description of the Papandreou Plan was accurate. The Greek leaders “strongly own and support the [austerity] programme policies and objectives.”

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