Tag Archives: Greece

Why the ECB is crushing Europe

By Andrew Busch | Published: September 14, 2011

In an excellent new paper for the IMF, Laurence Ball, Daniel Leigh and Prakash Loungani researched 173 episodes of fiscal austerity over the past 30 years that included the average deficit cut amounting to 1 percent of GDP. While their conclusions that growth suffered won’t be shocking, the specific numbers are telling.

“… the evidence from the past is clear: fiscal consolidations typically have the short-run effect of reducing incomes and raising unemployment. A fiscal consolidation of 1 percent of GDP reduces inflation-adjusted incomes by about 0.6 percent and raises the unemployment rate by almost 0.5 percentage point within two … …READ MORE

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EFSF and Greek Voting Schedule:

By Andrew Busch | Published: August 31, 2011

Here are the latest time frames for the approval process on the new Greek bailout program and the change to the European Financial Stability Facility. The end of October is when all the approvals are targeted to be finished. Most of this list comes from Reuters except when in italics.

GERMANY – Parliament reconvenes after summer recess on September 5. Approval is expected in September. The opposition Social Democrats has said they will vote for the EFSF/ESM framework agreement, ensuring its passage even if some members of Chancellor Angela Merkel’s center-right coalition defect. Some lawmakers among Merkel’s Christian Democrats have … …READ MORE

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China, India, Greece and Ben….oh my!

By Andrew Busch | Published: August 29, 2011

Global equity markets had big movers overnight, but not all in the same direction.

China was down 1.5% as that nation extended their reserve requirements to include client margin accounts. This has some estimating that $140 billion more will have to be held as requirements over the next 6 mths. This means that the tightening of Chinese monetary conditions is not yet done and could see additional steps to reign in lending and therefore reduce inflation.

Next up, India took steps to ease a political crisis that had engulfed the nation. Opposition leader Hanzarre was on a 13 day fast … …READ MORE

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EU Debt Negotiation Cacophony

By Andrew Busch | Published: July 12, 2011

Euro Zone finance ministers met yesterday and released a statement overnight that created these headlines:

• WE REAFFIRM COMMITMENT TO SAFEGUARD STABILITY IN EURO AREA
• WE STAND READY TO ADOPT FURTHER MEASURES TO IMPROVE EURO AREA SYSTEMIC CAPACITY TO RESIST CONTAGION
• THIS INCLUDES ENHANCING FLEXIBILITY AND SCOPE OF EFSF RESCUE FUND
• STEPS ALSO INCLUDE LENGTHENING MATURITIES OF LOANS AND LOWERING THE INTEREST RATE ON LOANS
• PROPOSALS TO THIS EFFECT WILL BE PRESENTED TO MINISTERS SHORTLY

Also, there have been a slew of comments coming from the individual finance ministers which have generated larger moves in the … …READ MORE

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Greece and Trichet

By Andrew Busch | Published: June 23, 2011

To most market participants, it should not be a surprise that today we had the type of comments by ECB’s Trichet on the risks associated with Greece contagion. We are constantly hearing the analogy to the US financial crisis and a Lehman event. Also, Trichet’s comments about the link between the sovereign debt and European banks should not be a surprise as this is the key factor in the crisis.
Governments can’t pay the debt, banks own the debt and the ECB has to decide to accept the debt as collateral. This is where the rubber meets the road and … …READ MORE

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Why Greece will restructure and what form it will take

By Andrew Busch | Published: June 13, 2011

The European debt crisis continues to remain headline material and continues to negatively impact the financial markets. This is happening despite the efforts of the ECB, the IMF and the European Union to reform the periphery and to provide liquidity to those sovereign nations. Greece is the linchpin for a solution and resolution of the crisis. The essential element missing is this: how to do a Greek debt restructuring. Let’s review what’s happened and what could happen given the rich history of global debt restructuring.
There are two paths that Europe can go down to deal with Greece, Ireland and … …READ MORE

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Global Macro Monday: Equities, Greece and Central Bank Bonanza

By Andrew Busch | Published: June 6, 2011

Equities

We start this week with global equities playing catch up to the drop on Friday in the US. We have now seen $2 trillion in value wiped out due to the drop in stock prices since the peak on May 5th. The S&P is down 5 weeks in a row. The reasons stem from a global drop in economic activity stemming from Japanese supply chain disruptions and US gasoline prices crimping consumer spending.

The data over the last month has remained weak and this culminated on Wednesday with the massive drop in ADP that foreshadowed the disappointing NFP and … …READ MORE

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3 Debt Musketeers

By Andrew Busch | Published: May 16, 2011

3 Debt Musketeers

Today, European finance ministers are meeting with a heavy and difficult schedule on periphery debt. While the Dominique Strauss-Kahn imbroglio/sex case makes it way through the US judicial system, the European debt situation should not be materially changed in a negative way by the development. I would argue that the IMF will actually push harder for a deal to regain credibility and reduce the negative media spotlight. But it won’t be a simple task.

For the EcoFin gathering, the easy part will be to approve the Portuguese bailout plan. The hard part will be coming to any … …READ MORE

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Top 3 Trades for 2011

By Andrew Busch | Published: December 21, 2010

Warning Holiday Alert! Last BU until next Monday!

Happy Holidays….even if you are currently stuck in a European airport.

Top 3 Trades for 2011

1. Sell 5 year Treasury note before every unemployment data day. This is a play on the ending of the Federal Reserve’s quantitative easing program. The US economy has been steadily improving after the second quarter’s dip to 1.7% due to the tightening of credit conditions courtesy of the European debt crisis. For the first three quarters of the year, the US is averaging about 3% and Q4 should be similar (released Jan. 28th).

As everyone … …READ MORE

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Stress Tests Watered Down

By Andrew Busch | Published: July 23, 2010

The over-under for the European bank stress tests are 12 out of 91 fail the tests and need capital injections. Unlike the US stress tests, the European tests didn’t tell us the metrics or guidelines before the tests were run. This has generated uncertainty over exactly how these banks are going to perform. Today, most of this should be resolved.

Key metrics not used: a default by Greece and not stressing the hold-to-maturity bond portfolios.

My take is this: how many Greek banks fail? If there is no Greek bank failing the test, then how good can the tests be? … …READ MORE

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