(20/02/2012 – 38kb, PDF)
Valentine's Day failed to soften the hearts of some the northern Eurozone members, led by Germany. Last week they appeared to have second thoughts over making a 130 billion euro commitment to Greece. Indeed, the idea of letting Greece default messily was gaining momentum as the week wore on. The main reason is that with a Greek election due in April and the opposition leading the opinion polls, they fear that a different government will renege on the agreements around austerity and reform. But perhaps it’s also to do with the belief that the Eurozone banking system is now strong enough to survive a Greek default. This seems a high risk strategy. Fortunately, finance ministers may be having second thoughts. As the weekend progressed the bailout option edged closer.
Please register to view these reports
(13/02/2012 – 38kb, PDF)
The 2012 BAFTA best film, The Artist, was set around the time of the Great Depression. This may chime with a Greek population that fears it will suffer something similar as it strives to deal with its debt. But another BAFTA nominee, The Help, seems more relevant right now. Greek politicians passed the austerity package required to secure the help it needs to avoid default. And it’s not before time. Talks have been going on since July. There will be a sigh of relief at the agreement, but it’s too early to relax just yet. The austerity measures are tough and are already causing severe social unrest. With elections expected in April, it will take the will of another nominee, The Iron Lady, to achieve the reforms in practice. The risk of a default at some future date remains. But how much more help will be available if that situation arises, is yet to be seen.
Please register to view these reports
(06/02/2012 – 38kb, PDF)
At the start of the RBS Six Nations rugby tournament many would be hoping that the European policymakers would take a leaf out of the players’ books and just get on with it. Unlike good rugby, when passing the ball leads to success, too many of the European policymakers’ passes have led nowhere. Greece has to find €14bn by 20 March to avoid a default. Without help it won’t have the funds to do this, and this is casting a shadow over the Eurozone and global economy. It’s time for the policymakers to push forward with conviction. In the UK and the US there have been some encouraging signs of economic revival. But even these are tinged with caution because of conditions in Europe. The governments on both sides of the pond will be hoping that their teams will gather enough momentum to push through this economic opposition.
Please register to view these reports
(30/01/2012 – 38kb, PDF)
It was never going to be a particularly jolly affair, but the mood at this year's annual meeting of the World. Economic Forum was much gloomier than previous years. The IMF announced a substantial reduction to its 2012 global economic forecast. No surprises about where it laid the blame - Europe. And the Brussels summit this week will address how to improve growth in the Eurozone. Confidence needs to be restored to achieve this, but for this to happen a realistic plan to end the crisis has to be in place. With continued wrangling about how best to achieve this, and Greece still a big worry, the delegates won't be feeling happy on their way home from Switzerland. At least there was some better news from the US where GDP growth picked up in the final quarter. While there are still risks ahead, this could be light at the end of a very long tunnel.
Please register to view these reports
(23/01/2012 – 38kb, PDF)
Private investors in Greek government bonds shied away from an agreement to accept just half of the capital they lent in the first place and take a lower interest return on the remaining debt. The haircut alone was less of a trim than a short back and sides, but if Greece defaults these investors risk a scalping, in the form of losing all of their money. Whether Greece will qualify for the bailout it needs is now in question and has unsettled markets again, despite the better news from Ireland last week. The Irish government managed to bring its deficit down well below the level needed to qualify for its next bailout and looks to be in safer territory as a result – at least for now.
Please register to view these reports
