Friday, April 30, 2010

Greece, the Latest and Greatest Bubble

by Peter Boone & Simon Johnson

New York Times

March 11, 2010

Bubbles are back as a topic of serious discussion, as they were before the financial crisis. The questions today are: (1) Can you spot bubbles? (2) Can policy makers do anything to deflate them gently? (3) Can anyone make money when bubbles get out of control?

Our answers are: (1) Spotting pure equity bubbles may sometimes be hard, but we can always see unsustainable finances supported by cheap credit. (2) Policy makers will not act because all great (and dangerous) bubbles build their own political support; bubbles are invincible, until they collapse. (3) A few investors can do well by betting against such bubbles, but it’s harder than you might think because you have to get the timing right — and that’s much more about luck than skill.


A Greek Tragedy

by Desmond Lachman

American Enterprise Institute
March 16, 2010

The sad reality is that Greece's domestic and external imbalances have reached such a dimension that their correction within the straightjacket of eurozone membership will necessarily involve many years of painful deflation and of deep economic recession.

Groucho Marx famously observed that he would not join a club that would have him as a member. As the Greek economic crisis heats up, one wonders whether Greek policymakers are not thinking the same about Greece's Eurozone membership. Not only does its Eurozone membership seem to be condemning Greece to many years of deep economic recession and deflation. Rather, Greece's present economic travails are now raising serious questions about the longer-run viability of the Eurozone in its present form.

At the root of Greece's present economic crisis is its longstanding failure to remotely live up to its Maastricht Treaty obligations with respect to its public finances. Indeed, from the moment Greece adopted the euro in 2001, the Greek authorities have been engaged in shameless creative budget accounting that evidently misled not only Greece's Eurozone partners but Greek policymakers themselves.


Thursday, April 29, 2010

How Reversible Is The Euro?

by Paul Krugman

New York Times
April 28, 2010

For a long time my view on the euro has been that it may well have been a mistake, but that bygones were bygones — it could not be undone. I was strongly influenced by the view expressed by Barry Eichengreen in a classic 2007 article (although I had heard that argument — maybe from Barry? — long before that piece was published): as Eichengreen argued, any move to leave the euro would require time and preparation, and during the transition period there would be devastating bank runs. So the idea of a euro breakup was a non-starter.

But now I’m reconsidering, for a simple reason: the Eichengreen argument is a reason not to plan on leaving the euro — but what if the bank runs and financial crisis happen anyway? In that case the marginal cost of leaving falls dramatically, and in fact the decision may effectively be taken out of policymakers’ hands.

Actually, Argentina’s departure from the convertibility law had some of that aspect. A deliberate decision to change the law would have triggered a banking crisis; but by 2001 a banking crisis was already in full swing, as were emergency restrictions on bank withdrawals. So the infeasible became feasible.

Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I’m sure it has no intention of doing that. But at this point it’s all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday — and at that point the logic of hanging on to the common currency come hell or high water becomes a lot less compelling.

And if Greece is in effect forced out of the euro, what happens to other shaky members?

I think I’ll go hide under the table now.


The Greek tragedy deserves a global audience

by Martin Wolf

Financial Times
January 20, 2010

The Greek government has promised to slash its fiscal deficit from an estimated 12.7 per cent of gross domestic product last year to 3 per cent in 2012. Is it plausible that this will happen? Not very. But Greece is merely the canary in the fiscal coal mine. Other eurozone members are also under pressure to slash fiscal deficits. What might such pressure do to vulnerable members, to the eurozone and to the world economy?

Having falsified its figures for years, violating the trust of its partners, Greece is in the doghouse. Yet, even if it bears much of the blame, the task it is undertaking is huge. In particular, unlike most countries with massive fiscal deficits – the UK, for example – Greece cannot offset the impact of fiscal tightening by loosening monetary policy or depreciating its currency.


Wednesday, April 28, 2010

The Euro in Crisis

University of Chicago
Chicago Booth / IGM Forum

February 24, 2010

The recent decision by European governments to bail out Greece has raised questions about the viability of the single currency area in Europe. Professors John Cochrane, Roger Myerson, and Luigi Zingales will discuss the bailout decision, the foundations of the euro area, and its future.  Professor Anil Kashyap moderates the panel.

Watch video

Here's Who's Getting Pounded When Greek Debt Holders Take Their Haircut

by Gregory White

Business Insider
April 27, 2010

S&P cut Greece's ratings today to BB+ and B triggering a sell off in European indices prior to close.

Greek contagion has led to the downgrade of Portugal, and rising credit difficulties for banks throughout the PIIGS states in Europe.

The expectation is that holders of Greek debt will end up taking a massive haircut -- possibly 50% or more.

With Greece creeping towards a default, due to Germany's unwillingness to support the country, we thought we'd revisit again who is going to lose the most in that scenario.


See who is going to get slammed

Εμείς και ο Στίγκλιτζ

του Παύλου Παπαδόπουλου

Το Βήμα
28 Ιανουαρίου 2010

Δεν δικαιολογούνται πανηγυρισμοί επειδή η χώρα κατόρθωσε να δανειστεί 8 δισεκατομμύρια ευρώ. Το πέτυχε προσφέροντας επιτόκιο 6,2%, λίγο μεγαλύτερο από εκείνο με το οποίο δανείζεται η Κολομβία(!). Θα μπορούσε να υποθέσει κανείς ότι μια χώρα η οποία παρουσιάζεται από τους ηγέτες της ως κέντρο κλεπτοκρατίας (από το «θεώρημα των νταβατζήδων» του κ. Κ. Καραμανλή το 2004 ως την πρόσφατη τοποθέτηση περί γενικευμένης διαφθοράς του κ. Γ. Παπανδρέου σε ευρωπαϊκή σύνοδο κορυφής) δύσκολα θα μπορούσε να αποφύγει να ενταχθεί στην ίδια κατηγορία με την πατρίδα των βαρόνων της κοκαΐνης.

Το δεδομένο είναι ότι η Ελλάδα χρειάζεται 1 δισ. ευρώ δανεικά την εβδομάδα και τους τελευταίους τρεις μήνες κλυδωνίζεται από μια κρίση εμπιστοσύνης που εκδηλώνεται κατά κύματα, περίπου ανά 15-20 ημέρες. Παρ΄ όλα αυτά επιμένουμε σε μέτρα αμφίβολης απόδοσης με τη δικαιολογία ότι «οι Γερμανοί δεν θα μας αφήσουν να πτωχεύσουμε». Εκχωρούμε δηλαδή στους Γερμανούς μέρος της ευθύνης για την ελληνική οικονομία πιστεύοντας ότι προασπίζουμε με αυτόν τον τρόπο την εθνική ανεξαρτησία(!).


Tuesday, April 27, 2010

Γιατί θα αποτύχουν τα μέτρα

του Αριστείδη Χατζή

14 Μαρτίου 2010

Ενώ όμως στην ιδιωτική μας ζωή φερόμαστε όπως θέλουμε, χωρίς να ενοχλεί ο ένας τον άλλον, στη δημόσιά μας ζωή, από σεβασμό προ πάντων, δεν παραβαίνουμε τους νόμους, υπακούμε σε όσους κάθε φορά κατέχουν δημόσια αξιώματα και τηρούμε τους νόμους, ιδιαίτερα εκείνους που έχουν θεσπιστεί για να προστατεύσουν όσους αδικούνται, αλλά και σε εκείνους τους κανόνες οι οποίοι αν και είναι άγραφοι, η παράβασή τους φέρνει πανθομολογούμενη ντροπή στους παραβάτες.
Θουκιδίδη, «Περικλέους Επιτάφιος»

Τα μέτρα που πήρε η ελληνική κυβέρνηση είναι πρωτοφανή. Ποτέ ελληνική κυβέρνηση τα τελευταία 100 χρόνια δεν τόλμησε να μειώσει μισθούς, να κόψει επιδόματα, να αυξήσει τόσο τους φόρους και να μειώσει ταυτόχρονα και κάποιες δαπάνες. Επιπλέον ποτέ τόσο σκληρά μέτρα δεν συνάντησαν τόσο μεγάλη ανοχή, αν όχι αποδοχή από το μεγαλύτερο μέρος της ελληνικής κοινωνίας. Κρίμα.. Κρίμα, γιατί αυτή η τόσο σκληρή δέσμη μέτρων και αυτή η πρωτοφανής ανοχή θα πάνε χαμένες. Τα μέτρα δεν θα πετύχουν τους στόχους τους.


Friday, April 16, 2010

Tragic Flaw: Graft Feeds Greek Crisis

Wall Street Journal
April 15, 2010

Behind the budget crisis roiling Greece lies a riddle: Why does the state spend so lavishly but collect taxes so poorly? Many Greeks say the answer needs only two words: fakelaki and rousfeti.

Fakelaki is the Greek for "little envelopes," the bribes that affect everyone from hospital patients to fishmongers. Rousfeti means expensive political favors, which pervade everything from hiring teachers to property deals with Greek Orthodox monks. Together, these traditions of corruption and cronyism have produced a state that is both bloated and malnourished, and a crisis of confidence that is shaking all of Europe.

A study to be published in coming weeks by the Washington-based Brookings Institution finds that bribery, patronage and other public corruption are major contributors to the country's ballooning debt, depriving the Greek state each year of the equivalent of at least 8% of its gross domestic product, or more than €20 billion (about $27 billion).

"Our basic problem is systemic corruption," Greece's Prime Minister George Papandreou said after he took office late last year, vowing to change a mentality that views the republic as a resource to plunder. He later berated the chief of public prosecutions, saying Greeks believe "there is impunity in this country." The chief prosecutor said that wasn't so.

Greece moved closer to a bailout Thursday, requesting aid talks with the International Monetary Fund and the European Union. Many investors and economists say aid would buy Greece time, but wouldn't solve its underlying problems.


Monday, April 5, 2010

Τι ξεχνάει να μας πει ο πρωθυπουργός

του Τάσου Καραγιάννη

5 Απριλίου 2010

Στις πρόσφατες ομιλίες του πρωθυπουργού και των άλλων στελεχών της κυβέρνησης του ακούμε πολλά και διάφορα για την πάταξη της φοροδιαφυγής, για την αναγκαιότητα να επωμιστούμε όλοι μας το βάρος της εξόδου από την κρίση κλπ. Όμως, με εξαίρεση λίγα λόγια κατά την επίσκεψη του Γιώργου Παπανδρέου στον ΟΑΕΔ λίγο πριν το Πάσχα, δεν ακούμε τίποτα για τον ίσως πιο κρίσιμο παράγοντα που μπορεί να μας βοηθήσει να ξεπεράσουμε τα σημερινά αδιέξοδα. Την επιχειρηματικότητα.