Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

Currencies Are Easy, Policies Are Hard

by Robert Kahn Sunday, July 5, 2015
Drachma or Euro? Will Greece give up the euro for the drachma? (Murad Sezer/Reuters)

Now that Greek voters have voted “no” in the referendum, the government is engaged in a last-ditch effort to reach agreement with its creditors on policies and financing; if an agreement is not reached soon, a rapid move to a new currency appears likely.

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Greek Polls Close; Surveys Say No

by Robert Kahn Sunday, July 5, 2015

The polls have closed in Greece and the initial surveys show a narrow win for the “No” side.  One GPO poll, for example, had Yes at 48.5%, No at 51.5%, within the margin of error; others also show a No lead of 3-4 points.  As I understand it, these polls are not exit polls–they were done by phone rather than as voters exited.  Phone polls are quite sensitive to assumptions about those difficult to reach, including the elderly (a majority who are expected to vote yes) and the youth (expected to vote no by a large majority). So, too early to call.  Despite this uncertainty, the major Greek TV stations are all predicting a victory for the No side, rejecting the policy measures earlier offered by creditors.

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Yes or No, Greece Needs Debt Relief

by Robert Kahn Thursday, July 2, 2015

The International Monetary Fund (IMF) has released their most recent debt sustainability analysis for Greece and, while it doesn’t include the devastation resulting from this week’s bank and capital controls, it makes for sober reading. Its bottom line is that, even if Greece were to commit to the policies now being proposed by the creditors, and were to fully implement them, Greece will need over €50 billion in financing over the next three years (see table), and require long-term debt relief through extraordinary maturity extensions and concessional interest rates. Factor in the damage in the past week, and the likelihood of further slippage in the best of scenarios, and the message is clear:  however the referendum turns out this weekend, actual debt haircuts eventually will be needed as part of any successful reform program for Greece within the eurozone.

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A New Greek Proposal? (updated)

by Robert Kahn Tuesday, June 30, 2015
A New Greek Proposal? The head of the Eurogroup, Jeroen Dijsselbloem, convened a meeting of eurozone finance ministers to discuss Greece’s third bailout requests on June 30, 2015. (Yves Herman/Reuters)

There are reports this morning that the Greek government has made a new proposal (PDF) to break the deadlock, involving a two-year bailout program to be funded from European facilities (e.g., ESM) and with explicit debt relief, but without the IMF financial involvement. Eurozone finance ministers will review the proposal in a call tonight.

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Greece: Game Over?

by Robert Kahn Sunday, June 28, 2015
People line up to withdraw cash in Athens on June 28, 2015. (Alkis Konstantinidis/Reuters) People line up to withdraw cash in Athens on June 28, 2015. (Alkis Konstantinidis/Reuters)

This is how Grexit happens. Following the collapse of negotiations between Greece and its creditors, the European Central Bank (ECB) has halted emergency liquidity assistance. Facing an intensified bank run, the Greek government on Sunday introduced banking controls and declared a bank holiday. With substantial wage and benefit payments due this week and local banks out of cash, economic conditions are likely to deteriorate quickly in Greece ahead of a planned referendum for July 5 asking Greek voters whether the government should accept a creditor-backed reform plan.

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A Roadmap for Ukraine

by Jennifer M. Harris and Robert Kahn Sunday, June 28, 2015

U.S. and European efforts to resolve the Ukraine crisis seem to be finding their stride in recent days. U.S. Secretary of Defense Ash Carter ended months of “will they won’t they?” by announcing earlier this week that the U.S. would be sending heavy weaponry into Eastern Europe, and late last week EU leaders declared that EU sanctions against Russia would remain in place through the end of 2016, quelling months of anxiety around whether EU resolve on sanctions would hold.

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Déjà vu in Greece

by Robert Kahn Wednesday, June 24, 2015

Here we go again. The counterproposal from Greece’s creditors has been leaked, and it underscores how far apart the two sides remain on a range of issues: VAT, corporate taxes, and especially pensions. Greek Prime Minister Alexis Tsipras has been called to Brussels to join European finance ministers in a marathon push today to negotiate a compromise that will release critically needed funding. We heard reports today of Greek backtracking, of the IMF’s deep resistance to the Greek proposals, and the prime minister’s questioning of his creditors’ motives. This is a dynamic we have become all too familiar with. It doesn’t preclude a deal, but it makes it harder to get to “yes” and contributes to short-term, kick-the-can solutions.

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Greece: Still No Deal

by Robert Kahn Monday, June 22, 2015
Greece: Still No Deal Critical decisions will likely have to wait for the next finance ministers’ gathering. (Paul Hanna/Reuters)

European finance ministers met earlier today and afterwards stated that new proposals from the Greek government were “broadly comprehensive” and “a solid basis” for restarting talks, but made clear that the Greek plan was far from complete and received too late for a deal to be concluded today. Markets had rallied earlier on hopes of a deal. But they fell back on comments from German Finance Minister Wolfgang Schauble and others who saw little new in the Greek proposal, suggesting significant splits among creditors. Leaders meet this evening, but it now appears that critical decisions will wait for the next finance ministers’ gathering, likely Thursday. Separately, the European Central Bank’s (ECB) board again expanded emergency assistance by 2 billion euros to Greek banks after weekend ATM withdrawals and orders for today reportedly exceeded 1.4 billion euros. With today’s modestly constructive statements though, it will be difficult for the ECB to cut off access to Greek banks over the next few days even in the face of broad insolvency in the Greek financial system.

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