Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Debt"

Ukraine and IMF: Step Forward Now

by Robert Kahn

The IMF announced today that it has reached an agreement in principle on a two-year program (stand-by arrangement) with Ukraine. The headline numbers are $14-18 billion of IMF money and overall financing of $27 billion, which is lower than some had hoped, but don’t be fooled. This is a three-to-six month program, designed to meet Ukraine’s critical near-term financing needs and to get reforms going. Both are essential tasks, and rightfully the focus. The program will be revised (and likely boosted) after elections. It will be at that point that thorny issues like debt restructuring will be addressed.

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Five Financial Questions for Ukraine

by Robert Kahn

There is an interesting debate going on in Western capitals over financial support for Ukraine.  The possibility of political change, coupled with Russia’s decision to suspend disbursements on its $12 billion financial package, has created an opening for meaningful economic reforms and renewed ties with global financial bodies.  There are compelling political arguments for the West to respond with a financing program that makes it economically viable for Ukraine to choose the EU Association Agreement that it rejected last year.  But the economics make a deal hard to put together.  For now, the ball is in Ukraine’s court—tensions remain high and Western aid will require at a minimum a technocratic and reform oriented government be put in place.  But should that happen, here are five economic questions on the table. Read more »

What’s So Special About November 1?

by Robert Kahn

It is starting to sink in that October 17 is not a hard deadline for default by the U.S. government on its obligations.  Senator Corker for instance says “I think the real date is around the first of November.” Some of the talk of later dates is posturing by the president’s opponents seeking leverage in the negotiations, and their willingness to go so close to the edge of the cliff is disturbing. But it also reflects the real uncertainty about when the debt limit will cause serious economic and political distress.  It is worth examining whether November 1 is a drop dead date for negotiations.

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The Government Shutdown: How This Ends?

by Robert Kahn

It’s day one, and there is agreement that we don’t know where we are headed or how we get there.  Both sides are playing a long game and seem unified in their brinkmanship.  If current market and political realities are any indicator, we’re a long way off from there being enough pressure on either side to deal.  Indeed, as my colleague Ted Alden emphasizes, the areas of government hit the hardest by the shutdown don’t provide services that the hardliners value, making compromise more difficult.  This could go on for a while (the on-line betting odds look about even for the shutdown to go more than 7 days), but when we do get to making a deal, here is one idea on the way forward.

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Argentina End Game

by Robert Kahn

In a clear and tough decision, the U.S. Second Circuit Court of Appeals has ruled against Argentina in its legal battle against holdout creditors.  A good analysis is here.

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Europe’s December Surprise?

by Robert Kahn
European Central Bank (ECB) president Mario Draghi speaks during the monthly ECB conference in Frankfurt on July 4, 2013. \ Courtesy Reuters European Central Bank (ECB) president Mario Draghi speaks during the monthly ECB conference in Frankfurt on July 4, 2013. \ Courtesy Reuters

Over the past year, Europe has enjoyed calm financial markets.  At the core of the market’s comfort were two assumptions about policy. First, that the European governments would do just enough to keep the process of European integration moving forward. Second, that the ECB would, in the words of Mario Draghi, do “whatever it takes”  to save the euro. The centerpiece of the ECB’s subsequent efforts was expanded liquidity (through long-term repurchase operations and easier collateral requirements for banks to access ECB liquidity) and a commitment to purchase government bonds to support countries return to market (the OMT program).  Even many pessimists who fear that Europe is trapped on a unsustainable, low-growth trajectory remain optimistic that Europe will do what it takes to navigate the near term risks.  It may be time to question that optimism.

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Greece and the Troika: Summer Break

by Robert Kahn
Courtesy Reuters Courtesy Reuters

The Greek government has reached agreement with the Troika (European Central Bank, European Commission, and IMF) on a set of policies putting its program back on track and opening the door for €8.1 billion in tranches over the summer, which should finance the government until September.  To get this done involves moving forward lending originally scheduled for later years.  That means a large financing gap looms for 2014.  But that’s an issue for after the summer break.

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Portugal: The Price of Austerity

by Robert Kahn
Portugal's Finance Minister Maria Luis de Albuquerque during her swearing-in ceremony at the Belem palace in Lisbon July 2, 2013 \ Courtesy Retuers. Portugal's Finance Minister Maria Luis de Albuquerque during her swearing-in ceremony at the Belem palace in Lisbon July 2, 2013 \ Courtesy Retuers.

News of the collapse of the Portuguese coalition government is further evidence of adjustment fatigue in the periphery that threatens the European project.  The leader of the junior coalition partner CDS-PP resigned yesterday, complaining that the new Finance Minister (Maria Luís Albuquerque, replacing Vítor Gaspar who resigned Monday) represented a “mere continuity” of failed austerity policies.  While it’s possible the government may survive as a minority party, the odds are rising that there will be early elections this fall, a vote that is set to become a referendum on austerity.  It is both an opportunity and a serious challenge for Europe.

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European Banking Union: Small Steps

by Robert Kahn

European finance ministers meet Wednesday to try and agree on common rules for resolving a failed bank, after failing to do so this past weekend.  If agreement is reached, and it appears far from certain that will happen, it’s likely to involve only limited flexibility for a country to bailout the bank without imposing losses on creditors.  Following on last week’s decision allowing the European Stability Mechanism (ESM) to directly recap banks, we are seeing the outlines of banking union.  That’s progress, but is it likely to draw a line under the financial crisis? It’s looking less and less likely. Read more »

No Break for Periphery Banks

by Robert Kahn

EU ministers apparently made little progress last week on terms under which the European Stability Mechanism (ESM) would recapitalize weak banks, though they still hope for an agreement by end month.  That said, if a draft plan circulated by European Commission Secretariat is a guide, we are seeing another step in the disappointing (and risky) retreat from last year’s promise to decisively break the link between troubled periphery banks and their sovereign.  This plan looks like more of a bruise, or a slight bend, rather than a break.  The good news is that events likely will force a change down the road.

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