Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Euro Zone"

Taking Stock of the Greece Crisis

by Robert Kahn

Yesterday, John Taylor and I testified on the Greece crisis before the Senate Foreign Relations Subcommittee on Europe and Regional Security Cooperation.  A summary of my testimony is here (including a link to my written statement), and the full video of our discussion is here. I continue to see Grexit as the most likely outcome, as we are at the very early stage of a complex adjustment effort that will face serious economic and political headwinds in Greece, and will be extraordinarily difficult to sustain. But whether Greece is ultimately better off in or out of the euro, a competitive and growing Greece is an objective the United States shares with our European partners.

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Greece: The Hardest Month

by Robert Kahn
Greek Banks Reopen People wait to enter a National Bank branch in Athens on July 20, 2015. (Ronen Zvulun/Reuters)

Greek banks reopened today, but there isn’t much you can do at them. Capital controls and withdrawal limits remain in effect, money transfers are barred (except for tax, social security or a few other allowed domestic transactions) and new accounts or loans effectively ruled out. Greeks now will be able to deposit checks, access safety deposit boxes, and withdraw money without an ATM card. All good things, though I suspect that any political boost from the visuals relating to reopening will proved short-lived.

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Greece’s Program: First Hurdle Cleared

by Robert Kahn
Prime Minister Alexis Tsipras battled to win lawmakers' approval on July 16 for a bailout deal to keep Greece in the euro. (Alkis Konstantinidis/Reuters) Prime Minister Alexis Tsipras battled to win lawmakers' approval on July 16 for a bailout deal to keep Greece in the euro. (Alkis Konstantinidis/Reuters)

The Greek parliament last night passed the first package of measures required by the government’s agreement with European governments reached over the weekend, winning 229 of 300 votes in the parliament. There were a large number of Syriza defections (39) that would appear at minimum to require a cabinet reshuffling. Some local analysts predict the government could fall, though most expect that if that happened Prime Minister Tsipras would reemerge as prime minister in a new coalition government.

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Greece and Europe: A Deal to Talk About a Deal

by Robert Kahn
Greek Prime Minister Alexis Tsipras speaks with German Chancellor Angela Merkel and French President Francois Hollande at a eurozone leaders' summit in Brussels on July 12, 2015. Greek Prime Minister Alexis Tsipras speaks with German Chancellor Angela Merkel and French President Francois Hollande at a eurozone leaders' summit in Brussels on July 12, 2015.

European leaders, meeting tonight in Brussels, appear to have given Greece something close to a take-it-or-leave-it offer.  If the Greek government can pass far-reaching reforms by Wednesday, creditors will provide bridge financing to meet near-term debt payments and cash to reopen the banks.  These steps also would allow a rebuilding of trust and allow negotiations on a third bailout that could total €86 billion to proceed.

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Greece: Europe Divides, Deal Elusive, Grexit Looms

by Robert Kahn
Tsipras and Hollande Greek Prime Minister Alexis Tsipras listens to French President Francois Hollande during a eurozone summit in Brussels on July 12, 2015. (Francois Lenoir/Reuters)

European finance ministers are meeting this morning amidst deep divides over whether, and on what terms, to provide a lifeline to Greece. Finance Ministers will not agree to a deal, with Germany (and other skeptical governments) resisting pressure from France and Italy for concessions to Greece. Leaders will have to decide.

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Greece and the Eurozone: Time to Decide

by Robert Kahn
European Council President Donald Tusk told the European Parliament there were only "four days left" to reach an agreement on Greece. (John Kolesidis/Reuters) European Council President Donald Tusk told the European Parliament there were only "four days left" to reach an agreement on Greece. (John Kolesidis/Reuters)

Another cliff in the never-ending Greek drama, as European leaders set a Sunday deadline for a deal. It’s easy to be cynical, but Europe could look very different next week. I now think that “Grexit” is very likely, and it could happen soon.

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Currencies Are Easy, Policies Are Hard

by Robert Kahn
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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Yes or No, Greece Needs Debt Relief

by Robert Kahn

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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Greece: Game Over?

by Robert Kahn
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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Déjà vu in Greece

by Robert Kahn

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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