After months of standoff, the Ukraine government appears to be making halting progress towards an agreement restructuring its external private debt. On hopes of a deal, and ahead of an IMF Board meeting next week to review its program, the government reportedly has decided that it will make a $120 million payment to creditors due tomorrow. It is possible that decision to repay will be seen as a signal of good faith and create momentum towards an agreement, but I fear it’s more likely we have reached a point where continuing to pay has become counterproductive to a deal. Absent more material signs of progress in coming weeks, there is a strong case—on economic, political and strategic grounds—that a decision to halt payments and declare a moratorium gives Ukraine the best chance of achieving an agreement that creates the conditions for sustainable debt and a growing economy in the medium term.
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.