Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Fiscal Policy"

Ukraine Needs a Moratorium

by Robert Kahn

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.

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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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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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A Roadmap for Ukraine

by Jennifer M. Harris and Robert Kahn

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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Greece: Still No Deal

by Robert Kahn
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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Greece’s Bridge to Nowhere

by Robert Kahn
Greece's Bridge to Nowhere Last week, Greece delayed a $338 million payment to the IMF as negotiations stalled. (Grigoris Siamidis/Reuters)

Negotiations continue today between Greece and its creditors, with reports that the government has presented a revised proposal that offers minor concessions in an effort to break the deadlock. A deal is needed in the next week if a package of assistance is to be put in place before end-month payments of $1.7 billion are due to the IMF. While this is not a hard deadline—a short-term default to the IMF need not sink the Greek economy—the government is out of cash and it is hard to imagine how they make critical domestic payments without an injection of cash from creditors.

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Greece and the Politics of Arrears

by Robert Kahn
Merkel-Tsipras German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras review an honour guard during a welcoming ceremony at the Chancellery in Berlin on March 23, 2015. (Pawel Kopczynski/Courtesy Reuters)

Greece is running out of money. Greek Prime Minister Alexis Tsipras’s meeting this week with German Chancellor Angela Merkel has taken some of the toxicity out of the conversation for now, but cannot mask Greece’s current collision course with its creditors. Committed to a platform on which it was elected but that it cannot pay for, and with additional EU/ECB financing conditioned on reform, the Greek government is likely to run out of money in April (if not before). If past emerging market crises are any guide, the decisions that it will then confront about who to pay and who not to—the politics of arrears—will present a critical challenge to the government and likely define the future path of the crisis.

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