Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Macroeconomics"

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’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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Ukraine’s IMF Program Sets Stage for Debt Restructuring

by Robert Kahn

The IMF yesterday approved a four-year, $17.5 billion arrangement for Ukraine, their contribution to a $40 billion financing gap that they have identified over that period. A further $15 billion is to come from a restructuring of private debt, with formal negotiations expected to begin soon. The rest is expected to come from governments and other multilateral agencies. An ambitious array of reforms—including to fiscal and energy policy, bank reform, and strengthening the rule of law—are laid out, signaling a dramatic break from past governments. These measures are expected to set the stage for recovery: output falls 5 ½ percent this year before 2 percent growth returns in 2016, inflation will average 27 percent this year and then decline, while the current account deficit falls to 1 ½ percent and the currency stabilizes around current levels. Public sector debt will peak at 94 percent of GDP in 2015 as the program takes hold. All this depends on an end to the current hostilities, which as the IMF notes remains a considerable risk to the program.

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G20 Worries About Growth

by Robert Kahn

The central message from the G20 Summit in Brisbane last weekend was the need for more growth, and there was a clear sense after the meeting that leaders are worried. David Cameron captured the mood with his statement that “red warning lights are flashing on the dashboard of the global economy” and his concern about “a dangerous backdrop of instability and uncertainty.” While Europe came in for the most criticism (Christine Lagarde rightly worries that high debt, low growth and unemployment may yet become “the new normal in Europe”) concerns about growth in Japan and emerging markets also weighed on leaders. In the end, though, the diplomacy conducted on the sidelines was more meaningful than the growth proposals put forward at the summit.

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Japan’s Sensible Fiscal Retreat

by Robert Kahn

Surprisingly poor second quarter growth numbers in Japan have raised market expectations that there will be snap elections and a delay in the consumption tax hike that was scheduled for October 2015. GDP fell for a second consecutive quarter, by 1.6 percent (q/q, a.r), versus market expectations of a 2.2 percent increase. A huge miss. Falling corporate inventories were a large part of the story, but exports rose only modestly while household consumption and capital spending slowed. The yen sold off after the announcement, reaching a low of 117 against the dollar. Japanese stocks are higher.

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