Category: international economic crisis

Larry Elliott
The Guardian
23 January 2015

Thomas Piketty wasn’t there but they were talking about his ideas: they’re committed to progress as long as nothing changes

Committed to improving the state of the world. That’s the motto of the World Economic Forum, which wraps up in Davos tomorrow with the rich and powerful pondering whether to listen to Mark Carney’s views about the global economy or head for the ski slopes.

Many will opt for the latter, not because they have anything against the governor of the Bank of England. On the contrary, the former Goldman Sachs banker picked by George Osborne to run Threadneedle Street is very much part of the Davos family. It is simply that one of the reasons the WEF is held in Davos and not in Atlantic City or Blackpool is that it has plenty of black runs available for those who, after four days, have had enough of hearing Christine Lagarde warn about the risks of rising inequality.

All of which raises a couple of obvious questions: is Davos simply an excuse for the 1% to have a big bonding session in which they convince themselves that we are all in it together? And does it actually do any good? Continue reading “Is Davos just an excuse for the 1% to have a bonding session?”

Michael Snyder
ETF Daily News
October 7th, 2012

A devastating economic depression is rapidly spreading across the largest economy in the world. Unemployment is skyrocketing, money is being pulled out of the banks at an astounding rate, bad debts are everywhere and economic activity is slowing down month after month. So who am I talking about?

Not the United States – the economy that I am talking about has a GDP that is more than two trillion dollars larger. It is not China either – the economy that I am talking about is more than twice the size of China.

You have probably guessed it by now – the largest economy in the world is the EU economy. Things in Europe continue to get even worse. Greece and Spain are already experiencing full-blown economic depressions that continue to deepen, and Italy and France are headed down the exact same path that Greece and Spain have gone.

Headlines about violent protests and economic despair dominate European newspapers day after day after day. European leaders hold summit meeting after summit meeting, but all of the “solutions” that get announced never seem to fix anything. In fact, the largest economy on the planet continues to implode right in front of our eyes, and the economic shockwave from this implosion is going to be felt to the four corners of the earth. Continue reading “Global Economic Crisis: The Largest Economy In The World Is Imploding”

Phillip Inman in Tokyo
The Guardian
8 October 2012

World economic outlook warns of fresh downturn as European ministers asked to try and promote growth

The International Monetary Fund has urged Eurozone leaders to act swiftly in response to the debt crisis in Greece and Spain, or risk dragging down the global economy with another financial crisis.

The IMF warned that the situation was grave and could escalate into a wider downturn unless national leaders ended their disputes with a long-lasting deal. As eurozone finance ministers met in Luxembourg for crisis talks and the launch of the euro’s permanent rescue fund, the IMF urged Europe and the US to promote growth to help major developing economies like China, Brazil and India .

The Washington-based lender said at the start of its annual meeting, in Tokyo, that the “downside risks are judged to be more elevated than in the April 2012 or September 2011 world economic outlook reports”. The annual assessment of the global economic situation said it was not clear whether the situation was another bump in the road to recovery or a worsening of the situation. “The answer depends on whether European and US policymakers deal proactively with their major short term economic problems,” it said. Continue reading “IMF warns of fresh global crisis unless eurozone finds a fix”

By William Pesek
Bloomberg
Aug 30, 2012

Policy makers around the world have long envied China’s ability to get big things done. A huge 4 trillion-yuan ($630 billion) stimulus plan as the global economy cratered in 2008? No problem. Marshaling banks to lend trillions more? Check. Enacting sweeping regulatory changes at a moment’s notice? You bet.

Ahhh, the good old days. Now, a once-in-a-decade leadership shift is getting in the way of the stimulus-happy policies to which investors became accustomed. The nimbleness that helped China steer around the worst of the global crisis is confronting political paralysis of the kind more often seen in Japan, Europe and the U.S. The upshot is that China’s 7.6 percent growth rate may fall more in the next 12 months than anyone expects. Continue reading “China’s Growing Economic Crisis”

By Harry Papachristou and Matt Robinson
Reuters
Sun Feb 12, 2012

ATHENS (Reuters) – Greek lawmakers looked set to agree to a deeply unpopular bailout deal on Sunday to avert what Prime Minister Lucas Papademos warned would be “economic chaos,” and Germany demanded Athens dramatically change its ways to stay in the euro.

The austerity bill sets out 3.3 billion euros ($4.35 billion) in wage, pension and job cuts as the price of a 130-billion-euro rescue package from the European Union and International Monetary Fund – Greece’s second since 2010.

Greece needs the funds before March 20 to meet debt repayments of 14.5 billion euros and the bill has stirred anger on the streets and turmoil within the coalition government.

Addressing the nation late on Saturday, Papademos warned that failure to back the bill would mean a disorderly default and “set the country on a disastrous adventure.”

“It would create conditions of uncontrolled economic chaos and social explosion,” he said.

“The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro.” Continue reading “Greece set to agree to bailout as Germany demands action”

By Barry Neild and Irene Chapple, CNN
Feb 10, 2012

Greece is in negotiations over its latest bailout deal, but needs to meet harsh new terms
The country is implementing austerity measures but faces protests and deteriorating finances
The default of a eurozone member is politically and economically charged

London (CNN) — Will Greece default?

Greece is negotiating to repay some creditors less than what it owes in order to avoid a disorderly default. If Greece is unable to repay its bills at all on the day they fall due, this would trigger a sudden default which would send shockwaves through the market. Greece faces its next large bond redemption, of €14.5 billion, in March, and is in negotiations over its latest bailout deal as the deadline to this payment approaches.

However, it needs to meet harsh new terms laid out by Europe’s leaders. Jean-Claude Juncker, the prime minister of Luxembourg and head of the Eurogroup, has said three elements must be nailed down in order for the country to access the funds.

The sweeping reform package agreed to by Greece and the so-called troika, made up of the European Commission, European Central Bank and International Monetary Fund, must be approved by parliament this weekend.

Secondly, Greece’s political leaders must pledge that they will continue to implement the measures after elections in April. Finally, Greece must also find a further €325 million in “structural expenditure” cuts for 2012.

Greece has been implementing harsh austerity measures to try to balance its books, but has faced protests on the streets, and finances that are worse than expected. Its economy is deteriorating, and it cannot raise money with investors due to the high premiums they demand — leaving it dependent on the bailout funds. Continue reading “Is Greece facing disorderly default?”

by Peter S. Goodman
Business Editor
The Huffington Post
01/28/2012

DAVOS, Switzerland — They came, they feasted on smoked sturgeon and black truffle risotto, drank liquor paid for by global banks, endured dozens of security checks, and tried not to fall down in the snow. They talked about the perilous state of the global economy and the future of capitalism. Then, they headed back to their home countries — many in chauffeured limousines, some by private jet.

But as the people who run much of the planet wrapped up the annual festival of influence known as the World Economic Forum on Saturday, any sense of achievement was hard to discern. The participants arrived amid elevated unemployment in many economies, worries about government budget deficits, and fears that contagion from a financial crisis in Europe could infect the rest of the world. They went home with all of these worries intact, and perhaps reinforced.

Nouriel Roubini, the economist who — not for nothing — is known as “Doctor Doom,” noted that world leaders are divided on a great array of crucial issues, from arguments over trade imbalances and currency valuations to the threats posed by Iran and North Korea and the challenge of climate change.

“On all these issues that require international coordination, there is no agreement,” he said during a Saturday morning panel. “It’s a world of chaos that can lead to potential conflicts.” Continue reading “At World Economic Forum, Fear of Global Contagion Dominates”

By Andrew Torchia
Reuters
Mon, Jan 23 2012

RIYADH (Reuters) – Big emerging economies such as China, India and Saudi Arabia will not aid the West in its financial crisis unless they are given more influence in running the global economy, a senior figure from Saudi Arabia’s ruling establishment said on Monday.

“The financial crisis and great recession were born in the West, developed in the West yet hit hard throughout the world,” former Saudi intelligence chief Prince Turki al-Faisal said in a speech to a business conference in Riyadh.

He said this showed the need to give emerging economies more representation and more authority in global bodies such as the Group of 20 nations, a forum of the world’s major industrialized countries, and the Financial Stability Board (FSB), which discusses regulation of banks and financial markets.

So far, however, organizations such as the FSB “have yet to take these new realities into consideration,” while the G20 is making little headway in coordinating economic policymaking around the world, he said.

Big emerging economies’ lack of influence in international bodies reduces their willingness to contribute money to fight the global crisis, the prince warned.

The International Monetary Fund is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone’s sovereign debt crisis. Continue reading “Saudi: no cash from emerging economies until given more clout”

The Malaysian Insider/Reuters
Dec 16, 2011

WASHINGTON, Dec 16 — No country is immune from an “escalating” euro zone crisis and each one must act to head off the risk of a global depression, the head of the International Monetary Fund said yesterday.

IMF Managing Director Christine Lagarde, speaking at the U.S. State Department, said the outlook for the world economy is “quite gloomy” and warned that failure to act collectively could lead to protectionism and isolation reminiscent of the 1930s depression.

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,” Lagarde cautioned.

“It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”

The IMF has warned that it is likely to cut its 2012 growth projections, with the economy struggling with a worsening two-year euro zone debt crisis and sluggish US growth. There are also signs from falling Chinese factory output that manufacturers are struggling with waning global demand and tighter credit conditions. Continue reading “No country safe from euro crisis, says IMF”

By Lee Wei Lian
The Malaysian Insider
Dec 07, 2011

KUALA LUMPUR, Dec 7 — Malaysia will be hit harder than its Asian peers by the economic crisis in Europe due to its relatively weak public finances and dependence on commodities, said Nomura International today.

Its chief economist for Asia ex-Japan, Robert Subbaraman, said that unlike most countries in Asia, Malaysia will be negatively affected by an expected drop off in commodity prices while the government will also find it difficult to keep up stimulus policies.

“Malaysia is one of the economies that will weaken the most; it is in the weaker group of economies,” said Subbaraman at a media briefing here today.

Nomura economist for Southeast Asia Euben Paracuelles said Malaysia’s growth in the first three quarters of this year was largely led by government spending, but as public finances were relatively weak, he doubted that it would be sustainable.

Subbaraman also noted that Malaysia ranked third in Asia ex-Japan in terms of exposure to European bank claims, after Hong Kong and Singapore, which could mean a drying up of liquidity should European banks start to cut their exposure to the region. Continue reading “Malaysia among most vulnerable to euro crisis, says Nomura”

By LANDON THOMAS Jr.
November 27, 2011 | The New York Times

LONDON — Eighteen months into a sovereign debt crisis — and after many futile efforts to resolve it — the endgame appears to be fast approaching for Europe.

While its leaders may well hold to the current path of offering piecemeal solutions, nervous investors are fleeing European countries and banks.

Two main options exist: either the euro zone splits apart or it binds closer together.

Each of these paths — Greece, and possibly others, dropping the euro or the emergence of a deeper political union in which a federal Europe takes control of national budgets — would lead to serious political, legal and financial consequences.

But with financial panic now threatening to move beyond Italy and Spain to Belgium, France and Germany, the euro zone’s paymaster, the pressure to arrive at a solution is at a new level of intensity. Continue reading “Time Runs Short for Europe to Resolve Debt Crisis”

UPI.com
Nov. 26, 2011

BRUSSELS, Nov. 26 (UPI) — Banks in Europe say they are bracing themselves against the eurozone possibly losing one more member because of the ongoing sovereign debt crisis.

“We cannot be, and are not, complacent on this front. We must not ignore the prospect of a disorderly departure of some countries from the eurozone,” said Andrew Bailey, a regulator at Britain’s Financial Services Authority, The New York Times reported Saturday.

Analysts in a research note at Nomura bank said, “The eurozone financial crisis has entered a far more dangerous phase — a euro(zone) breakup now appears probable, rather than possible.” Continue reading “Banks brace for eurozone defection”

By Michael Birnbaum,
Washington Post
November 17, 2011

MADRID — As Europe’s debt crisis escalates, investor fears are also rising, making it increasingly difficult for some countries to raise money to pay their bills. That dying demand, despite the record-high interest rates they are being forced to pay, is raising concern that those nations could face a credit freeze similar to the one that brought the world’s economy to its knees in 2008.

Spain is the latest country to try to borrow, only to find few takers. In an auction of its bonds on Thursday, Spain fell $600 million short of its goal. Demand was the lowest since the depths of the 2008 recession — even though the nation’s bonds are paying the highest interest rates since it joined the euro more than a decade ago. An earlier auction this week also raised less money than the nation had hoped.

The situation in Spain raised new alarms about the European debt crisis and helped drive U.S. stocks lower Thursday. By mid-afternoon, the Dow Jones industrial average and the Standard & Poor’s 500-stock index were down nearly 2 percent, and the tech-heavy Nasdaq was off more than 2.2 percent.

The lack of willing lenders could send countries into bankruptcy faster than the high interest rates alone, analysts say, because countries can typically withstand a temporary spike in borrowing costs. But if they can’t find anyone to lend to them at any price, that’s a sign of more dire straits, because unlike most countries that can print money in an emergency, they have no lender of last resort. Continue reading “Spain struggles to find lenders, despite high interest rates”

By Shamim Adam and Michael Forsythe
Bloombert Businessweek
November 12, 2011

Nov. 12 (Bloomberg) — U.S. President Barack Obama said formation of new governments in Greece and Italy may help calm world markets roiled by the European debt crisis, which is having a “dampening effect” on the global economy.

“We’re not going to see massive growth out of Europe until the problem’s resolved,” Obama told corporate chief executive officers gathered in Honolulu today as part of the Asia-Pacific Economic Cooperation forum. The president said he was “cautiously optimistic” of getting through the current crisis.

Europe’s sovereign-debt crisis was a frequent topic at the summit aimed at improving economic ties in the Asia-Pacific region as officials said they are bracing for a worsening of the situation in Europe that may push the global economy into a recession and increase volatility in financial markets. Investors this week pushed Italian bond yields passed the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts, ahead of the resignation today of Italian Prime Minister Silvio Berlusconi.

“You can’t talk about Asia without talking about Europe right now,” Jerry Webman, chief economist at OppenheimerFunds Inc. in New York, told Bloomberg News in Honolulu yesterday. “Having a prolonged economic slump in Europe is really threatening to the export-oriented Asian economies.” Continue reading “Obama Says Europe Making Progress as APEC Nations Fear Worst”

Reuters
Fri Nov 11, 2011 11:16pm EST

By Barry Moody and George Georgiopoulos

Italy lower house set to vote on cuts, new govt seen by Sunday

ROME/ATHENS, Nov 12 (Reuters) – Italy’s parliament was set to approve austerity measures on Saturday, triggering the formation of an emergency government to replace that of Prime Minister Silvio Berlusconi, and meeting European Union demands to avert a euro zone meltdown.

After months of dither and delay, Rome appears to have got the message as bond markets pushed it to the brink of needing a bailout that the euro zone cannot afford.

President Giorgio Napolitano and Italian lawmakers have put the process on a fast track: the Chamber of Deputies was due to start debating at 1130 GMT and final approval of the cuts by the lower house marks the Berlusconi government’s final act.

Berlusconi was expected to hold a last cabinet meeting and then hand his resignation to Napolitano at the Quirinale Palace.

A largely technocratic government headed by former European Commissioner Mario Monti was seen in place by Sunday night or Monday morning. Continue reading “Wrap-Up: Italy braces for new govt, IMF warns Asia on euro fallout”

by Alex Lee
10th November 2011

After seeing his parliamentary majority decline further in a routine vote earlier today, Italian PM Berlusconi offered to resign once Parliament approves new austerity measures, possibly towards the end of next week. We see three possible outcomes at this delicate stage, with different implications for the BTP market and Italian risk premium more broadly:

*Most likely scenario: In the coming weeks, the current centre-right coalition of the Northern League and PdL moves to rally round another candidate who can gain wider acceptance domestically and internationally. In order to broaden its support, the new government may reach out to smaller centrist parties which can advance their own political agenda.

A centre-right executive backed by a broader coalition and committed to implementing the ‘troika’s’ economic platform could eventually stabilize markets. But the newly appointed Cabinet would need to prove itself first, and the protracted uncertainty would weigh on economic growth. Furthermore, reforming the pension system could meet resistance from the Northern League. Still, it would be hard for the ECB and Italy’s EMU peers not to stand by a new Italian government genuinely trying to pursue reforms. Under this scenario, thanks to the ECB’s interventions, we would expect BTPs to remain capped at around current levels (400-450bp) over the average of Germany, France and the Netherlands until measures are gradually approved. Continue reading “Now Italy – What’s Next”

by: Nicholas Pardini
November 11, 2011

Starting in May of 2011, the extent of the global sovereign debt crisis began to hit the equity markets. Greece was first, then Portugal, then Ireland, and now Italy has become the focus of the financial markets and a source of macroeconomic weakness.

However, these countries are simply the first dominoes in a chain of fiscal crises that will either result in a series of defaults in the developed economies’ bond markets or high inflation generated by central bank intervention. The question now is who’s next? Countries with high debt/GDP ratios, high unemployment and lack high economic growth to sustain deficit spending are all about to face the consequences of reckless fiscal policies. Below I list the countries I believe to the most likely to enter sovereign debt crises of their own after Italy. Continue reading “First Greece, Now Italy, Who’s Next?: Analyzing The Sovereign Debt Default Chain”

By Nick Thompson
2011-11-09
CNN.com

(CNN) — Europe’s financial crisis claimed its second scalp in three days when Italy’s Silvio Berlusconi announced he will step down after parliament approves new austerity measures in an effort to stave off economic collapse.

The scandal-plagued prime minister will follow his Greek counterpart George Papandreou into early retirement as fears grow that Italy, the eurozone’s third largest economy, may default on its debt.

Italy has failed to implement austerity measures designed to reduce its mammoth €1.9 trillion debt load — nearly six times that of Greece — and the cost to the country of borrowing more money to pay off that debt is spiraling out of control.

While no one knows yet whether Italy will default, analysts say that the country is vastly too big to bail out — and that the consequences for the world economy of a default would be a disaster. Continue reading “Has Italy passed the point of no return?”

by Hugo Dixon
Reuters
Nov 6, 2011

Chaos, drama and crisis are all Greek words. So is catharsis. Europe is perched between chaos and catharsis, as the political dramas in Athens and Rome reach crisis point. One path leads to destruction; the other rebirth. Though there are signs of hope, a few more missteps will lead down into the chasm.

The dramas in the two cradles of European civilization are similar and, in bizarre ways, linked. Last week’s decision by George Papandreou to call a referendum on whether the Greeks were in favor of the country’s latest bailout program set off a chain reaction that is bringing down not only his government but probably that of Silvio Berlusconi too.

The mad referendum plan, which has now been rescinded, shocked Germany’s Angela Merkel and France’s Nicolas Sarkozy so much that they threatened to cut off funding to Greece unless it got its act together — a move that would drive it out of the euro. But this is probably an empty threat, at least in the short term, because of the way that Athens is roped to Rome. If Greece is pushed over the edge, Italy could be dragged over too and then the whole single currency would collapse. So, ironically, Athens is being saved from the immediate consequences of its delinquency by the fear of a much bigger disaster across the Ionian Sea.

Italian bond yields, which were already uncomfortably high, shot up after the Greek referendum fiasco. Continue reading “Chaotic catharsis”