Category Archives: Euro area periphery

4/2/16: Tear Gas v Lagarde’s Tears: Greece

Here’s Greece on pensions reforms:


Here’s IMF on same:

Note: to watch the video comment by Mme Lagarde on Greek situation, please click on this link: (answer on Greece starts at 22’:22”). Otherwise, here’s official IMF transcript of it:

“I have always said that the Greek program has to walk on two legs: one is significant reforms and one is debt relief. If the pension [system] cannot be as significantly and substantially reformed as needed, we could need more debt relief on the other side. Equally, no [amount of debt relief] will make the pension system sustainable. For the financing of the pension system, the budget has to pay 10 percent of GDP. This is not sustainable. The average in Europe is 2.5 percent. It all needs to add up, but at the same time the pension system needs to be sustainable in the medium and long term. This requires taking short-term measures that will make it sustainable in the long term.

“I really don't like it when we are portrayed as the “draconian, rigorous terrible IMF.” We do not want draconian fiscal measures to apply to Greece, which have already made a lot of sacrifices. We have said that fiscal consolidation should not be excessive, so that the economy could work and eventually expand. But it needs to add up. And the pension system needs to be reformed, the tax collection needs to be improved so that revenue comes in and evasion is stopped. And the debt relief by the other Europeans must accompany that process.  We will be very attentive to  the sustainability of the reforms, to the fact that it needs to add up, and to walk on two legs. That will be our compass for Greece. But we want that country to succeed at the end of the day, but it has to succeed in real life, not on paper.”

Yep. Lots of good words and then there are those ungrateful Greeks who are just refusing to understand:

  1. How can Mme Lagarde insist that there’s a second leg (debt relief) where the EU already said, repeatedly, there is none? and
  2. How there can be sustainability to the Greek pensions reforms if there are actually people living on them day-to-day who may be unable to take a cut to their pay? Who's going to feed them? Care for them? On what money? Where has IMF published tests of proposed reforms with respect to their impact on pensioners?

Strangely, Mme Lagarde seems to be not that interested in answering either one of these concerns.

26/1/16: Chances of Repairing Greece?..

When someone says that Europe (or anyone else) "has missed a chance to" stabilise or repair or make sustainable or return to growth Greece, whilst referencing any time horizon spanning the last 8 years - be it today or 6 months ago, or at any recent iteration of the Greek crisis, I have two charts to counter their claims:

You can't really be serious when talking about stabilising Greece. Greece has not been stable or sustainable or functioning by its Government deficit metrics ever since 1980, and by Current Account balance in any year over the same time horizon, save for the last 3 years.

Yes, there probably are means and ways to significantly improve sustainability of the Greek economy. But such means and ways would have to be radical enough to undo three and a half decades of systemic mismanagement.

20/9/15: Euromoney: "Cyprus almost as safe as Portugal"

"The Cyprus risk score has steadily improved this year in Euromoney’s crowdsourcing survey, rebounding in Q2, and is seemingly on course for further improvement in Q3 as economists and other risk experts make their latest quarterly assessments. Chalking up almost 53.1 points from a maximum 100 allotted, Cyprus has managed to climb one place in the rankings to 56th out of 186 countries surveyed, leapfrogging India and closing in on Portugal into a more comfortable tier-three position:"

Read more here.

Here are my notes on the topic (to accompany the quote in the article):

In my view, Cypriot economy recovery after 3 years of deep recession and banking sector devastation is still vulnerable to growth reversals and deeply unbalanced in terms of sources for growth. Firstly, the rate of growth is hardly consistent with the momentum required to deliver a meaningful recovery. Cypriot GDP rose 0.2% y/y in 1Q 2015 and 1.2% y/y in 2Q 2015. This comes on foot of 14 consecutive quarters of GDP decline. Quarterly growth rate in 2Q came below flash estimate and expectations.

Positive growth was broadly based, but key investment-focused sector of construction posted negative growth. Deflationary pressures remained in the Cypriot economy with HICP posting -1.9% in August y/y on top of -2.4% in July. Over January-August 2015, HICP stood at -1.6% y/y.

Despite some fragile optimism, the Cypriot Government has been slow to introduce meaningful structural reforms outside the financial sector. The economy remains one of the least competitive (institutionally-speaking) in the euro area, ranked 64th in the World Bank Doing Business 2015 report - a worsening of its position of 62nd in 2014 survey. This compares poorly to the already severely under-performing Greece ranked in 61st place.

Thus, in my view, any significant improvements in the country scores relate to the policy-level post-crisis normalisation, rather than to a measurable improvement in macroeconomic fundamentals.

7/6/15: Greece: How Much Pain Compared to Ireland & Italy

Today, I took part in a panel discussion about Greek situation on NewstalkFM radio (here is the podcast link during which I mentioned that Greece has taken unique amount of pain in the euro area in terms of economic costs of the crisis, but also fiscal adjustments undertaken. I also suggested that we, in Ireland, should be a little more humble as to citing our achievements in terms of our own adjustment to the crisis. This, of course, would simply be a matter of good tone. But it is also a matter of some hard numbers.

Here are the details of comparatives between Ireland, Italy and Greece in macroeconomic and fiscal performance over the course of the crises.

Macroeconomic performance:

Fiscal performance:

All data above is based on IMF WEO database parameters and forecasts from April 2015 update.

The above is not to play down our own performance, but to highlight a simple fact that to accuse Greece of not doing the hard lifting on the crisis response is simply false. You can make an argument that the above adjustments are not enough. But you cannot make an argument that the Greeks did not take immense amounts of pain.

Here are the comparatives in various GDP metrics terms: