Griekenland, of de val van de Euro #5

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Op vrijdag 30 april 2010 11:15 schreef axis303 het volgende:

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Businessweek.

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Op maandag 3 mei 2010 09:24 schreef Perrin het volgende:
-knip- verkeerde draad

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Since my Sunday email earlier this afternoon, which included details on the Greek program as published by the government, the IMF and EU Commissioner Rehn have issued the two attached statements, and the IMF staff held a conference call.

It is now clear that the total financing package will be “only” EUR110bn (as opposed to the EUR135bn that I had expected following the rumours on Thursday) with EUR80bn coming from the 15 Euro-zone countries and EUR30bn from the IMF. I maintain my estimate that the total financing requirement will be about EUR150bn over the next three years, so this means that the program will not be fully financed throughout, and that the IMF and EU expect them to regain access to commercial financing probably towards the end of the second year of the program. The program is surely fully financed for the next 12 months.

I maintain my view on risks as summarised in paragraphs 5 and 6 below.

Stay tuned; the official IMF and EU approval – which will both release the first tranche, and (more interestingly) will coincide with the publication of more details on the conditionality should take place within the coming week.

Erik

The IMF statement on the staff agreement: http://www.imf.org/external/np/sec/pr/2010/pr10176.htm

The statement from EU Commissioner Rehn and IMF MD Strauss-Kahn: http://www.imf.org/external/np/sec/pr/2010/pr10177.htm

Relevant paragraphs on Greece from my note earlier today:

1. Earlier today, the Greek government announced the summary of the new austerity measures agreed with the visiting IMF-EU-ECB staff which will release the first tranche of the much discussed mega-sized rescue plan; the rest is a formality in terms of getting loans for the May payments. The program is being discussed now by the Euro-zone finance ministers who will recommend that the European Council (the heads of state) approves the loan package of some EUR90bn over three years, including EUR30bn for the first year. The heads of state will meet on the matter at the end of the week. Meanwhile, IMF management will send the detailed conditionality and loan request for up to EUR45bn equivalent to the IMF board which will approve it either on Friday or very next week; making potentially available the eye-watering sum of some EUR135bn for the next three years.

2. The announcement includes tough fiscal measures on the spending and revenue side as well as a number of important structural measures. In terms of fiscal policies, the famous 13th and 14th month salaries for public employees will be eliminated for those earning over EUR3,000 a month and capped at EUR1,000 for those earning less. In addition, all public sector salaries will be frozen until 2014 and allowances (another income stream for public employees) will be chopped by another 8% (on top of the 12% cut already announced.) On the revenue side, the VAT rate will increase by an additional 2% (to 23%) on top of the increase announced in March of 2% to 21% and excise taxes on fuel, tobacco and alcohol will increase by another 10%. In addition, there’ll be new taxes on properties and the gaming industries; all topped off with a one-off tax on what’s been reported as “highly profitable” businesses. All in all, these measures are estimated to cut the budget deficit from 13.6% of GDP last year to 8.1% of GDP this year, to 7.6% in 2011, to 6.5% in 2012, 4.9% in 2013 and to 2.6% by 2014; all under the assumption that GDP will contract by 4.0% this year, followed by -2.6% next year, and then stage positive growth of +1.1% in 2012 and +2.1% in each of 2013 and 2014. If so, public debt to GDP will peak in 2013 at 149.1%, and decline to 144.3% in 2014.

3. In terms of structural policies, which are hoped to deliver the economic recovery from 2012, the government has promised to begin liberalise labour markets by doing away with the present law that limits the number of firings any company can do to 2% of its labour force per month. They’ll also liberalise presently closed sectors, including in energy and transportation. And there’ll be several changes to the present generous pension system: The retirement age will be increased (from 65 for men and 60 for women) and will be linked to the average life expectancy – and early retirement will be curtailed. Also, the minimum contributions will be increased gradually, and future pensions will be cut by linking them to the average pay during the working life, rather than to the final pay.

4. There is no doubt that this is a very tough program, although there are not enough details available yet to make a firm assessment of the program. On what’s been made public so far, I have two concerns: While partly fuelled by traditional May 1 demonstrations, the Greek public has not reacted well to the announcement, so one must wonder if it’ll all be legislated and implemented as intended. I notice that the previous insistence on cutting the budget deficit to 3% of GDP in three years has been abandoned. This is welcome because the “3% in 3 years” was a random concept unrelated to the depth of the Greek crisis and would likely have implied an even deeper “hole” in GDP.

5. But here is my real concern: Remember, this is as much an economic crisis as it is a fiscal one, and on my numbers, Greece would need to engineer a (gradual) decline in private sector nominal wages by about 15% to re-establish competitiveness - and by up to 20% to start to generate the (non-interest) current account surpluses necessary for the ongoing transfer of interest payments to foreign creditors. Such a decline in private sector wages cannot be legislated, of course, so one has to cut public sector wages by at least as much and then liberalise labour markets in the hope that spare capacity will drive wages down. I am not sure exactly how much the public sector wages are set to decline on these latest measures, but from what’s been published so far, it looks like about 15%. If so, while of course substantial, unfortunately its probably not enough to drive people into competition with private sector employees to an extent that it’ll drive private wages down by 15%-20%. This, in turn, puts a big question mark on the 2012 recovery. Where will that growth come from? The working age population will be declining and the private sector will still be internationally uncompetitive while struggling with substantially higher tax burdens in the domestic market. And without the assumed recovery, where will the fiscal adjustment come about?

6. With the May liquidity crisis now practically dealt with, here are the risks for the rest of 2010 and 2011 (and beyond) as I see them: (1) Implementation of the program in the face of a social unrest; (2) the likely need for further adjustments when/if GDP doesn’t respond as expected; and (3) European approval of the second phase of their part of the package (which will emerge in their fiscal bills for the next two years.)

Best

Erik F. Nielsen

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Op maandag 3 mei 2010 11:28 schreef SemperSenseo het volgende:
Willem Middelkoop in BNR - 'Aan de Slag' (3 mei 2010 11:00hr):
Ik ben het eens met Middelkoop, ook al leven vele Eurolanden boven hun stand en hebben zo hun eigen problemen, de Amerikanen maken hier vies misbruik van en spelen een politiek spelletje om de aandacht af te leiden van hun eigen problemen. Tja van je 'zogenaamde' bondgenoot moet je het hebben

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Op maandag 3 mei 2010 12:55 schreef SeLang het volgende:
Wie betaalt wat aan Griekenland: een overzicht
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Op maandag 3 mei 2010 13:09 schreef bascross het volgende:
En Spanje bijna 10. Gaat toch nergens over?

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Op maandag 3 mei 2010 11:28 schreef SemperSenseo het volgende:
Willem Middelkoop in BNR - 'Aan de Slag' (3 mei 2010 11:00hr):
Eurolanden zijn stelletje naieve sukkels die zich in de luren laten leggen door Amerikaanse kredietbeoordelaars

Ik ben het eens met Middelkoop, ook al leven vele Eurolanden boven hun stand en hebben zo hun eigen problemen, de Amerikanen maken hier vies misbruik van en spelen een politiek spelletje om de aandacht af te leiden van hun eigen problemen. Tja van je 'zogenaamde' bondgenoot moet je het hebben

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Op maandag 3 mei 2010 13:54 schreef piepeloi55 het volgende:
Ik ben ook tot de ontdekking gekomen dat de UK een opt-out heeft. Dit houd in dat de UK ten alle tijden kan toetreden tot de EU, zonder dat het aan bepaalde voorwaarde hoeft te voldoen. Zoals andere toekomstige toetreders tot de Euro.

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Op maandag 3 mei 2010 13:57 schreef SeLang het volgende:
Die arme Slovenen

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Op maandag 3 mei 2010 14:20 schreef sitting_elfling het volgende:
Vergeet niet dat die opt-out een belangrijke conditie was voor de UK om het beleg van maastricht destijds goed te keuren!

Maarja, de UK zal nooit van zijn leven de Euro nemen. Never, nada, nooit niet Ook niet zo heel gek, als ze sinds de start van de euro, die ook hadden ingevoerd was het nu de UK die een bail out nodig had

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Op maandag 3 mei 2010 14:30 schreef piepeloi55 het volgende:

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Zeg nooit nooit. Als de UK en/of de pond in de problemen zou komen kan het wel een makkelijke weg zijn.

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Op maandag 3 mei 2010 14:49 schreef sitting_elfling het volgende:

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Ja ? Zie je het al voor je? Op het moment dat Engeland echt in dikke problemen komt maar in de Euro stappen? Dat veranderd helemaal niks aan de onderliggende problemen van Engeland. De politiek heeft daar jaren lang lopen kloten.

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Op maandag 3 mei 2010 14:54 schreef flyguy het volgende:

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Daarom hoopt zo'n beetje de hele financiële wereld in de UK dat Cameron aan de macht komt Maar dat zullen we dan wel op de beurzen zien vrijdag (/donderdagavond).

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Op maandag 3 mei 2010 14:54 schreef flyguy het volgende:

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Daarom hoopt zo'n beetje de hele financiële wereld in de UK dat Cameron aan de macht komt Maar dat zullen we dan wel op de beurzen zien vrijdag (/donderdagavond).