Smoke On The East European Horizon?

“The market is pricing these sovereigns at much wider levels than where their agency ratings would imply,” said Diana Allmendinger, a director at Fitch Solutions.CDS on Italy imply a rating of BBB, five notches below its agency rating of AA-minus. And Spain’s implied rating is BB-plus, nine notches below its agency rating of AA-plus.

With so much emphasis being placed on what has been happening farther to the South, economic realities on Europe’s Eastern periphery have largely been escaping the close scrutiny of media and analyst attention. In the wake of the belated recognition of the region’s vulnerability which followed the bout of acute stress experienced during the post-Lehman crisis, a new consensus has now emerged (for an in-depth study of the Latvian example see this piece) that the IMF-guided programmes put in place at the time have essentially set things, if not entirely straight then at least on the right track. In particular, as a result of the extensive fiscal discipline and willingness to sacrifice shown a much brighter future now awaits these countries well to the sidelines of all those horrible Greek debt concerns. Continue reading

Can Italy Grow Its Way Out of Debt?

What follows is simply a follow-up note to my earlier (Elephant in The Euro Room) piece on Italy. The decision by S&P to put Italian sovereign debt on negative outlook, and the subsequent announcement by Moody’s that it was considering a downgrade has been widely commented on by analysts, and it might be interesting to take a look at some of the views that have been advanced on either side of the argument (although for the detailed analysis see me earlier post). But first, a summary of the problem. Continue reading

Greek voices…

Behind all the raw financial data there are always people. Here are two very human voices talking about the current crisis in Greece.

First up is a passionate call for action on Sturdyblog, called Democracy vs Mythology: The Battle in Syntagma Square. One quote:

I know it is impossible to share in a single post the history, geography and mentality which has brought this most beautiful corner of our Continent to its knees and has turned one of the oldest civilisations in the world from a source of inspiration to the punchline of cheap jokes. I know it is impossible to impart the sense of increasing despair and helplessness that underlies every conversation I have had with friends and family over the last few months. But it is vital that I try, because the dehumanisation and demonisation of my people appears to be in full swing.

And then there is Regarding the Greek situation by Eugenia Loli-Queru. One quote (emphasis mine):

In the 1920s, the bureaucracy had become so big that the public sector grew not only in numbers, but also in power. A law was enacted where from the moment you became a civil worker, you effectively couldn’t get fired.

This quickly created a two-tier citizenship in Greece. The powerful civil workers (who retire early, some of them work few hours, some of them working in offices are indeed lazy etc), and the private sector, which remained very underpaid, very hard working, and who’d retire at the age of 65. When Europeans today complain about the lazy Greeks, they must understand that Greece has a virtual cast system, and that not everyone is equal in it.

I kindly invite our readers to go and read both posts. Hat tip for the first post goes to Sargasso.

Collapsing Case Against Strauss-Kahn?

The New York Times talks to its sources in the NY Police Department and prosecutor’s office and reports:

The sexual assault case against Dominique Strauss-Kahn is on the verge of collapse as investigators have uncovered major holes in the credibility of the housekeeper who charged that he attacked her in his Manhattan hotel suite in May, according to two well-placed law enforcement officials.

Although forensic tests found unambiguous evidence of a sexual encounter between Mr. Strauss-Kahn, a French politician, and the woman, prosecutors now do not believe much of what the accuser has told them about the circumstances or about herself.

More key phrases include “repeatedly lied” to investigators, “issues involving the asylum application,” and “possible links to people involved in criminal activities, including drug dealing and money laundering.”
Continue reading