Blogginlägg med etiketten Greece

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New decision-makers
Marcus Svedberg
2011-11-01 (Comments)

Media and analysts have been busy analyzing the pros and cons of the broad deal reached by the leaders of the Eurozone on 27 October. Two sets of news suggest that the focus will shift from Merkel and Sarkozy and their peers to some other actors in the near future though.

The Greek government announced on Monday night that they plan to hold a referendum on the next bailout package, thus putting the Greek voters rather than the politicians at center stage. PM Papandreou is obviously playing high but seems to deem it necessary to involve the people directly in order to get a necessary reform mandate.

The world has grown accustomed to seeing Greeks protesting and taking to the streets, now they have been invited to play a more productive role in this drama. I believe they are up to the task but it may be a close call. 

The IMF and emerging market leaders are also likely to be drawn more into the Eurozone situation in the near future. The upcoming G20 summit at the end of this week will most likely carve out a bigger role for the fund not only in Greece, Ireland and Portugal (where it is already operating jointly with the EU) but in some of the larger Eurozone countries as well.

There is a need to boost the financial resources for the Eurozone in order to protect the likes of Italy and Spain and those resources are to be found in emerging markets like Brazil, Russia, India and China. These countries have said they might be willing to make funds available but only through the IMF.

That would bring the IMF and the decision making full circle as the fund has traditionally been bailing out emerging markets with developed market funds (and expertise). This may very well be the start of an old phenomenon with the roles in reverse.

See also our comment on the deal as of 27 October here.

(Comments) | Taggar: emerging market, Eurozone, Greece, IMF, referendum
Marcus Svedbergs bild

Bulgaria is not Greece either
Marcus Svedberg
2010-06-11 (Comments)

Spotting the next Greece seems to have turned into a new sport among journalists. Countries experiencing economic problems are instantly likened to Greece these days even though the fundamentals may differ substantially.

We argued here last week that the Hungarian economic situation is challenging but not necessarily similar to Greece’s. The same is true for Bulgaria. The EU commission suspects that the budget numbers produced by the Bulgarian authorities are incorrect and should be revised upwards. This is obviously bad news and there may be some really serious issues behind the revision. But that does not make Bulgaria into Greece. The latter suffers from a structural debt problem – with sovereign debt expected to reach 150% in a few years – whereas the former has one of the smallest public debt figures in Europe at less than 15% of GDP. These differences do matter when analyzing the severity of the problem and how long it may take to correct the problem.

There is one common denominator in Greece, Hungary and Bulgaria and that is that the authorities knowingly or unknowingly have presented incorrect economic statistics. That points to incompetence or poor judgment or both.  It is not necessarily the present governments fault but that does not really comfort financial markets. So, it is probably a good idea that the EU Commission will start to scrutinize the numbers more closely. That should hopefully work as a deterrent so that we can avoid these things in the future. 

(Comments) | Taggar: Bulgaria, debt, Greece
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Hungary is not the next Greece – but that gives only limited comfort
Marcus Svedberg
2010-06-04 (Comments)

Several journalists and analysts have suggested that Hungary is next in line to experience what Greece has been going through in the last few months. Even though Hungary is the most leveraged economy in Eastern Europe and the budget deficit is under pressure, there are important differences.

First of all, the gross debt is almost twice as high in Greece (133% vs 79% of GDP) and whereas IMF expects it to increase to almost 150% in Greece by 2014 it is expected to decrease by more than 10 percentage points in Hungary during the same period. Secondly, the structural budget deficit is significantly higher in Greece; the IMF argues that the required fiscal adjustment in Greece is 9.2% over the next ten years, compared to none in Hungary. There are two main reasons behind these differences. Hungary did not build up such huge imbalances in the first place and, secondly, started the adjustment already a few years ago. Moreover, Hungary already has an IMF program in place and the population is more willing to accept budget cuts. 

There is, however, reason to be concerned about the economic situation in Hungary. The reasons behind the nervousness on the market this week are statements from government representatives that the budget deficit may be over 7% this year rather than the previously announced 3.8%.The representatives also made a series of unwise statements with references to Greece and criticism of the former government’s deal with the IMF, which frightened the financial markets.

The deficit is likely to fall somewhere between the old and the new forecast as the latter is a worst case scenario. We can only speculate about the reasons for the statements but they were most likely intended for domestic political consumption. The incoming right-wing government probably feels the need to prepare the ground for a tougher fiscal outlook (less expansionary policies and more cuts) than promised during the election campaign and then it is quite effective to use Greece as a deterrent and blaming the IMF. It is very unwise to do so though as financial markets are extremely nervous at the moment. And the Hungarians did not only do it once (on Thursday) but a second time (on Friday). That the Hungarian economy is weak was known before this week, but that the incoming government is so ignorant about how financial markets work is new and worrying indeed. The irony is that the government is probably planning to do more fiscal adjustment and that should be welcomed.  

(Comments) | Taggar: debt, Greece, Hungary
Marcus Svedbergs bild

Exaggerated pessimism replaced by cautious optimism

Marcus Svedberg
2010-01-22 (Comments)

Judging from the Euromoney Central and Eastern European Forum in Vienna – one of the biggest annual gatherings of bankers and investors in the region – the main concern has shifted from the temporary refinancing issues in Eastern Europe to the structural debt problems in Southern Europe.

Analysts, investors and central bankers reminded each other of the remaining challenges in the financial and economic system in Eastern Europe but it was the large debt and fiscal problems in Greece that was mentioned as the number one concern in almost every panel regardless of topic.

On a more positive note, investors in Eastern Europe are clearly more upbeat about the prospects in the region after the strong gains in 2009 and the fact that most economies are recovering faster than previously expected. The panel on Russia, which I participated in, was very well attended and illustrated the cautious optimism about Eastern Europe that characterized the entire conference. One speaker argued that the previously so prevailing pessimism was overdone and it is comforting to note that it has not (yet) been replaced by investor exuberance and policy-making complacency but rather a sober attitude to the prospects and risks in Eastern Europe.

(Comments) | Taggar: debt, Greece, sentiment

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    Karine Hirn

    Partner och Chief Representative, Shanghai-kontoret. Karine bloggar om East Capital, våra fondprodukter och ger direktrapporter från Shanghai.

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    Marcus Svedberg

    East Capitals chefekonom fokuserar på makroekonomi, analyser och omvärldshändelser som påverkar utvecklingen i regionen.

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