Euro Area

 

Greek Stocks Reopen with a Thud

The Greek stock market very likely represents an emerging opportunity, as many stocks are sporting extremely low valuations these days. However, when we last discussed the Greek market, we pointed out that there was probably no hurry and more importantly, that using ETFs to play the Greek market would pose a difficulty at the current juncture.

 

arquitectura-del-pasado-7161Greek ruins – emblematic for the country’s situation.

Photo credit: fondos7.net

 

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Austria’s Constitutional Court Decides to Uphold Property Rights

To everybody’s vast surprise, Austria’s constitutional court has decided not to side with the government in the infamous Hypo Alpe Adria (HAA) case. The bank went belly-up after the 2008 crisis and slowly but surely it emerged that it represented a financial catastrophe of truly stunning proportions.

Incompetence on a rarely seen scale, but probably also fraud (although that angle has yet to be pursued by the judiciary) ultimately produced the biggest de facto (if not de iure, yet) insolvency in Austria’s history.

 

Hypo_Centar_7_downloadHypo Alpe Adria – a giant house of cards that imploded in the course of the financial crisis.

Photo credit: hypo-alpe-adria.hr

 

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Begone, Rebels

As we noted last week, a surprisingly large number of Syriza MPs voted against the bailout package, thereby defying their own government. The rebel faction was led by Marxist hardliner and energy minister Panagiotis Lafazanis, who has always been on record for being in favor of a “Grexit”.

After the vote, Lafazanis told journalists that he “was against the plan”, but “supported the government”. This didn’t save him however – Tsirpas reshuffled his cabinet, removing Lafazanis and two deputy ministers, replacing them with more loyal allies.

 

1000Grexit supporter Panagiotis Lafazanis got “exited” himself.

Photo credit: Thanassis Stavrakis / AP

 

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Is Spain the Next Greece?

Today, we report on a new front in the Great Zombie War – the U.S. health care sector… and why costs there are set to rise. (More on that below…)

For now, we are sitting in the bar at The Hazelton Hotel. We always thought of Canadians as being a bit more reserved and conservative (socially, not necessarily politically) than their neighbors to the south. Well, not in this hotel!

It is more like Dallas than what we recall from our summers in Nova Scotia. People dressed in the latest gaudy fashions… loud hipster music… trendy decor… women who appear to have had extensive body work done. And on the TV above the hotel bar is a recurring ad from a zombie law firm advertising for personal injury cases!

 

Rioja_barrelsBarrels of Spanish Rioja

Photo credit: illogronio.com.es

 

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Interest Rates and the Euro

After the introduction of the euro, many peripheral countries in the euro area experienced a major credit boom. The reason for this was that these countries previously had “soft” currencies, this is to say, they regularly devalued their currencies instead of implementing economic reform.

Devaluation is the easy way out for policymakers after all. The supposed “advantages” of currency devaluation, illusory, misleading and fleeting as they are, are always experienced as the first effect. The disadvantages – which dwarf all the so-called advantages – are only becoming visible at a later stage, by which time most people are no longer able to properly assess the cause-effect vector.

This failure to understand cause and effect in economics is widespread. Unfortunately, one group among which it is widespread are economists. Looking at the assertions made by many of today’s most prominent economists, we are often struck by how superficial they appear, especially with respect to monetary debasement.

 

bastiatFrédéric Bastiat: a classical “proto-Austrian” economist whose writings remain highly pertinent.

Photo via Wikimedia Commons

 

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Bribes and Payoffs

PARIS – Protesters gathered in Syntagma Square in Athens on Wednesday night…

They were demonstrating against the cruelty of life in general and, more specifically, the deal their government made with its creditors.

“Greek workers taken to the cleaners, as Tsipras forced to retreat on promises,” reports the Financial Times.

“Austerity,” the papers call it. But that is just the public narrative. Austerity is what Greece would have gotten without $220 billion in bailout funds from its neighbors and two debt restructurings.

Without these, public sector wages… and pensions… would go unpaid. The banking system would collapse. And Greek savings would be obliterated.

 

Athens riotsRiots in Athens – it was actually just a tiny group joining the rioting fun this time (as in: how dare they send us more billions and actually tie that to conditions!). Most of the Greek zombies know that if they want to keep suckling on the government teat, they have little choice, so they have decided to take the money just one more time  ; )

Photo credit: Yannis Behrakis / Reuters

 

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Euro-Group Deal Approved by Greek Parliament

The result of the parliamentary vote in Athens just came through, and was remarkably closely aligned with recent surveys of Greek voters. Funny enough, these surveys revealed approximately 70% approval of the deal offered by the euro-group among the population. No doubt the fact that the insolvency of Greece’s fractionally reserved banking system was recently painfully revealed to depositors after the ECB froze ELA had something to do with this sudden surge in support. Moreover, it is always possible that a majority of Greece’s citizens actually realizes that there is no way around wide-ranging reform.

 

metron-analysisRecent polls show soaring support for Syriza in spite of Tsipras ignoring the referendum outcome (source: Keep Talking Greece)

 

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“Game Over” for Greece

The drama… the drama. I’ve had enough of this. And after examining the details any reasonable person ought to agree. The bottom line = Greece is a “free-loading” country with a “free-loading” national manifesto. This nation, and its people, have lived beyond their means for long enough. Their Debt/GDP ratio is > 175% and climbing. More importantly, the outlook for any economic recovery is bleak as Greece’s structural reforms seem insurmountable and definitely, to them, not at all palatable. Plus, the perceived/tolerated graft associated with the people/government Greece is just monumental. The proverbial “ride” they’ve been on has now come to a deservedly screeching halt.

 

shove-it

 

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While all Eyes are on Greece, Italy’s Banks are Drowning in Bad Debt

The real danger to the euro area probably doesn’t emanate from Greece, but from two of its heavyweights, namely France and Italy. A small note in the European press reminds us that all is not well in at least one of these countries, least of all with its banks (currently this is only a “page 16 story”, but it has great potential to eventually move to the front page).

 

NPLs by regionRegional distribution of non-performing loans in Italy

 

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A Learning Experience

MADRID – The Dow rose 217 points on Monday, even though Greece missed a $500-million loan payment to the IMF. And the country needs to come up with another $8 billion by July 20, when it’s scheduled to pay back the principal it owes on bonds held by the ECB.

Greece reached an agreement with its creditors on Sunday night that would, in theory, allow it to tap further emergency loans. But in practice, there are two major stumbling blocks…

First, Greek prime minister Alexis Tsipras faces rebellion in Athens. Many in his coalition government don’t like the terms of the latest deal. They’re already vowing to oppose it when it comes to a crucial vote in parliament on Wednesday.

Second, Greece’s creditors need to come up with a “bridge loan” to tide the country over until the details of its third emergency bailout can be worked out. This is likely to be a bridge to nowhere…

 

 

bridge-to-nowhere-1A literal bridge to nowhere. Amazingly, a great many of these things exist …

Image via lustich.de

 

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