Michael GoldfarbJanuary 27, 2012 08:16

Portugal: the new Greece

Unsustainable bond yields being used to finance unpayable debts.

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Things are really rough all over the Iberian peninsula as Portugal's Prime Minister Pedro Passos Coelho (R) seems to be telling his Spanish counterpart Mariano Rajoy. (PATRICIA DE MELO MOREIRA/AFP/Getty Images)

In Portugal the numbers are all bad:

The deficit is 9.1 percent of GDP. The economy is expected to contract by anywhere between 3.1 and 5 percent this year. It took a bailout from the EU, ECB, IMF "troika" of 78 billion euros ($102.6 billion) and will have a hard time paying it back because its credit rating is now "junk." Five year bond yields yesterday broke a record: 18.9 percent. Three year bond yields hit 21 percent.

Oh, and unemployment stands at a record 13.2 percent.

Michael GoldfarbJanuary 26, 2012 14:19

Davos takes on euro zone crisis

Old arguments about how to solve the euro zone crisis are re-hashed at World Economic Forum annual meeting

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Davos: the euro zone crisis followed the leaders to the Alps (FABRICE COFFRINI/AFP/Getty Images)

Davos. The name, the place, what it stands for is a challenge to an ideal of journalism. It seems to be one of those events that become a story not because of any intrinsic news value but because a bunch of famous people get together and allow journalists to mingle among them.

There are many national leaders at the World Economic Forum's annual meeting in Davos but no treaties are signed, nor are there joint declarations of policy made. That would be news and worth reporting. There are titans of industry in Davos, but no products are launched or companies acquired. That, too, would be news etc.

It can't be news because the comments about the year to come actually shape events. I came across this article from The Washington Post a couple of years ago on Google about some famously wrong predictions made by the rulers of the planet at the World Economic Forum. It's pretty amusing. (For that matter, did anyone at Davos in 1996 or 97 predict there would be something like Google (founded in 1998) and that a search engine would upend all previously known models of information aggregation and dissemination?

Anyway, the leaders are at Davos, journalists are tweeting like fan-boys and girls about rubbing shoulders with them.

European officials blame euro crisis on the US

Paul AmesJanuary 27, 2012 07:28

BRUSSELS — Behind the bluster lies concern about the power of US-based agencies, and frustration that governments can’t control them.

Michael GoldfarbJanuary 25, 2012 11:45

Austerity bites, pt. 2

Second thoughts about austerity cuts as the cure for what ails Europe's economies

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Retired hedge fund manager George Soros at Davos today. He expressed concern that the euro zone's austerity policies would create social unrest that would engulf Europe. (VINCENZO PINTO/AFP/Getty Images)

Austerity cuts seems to be the theme of my blog posts today. Heavily indebted European governments need to "deleverage," as the current buzz word has it, but how far and, crucially, how fast?

In Britain, despite warnings from the opposition Labour Party about the pace and size of cuts doing more harm than good, Britain's Conservative-led coalition government has reduced the size of government spending with abandon. Predictably Prime Minister David Cameron's austerity program has landed the country on the door-step of a double-dip recession. The economy contracted in the last quarter of 2011 by 0.2 percent.

At Prime Minister's Question Time today, Cameron contemptuously swatted away criticism from Labour leader Ed Miliband. But that is party politics. The IMF's chief economist Olivier Blanchard is no left-wing politician and he told the BBC today it would be wise for Cameron and his Chancellor of the Exchequer George Osborne to slow down the pace of the cuts.

Michael GoldfarbJanuary 25, 2012 08:06

Merkel speaks

German Chancellor on EU's future and the prospects for Greece

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German Chancellor Angela Merkel before today's weekly cabinet meeting in Berlin (Sean Gallup/AFP/Getty Images)

Angela Merkel has become the most important politician in Europe. She rarely speaks candidly to the press so these comments given to a consortium of liberal newspapers including The Guardian are worth paying attention to:

Within the wider euro zone debt crisis she considers Greece, "a special case where, despite all the efforts that have been made, neither the Greeks themselves nor the international community have yet managed to stabilize the situation."

Michael GoldfarbJanuary 24, 2012 13:53

IMF report sharply downgrades global growth and blames the euro. European daily economic round-up

IMF dramatic revision of figures projects euro zone as a whole will be in recession in 2012

The IMF has sharply cut its growth forecast for the global economy this year and reason number one is the euro area. Just last September, in its World Economic Outlook, the IMF had projected world output to grow by 4 percent in 2012, now because of the euro zone debt crisis it expects growth of just 3.3 percent. The organization made clear what this dramatic reassessment means.

“Given the depth of the 2009 recession, these growth rates are too sluggish to make a major dent in very high unemployment,” the IMF said.

Michael GoldfarbJanuary 24, 2012 10:59

British national debt passes £1 trillion

A record is set and a psychological barrier breached.

Despite a year of spending cuts and modestly increasing tax revenues Britain's government debt breached the £1 trillion mark ( $1.55 trillion) for the first time today. That is the equivalent to 64.2 percent of GDP.

A spokesman for the British Treasury said, ""That our national debt has reached more than £1 trillion simply shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation's future that we deal decisively with the deficit."

Michael GoldfarbJanuary 24, 2012 05:42

Greek debt talks: sticking point

Euro zone finance ministers step into the picture stalling a deal on Greek debt

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French Finance minister Francois Baroin (L) speaks with Greek Finance Minister Evangélos Vénizélos on January 23, 2012 before the euro zone finance ministers' meeting at EU headquarters in Brussels (GEORGES GOBET/AFP/Getty Images)

Talks between Greece and its creditors have been stalled because the euro zone's finance ministers object to the interest rate Greek bondholders are demanding on a new issue of bonds to replace those Greece cannot repay, reports Greek newspaper, eKathimerini.

It's a little tricky to understand but the solution to Greece's crisis lies in this detail.

Michael GoldfarbJanuary 23, 2012 13:48

Greek debt talks: European economic daily round-up

Greek debt talks, IMF's Lagarde talks, financial markets talk

The Greek debt talks continued today. The sticking point remains the rate of interest bondholders will be paid on new issues of Greek sovereign debt. The idea is they will exchange their current bonds for new ones that are at least 50 percent less in face value. (Friday I saw speculation that they might be worth between 65 and 70 percent less.)

When you take that big a haircut now, you want something sweet to look forward to down the road. The Greek government doesn't want to give what's left of its future away to high interest rates on these new bonds. We'll see.

Michael GoldfarbJanuary 20, 2012 13:58

Greek bondholder haircuts. Europe: daily economic round-up.

Haircut rumors, bond market adjustments and stock markets becalmed as week ends

Positive vibes were emanating from negotiations between the Greek government and its creditors over the size of the haircut bondholders will take as the week came to an end.

The Wall Street Journal reported that the haircut would be between 65 and 70 percent of the value of the bond. The talks will probably extend through the weekend.