Fiscal Policy

Hugo Dixon: The big fat Greek blame game

22 Jun 2015

If Greece collapses, the biggest chunk of the blame will go to whoever behaves most unreasonably in the final stages of the current game of chicken. So both sides have an incentive to accommodate each other’s reasonable positions. Hopefully, they realise this.

Greek point of no return could come on July 20

19 Jun 2015

The slide into financial no man’s land begins whenever the ECB has no excuse for propping up Greek banks. The central bank can overlook a June 30 non-payment to the IMF, even if a deposit run leads to capital controls. But if Greece stiffs the ECB on July 20, it gets much harder.     

Capital control grenade hovers over Greek impasse

18 Jun 2015

If the Tsipras government can’t agree on bailout terms, Europe will soon be able to justify freezing Greek deposits. Athens might then be scared into a deal, but might also quit the euro zone. EU politicians need to make the threat credible - but they don’t want to pull the pin.  

Fed hikes may flummox newbies and old hands alike

17 Jun 2015

Many people in the financial markets have never worked through U.S. policy rate rises. Unhappily, training and textbooks are of limited use, because there are no precedents for the end of so many years of ultra-low rates. Besides, crisis and regulation have transformed trading. 

Greece and creditors are not really far apart

15 Jun 2015

The brink keeps getting closer, but there’s agreement on broad principles. The fight is over 2 bln euros, 1 pct of Greek GDP and 0.02 pct of euro zone GDP. The damage from failure is many times larger. A deal can be done - if only politics and pride can be overcome. 

Hugo Dixon: How a Greek debt deal could work

15 Jun 2015

Athens has struggled to get its euro zone creditors to talk about debt relief. That’s because it is not the most urgent issue. But if the negotiators resolve the immediate crisis, debt relief should come onto the table. Then they will need creative ideas. Here’s one.

Central bankers try tough love on debt markets

12 Jun 2015

Rate-setters are not only tolerating big bond swings. They are actively welcoming the lessons that volatility teaches investors. But there are limits to market discipline. If borrowing costs rise enough to threaten economic recovery, policymakers will probably soften up. 

Zimbabwe’s 15-digit money woe is mercifully rare

12 Jun 2015

The African nation is paying one U.S. dollar for every 35,000,000,000,000,000 of its old scrapped scrip. Zimbabwe is a byword for monetary disaster but the outcome is unusual. It shows it takes truly exceptional incompetence to create hyperinflation.

ECB cares about some markets more than others

8 Jun 2015

Mario Draghi is calm about the volatility in government bonds. The European Central Bank president doesn’t share the American fixation with equities. Commodities are out of his control. But an overly strong euro could nip budding inflation. He’ll be watching FX trends closely.

Hugo Dixon: What sort of man is Tsipras?

8 Jun 2015

The next days will define Greece’s PM. He must choose between saving his country and sticking with a bankrupt ideology. If he is brave and smart, he can secure a few more concessions from creditors and a goodish deal for Greece. If not, he will drag Greece into the abyss.

Elite FX club is better with China in than out

3 Jun 2015

Adding the yuan to the IMF’s reserve currency basket this year would be an easy win. It’s a big symbol for China but costs little for other constituents. Moreover, officially designating China as a lynchpin of the world’s financial system may convince it to act the part.

Bundesbank squeezed by euro’s design flaws

3 Jun 2015

The ECB’s quantitative easing rules reflect the incomplete unity of the single currency. They’re forcing the German central bank to buy more of its government’s bonds than the market can easily provide. In May, the mix of maturities purchased probably added unwanted volatility. 

Hugo Dixon: Greek ultimatum is a bad idea

1 Jun 2015

Some say the euro zone and IMF should present Greece with a take-it-or-leave-it offer, set a deadline, and threaten to cut off its banks if it doesn’t agree. This could play into the hands of Greek nationalists who would argue that foreigners were again bullying Athens.

Renzi’s reform agenda rattled but still on course

1 Jun 2015

The Italian prime minister’s modest showing in regional elections weakens his hand and shows growing dissent at his domestic programme. But Matteo Renzi still has momentum and the economy is recovering. If the latter persists, he has a limited window to force change.

German job miracle keeps defying gloom-mongers

29 May 2015

Most experts predicted that January’s imposition of a national minimum wage would lead to heavy job losses. But employment in Germany keeps rising and economists are confused. The fears may yet be vindicated, although it could take a recession to show they were right.

Yen slide will encounter little political friction

28 May 2015

Some Japanese officials sound ambivalent about their currency falling to 12-year lows against the dollar. But the drop isn’t unruly, and the economic pros probably outweigh the cons. Aided and abetted by monetary policy, traders can easily push the yen down further.

Greece cries wolf, genuine beast may lurk

26 May 2015

Greek ministers are threatening a default on IMF loans. They might be bluffing, like Aesop’s shepherd boy. That scamp found that lying does not pay. The Syriza government may know more about extreme game theory, but it could end up out of the euro zone, or mauled by the ECB.

Perceptions about inequality beat the reality

26 May 2015

Poor people often feel rich, the rich think they are hard up, and big income gaps elicit little indignation, says a new multinational study. Income levellers should take note. Accurate economic statistics won’t foment revolt. But perceptions of rising inequality just might. 

Debt extension could help Syriza but hurt Greece

22 May 2015

Europe could split off payments owed to Greece from its second bailout, according to reports. The move could break an impasse over reform talks and avoid a messy default. Yet Europe would have less leverage over the Syriza-led government and the Greek economy would suffer. 

Renzi is still dodging big Italian pension fight

21 May 2015

The prime minister has found a clever way to blunt a constitutional court ruling on pensions that threatened to blow a hole in Italy’s budget. That avoids a conflict with Brussels. But he hasn’t bitten the bullet on the bigger pension issue: bloated spending that stifles growth.