Monday, June 29, 2015

29/6/15: Greek Options & Default Contagion Mapping

Couple of interesting charts on Greece.

First up: what are the options?
Source: @MxSba

Interestingly Greece already has capital controls, but yet to miss (officially) and IMF payment. Now, even if there is a deal, Greece will still have to go into the arrears on IMF, unless they found that proverbial granny's couch from which they can squirrel away few bob (EUR1.6 billion that is). We also have an already scheduled referendum. Which, according to the chart is a dead-end. Which it is, because its outcome is either rejecting a non-valid deal or accepting a non-valid deal. Though, presumably, the non-valid deal can be revalidated by the Troika (Institutions) in a jiffy.

In short, the chart above doesn't help much.

Now, a default trigger table and a map:

Source: both via @jsphctrl

Non-payment to IMF can trigger (though does not have to) default on EFSF and holdout private sector bonds (pre 2004). Default on T-bills (short term bonds) triggers privately held bonds excluding holdouts and new bonds. Everything else is fairly simple. Now, per table above, we are in the 'Publicly Acknowledged' blue-shaded area (any delay on payment will be known at this stage and avoiding a public declaration will be hard, if not impossible, especially given political stalemate).

  • Non-payment to IMF triggers default on EFSF, and likely to trigger default on bilateral EU loans.
  • Non-payment of EFSF loans triggers nothing with any certainty.
  • The worst contagion is from PSI bonds default. 
Special note to CDS triggers: basically, bigger risks are from SMP (ECB) bonds, PSI (private) bonds, and post-PSI (private) bonds. EU loans and holdouts from PSI bonds are dodos. 

Enjoy playing with the above...

29/6/15: Greece & Grexit: In Europe, what the bank does, the kings say

Couple of interesting items on on Greek crisis:

Bloomberg prints an exercise in extrapolating Greek devaluation to Mexico peso crisis. It is an interesting exercise in so far as it does indicate (imperfectly) one side of the 'pain coin' currently spinning in the air. But it does not provide for any realistic comparatives to the other side of the same coin: the side of Greece not opting out of the euro area. Suppose the estimated path in the Bloomberg chart is correct and Greece, exiting the euro does face a devaluation 'bill' of some 300 percent-odd. As Bloomberg article says, there will be pain. Huge pain. Now, suppose Greece does not opt for direct devaluation. Then what? Then - exactly the same adjustment will have to happen via internal devaluation. Absent inflation (of any significance) in the euro area (and even given the ECB target inflation), this means all of this adjustment will be carried by Greek people. Except, with devaluation and exit, Greece will still retain internal markets for adjustment: with reforms (not guaranteed by any means), and with some pain taken on the side of capital / funding, it might ameliorate the period of post-default devaluation (the 'jump' stage in the chart below). Staying in the euro clearly implies zero adjustment on capital side, with all adjustment on households' side (employment, earnings, pensions etc). In addition, staying with euro implies no imports substitution (no price effects), exiting implies devaluation-driven imports substitution. Finally, staying with the euro implies no exports boost from devalued currency.

Source: Bloomberg

So the Bloomberg exercise is fine and interesting, but one-sided ad extremum.

Which rounds us to the latest news from the ECB. With Greeks requesting EUR6 billion increase in ELA and ECB rejecting it, Reuters reports a comment from a source on the situation:
"Commenting on the expected extension of existing emergency funding, one person said: "It doesn't make sense to stop it now. The banks are not able to pay it back anyway. So if you froze it for another two or three days, it wouldn't make any difference."" Except, of course, it does make perfect sense: if the ECB were to extend ELA, there would not have been capital controls (note: I am not suggesting the ECB should have done so - that's a different matter). However, without ECB support for ELA uplift, we have capital controls. Which sends a clear message from Frankfurt to Greek voters: this is what you will have to live with if you go against us. 

And this neatly dovetails with what Jean Claude Juncker said to the Greek voters earlier: "You should say ‘yes’ regardless of what the question is.” 

Because whether Reuters wants it or not, in Europe, what the bank does, the banks' kings say.

29/6/15: Juncker to Greece: "say ‘yes’ regardless of what the question is"

Ok, folks. I never was a fan of Jean Claude Juncker, the [one of oh so many] European President.

But, honestly, where does one go from this:

Jean-Claude Juncker, the [EU] commission’s president: “I love you deeply - You shouldn’t commit suicide because you’re afraid of dying. You should say ‘yes’ regardless of what the question is.” A “no” vote in the referendum “will mean that Greece is saying no to Europe,” Mr. Juncker said.

Does anyone in Europe believe this to be a reasonable or functional basis for attempting to resolve the crisis? Irrespective of whether you take Greek side or creditors side (I can spot reasonable points on both ends of the argument), how can the above be construed as anything but a wholesale insult by a hopelessly out-of-touch-with-reality apparatchik?

There is really nothing one can add to this, other than convey a deep sense of basic, human, natural sense of horror...

Sunday, June 28, 2015

28/6/15: Grexit with Help: Hans Werner Sinn

My favourite Bad Dude of German Economics, Hans Werner Sinn on Greek crisis:

Orderly Grexit is, in my view, still more disruptive and costly to all sides than a facilitated debt writedown and restructuring, while allowing Greece more time and fiscal room for implementing real reforms (as opposed to the currently proposed reforms, which are aimed solely on addressing short term fiscal imbalances).

Truth is - Europe has the means to meaningfully help Greece, as well as other 'peripheral' states, to get back onto growth path consistent with long term sustainability (in Greek case, we are talking about 3.5-4 percent annual growth averaging over a good decade). What Europe lacks is the will.

28/6/15: IMF Gun, Greek Voters

Just as the Greek Parliament engaged in a vote to hold or not to hold a referendum on Troika proposals, the IMF has decided to end any hope for any referendum to have any basis for validity. As noted by ZeroHedge (, the IMF chief told BBC that Greece can vote as much as it wants, but by the time the referendum is held next Sunday, there won't be any proposals standing that a vote can address in any shape or form. The reasons is that the current 'bailout' offer is only good if accepted before July 1st when the current programme expires.

Christine Lagarde also seemed to have been implying in her statement that the creditors have zero interest in working with Greece unless Greece accepts their demands in full prior to the referendum or unless the voters support the (by-then unavailable) 'bailout' in a referendum. In other words, Madame Lagarde had just issued an ultimatum directly to Greek people (if you do vote, vote as we want you to) and to the Greek Parliament (as you vote on referendum, vote as we want you to).

Funny thing, European democracy... as Italian voters should know...

Saturday, June 27, 2015

27/6/15: Greek Political Outlook: June 2015

As Greece is set for a referendum on the bailout, here is the latest opinion poll:


In short, if there is an election called now, it appears Syriza-led Left will win with a stronger mandate (187 total seats against January outrun of 162 seats).

You can see more detailed polls results here: Greek referendum polls are covered here:

Meanwhile, the dreaded Plan B (forced default and, associated Grexit) now appears to be Plan A for the euro area: All the while, EU 'leaders' continue to spin various versions of their objectives and intentions, as evidenced by the European Council President, Donald Tusk's most recent statement that "Greece is & should remain euro area member. In contact with leaders to ensure integrity of euro area of 19 countries". Whatever this means, anyone's guess, but referendum is the most democratic form of governance one can imagine in modern setting and the 'bailout' deal faced by the Greek Government is such a significant alteration of the structural conditions to be endured by the Greek people that a referendum is de facto required in order to either accept or reject these conditions. The problem is as follows:

  1. A democratically elected government sees its electoral mandate fully contradicted by the 'bailout' offer;
  2. The Government has no option but either accept the 'bailout' terms (and thus violate its own electoral mandate) or reject it (and thus impose an outcome - default and Grexit - that is not supported by the majority of the electorate). 
Thus, like Syriza or not (I am with the latter camp), but it has no ethical choice to make other than conduct a referendum. Anyone claiming that in a representative democracy an elected Government has a mandate to violate in full its electoral mandate (thus accepting the 'bailout' offer as it stands) is simply anti-democratic. In a representative democracy, an elected Government has only one feasible mandate - to execute its electoral mandate.

Note: I am still barred from using my Twitter account.

27/6/15: Surreal World of Twitter...

The surreal nature of social media is that in failing to protect us from spam and bots, it actually blocks those of us who genuinely interact on social media without commercial interest.

Thus, I have now been blocked by Twitter for "suspicious automated activity" despite the fact that there is no evidence on my timeline of any activity that fits their own definition of the said 'suspicious automated activity'.

My request to the Twitter Help team to identify the said 'suspicious activity' went unanswered, despite the team attempting to answer my other queries.

I have no recourse on the matter. Twitter has only one default option for correcting for their own abuse of their rules: they offer to send one an SMS message with a code that unlocks one's account. As it happens I have no mobile coverage where I am over this weekend.

Logic implies, Twitter team might just send the said code to my personal email. They have my email, as they used to communicate with me their useless replies. But no, the drones of Twitter Help are incapable of generating anything as creative as offering a code via the only channel of communication open to me.

And so we have it: false accusation of suspicious 'automated activity' generates actual 'automated activity', dumb and irresponsive to actual needs of the Twitter account holders, inflicting the very harm that Twitter purports to minimise.

Well done, Twitter!

Friday, June 26, 2015

26/6/15: Russian Economy: Domestic Demand Still Weak in May

Some latest Russian stats to scare the pants off everyone:

  • Investment is down 7.5% y/y in May and in January-May cumulative drop in Investment is 5% y/y. 
  • Retail sales are down 9% y/y in May and down 7.5% y/y in January-May 2015. January-May seasonally-adjusted sales, however are down primarily due to January drop.
  • Real disposable incomes are down 5% y/y in both April and May.
  • Industrial production is down 8% y/y in May, January-May decline is 4%.
  • Estimated GDP is down 3.2% y/y in January-May 2015 based on Economy Ministry estimates and 3.4% y/y based on Vnesheconombank estimates. This suggests acceleration in contraction compared to 1Q 2015 when the economy shrunk 2.2% based on first revision of the earlier estimate. Latest consensus forecast is for full year real GDP decline of 2.7-3.5% on 2014.  Which is an improvement on past forecasts. 
Problem is, fifth month into the year, and the signs of stabilisation are still quite contradictory and major parameters on domestic demand size are still volatile. 

26/6/15: Grexit and European Banks

In the tropical heat of #Grexit, which banks get sweats, which get chills? Two charts via @Schuldensuehner :

Note increased (speculative) exposures at Deutsche and Barclays, RBS and Commerzbank... which kinda jars with the conventional wisdom of uniformly reduced exposures. Total end of 2014 exposures were at USD44.5 billion, which is basically marginally down on Q4 2012-Q4 2014 period.

You can see pre-crisis debt flows within the Euro area here:

Thursday, June 25, 2015

25/6/15: Tipping my hat to Karl Whelan on Official Ireland's Moralising...

UCD Professor Karl Whelan just finished a concise and thorough demolition job on the Irish Government's moralistic and uncouth bragging about the 'successful adjustments' that, in their view, stand as a contrast to the Greek case. Here's his twitter line:

Nothing to add.

See Karl's timeline here:

25/6/15: Monetising Greece

Recently, I mused about cash balances in Greece being monetised by the ECB.

Here is some evidence. First Greek holdings of cash:

Next: Eurosystem ELA:

Wednesday, June 24, 2015

24/6/15: Ifo Miss is Not a Biggy...

Ifo business climate index for Germany fell from 108.5 in May to 107.4 (expected 108.1) in June, while the business expectations index was down from 103 to 102 (also missing expectation for 102.5) and the current assessment index fell from 114.3 in May to 113.1 in June (missing expectations for a decline to 114.1).

For all the media chatter about missed expectations, Ifo index is trending at levels consistent with close to 3% growth and well within the range of the average for Q1 2013-Q2 2015 period.

As chart above shows, Ifo has been signalling strong growth momentum in Germany for some time now, with volatility of the index reading around period averages being less pronounced than for the euro area as a whole.

The chart also shows recent uptick in economic climate conditions in the euro area as a whole. When we look at period averages, one interesting sub-trend to watch is the step-up change in growth conditions in the euro area as opposed to highly steady growth conditions in Germany.

Tuesday, June 23, 2015

23/6/15: Ukraine's Debt Haircuts Saga: One Step Forward, Two Steps Back

Two big setbacks for Ukraine in its bid to cut the overall debt burden and achieve targets mandated by the IMF.

First, Moody issued a note today saying that Ukraine will be in a default if it haircuts principal owed to private creditors. The agency said it believes Ukraine can deliver USD15.3bn in savings without haircuts. Ukraine believes it cannot. IMF backed Ukraine on this, but it is not to IMF to either declare a default even or not. Moody further noted that any moratorium on debt redemptions will have long-term implications for Kiev access to international debt markets.

Second, the IMF has signalled that private debt open to haircuts under Kiev-led negotiations does not include debt owed to Russia which is deemed to be official sector debt. This is not surprising, and analysts have long insisted that this debt cannot be included into private sector haircuts, but Kiev staunchly resisted recognising debt to Russia as official sector debt.

Incidentally, Ukraine debt to Russia is structured as a eurobond and is registered in Ireland, as reported by Bloomberg. The bond is structured as private debt, but Russia subsequently re-declared it as official debt. Re-declaration was somewhat of a positive for Ukraine, because a default on official debt does not trigger automatic default on private debt (the reason why the bond was originally structured as private debt was precisely the threat that a default on it will trigger default on all bonds issued by Ukraine). Ironies abound: IMF is happy to declare Russian debt to be official sector debt, because it takes USD3 billion out of the pool of bonds targeted for haircuts. This implies that for Kiev to achieve USD15.3 billion in savings, Ukraine will most likely need to haircut actual principal outstanding to private sector bond holders - something IMF wants Kiev to do. So here, too, Russian side gain is also Kiev's gain.

Ultimately, in my view, Moscow should write down the entire USD3bn in debt owed by Kiev. Because it would be ethical to do, and because it would help Ukraine. But that point is outside the fine arts of finance, let alone beyond the brutal realities of geopolitics.

More background on both stories:

23/6/2015: Hans Werner Sinn: Just Grexit!

Hans Werner Sinn (Ifo) to Greece: "Will ya, just default, for the love of..."

23/6/15: In the parallel Universe of Greece: Strangulation is Cure

Greece has been 'repaired' with an application of yet another plaster to a gaping shark wound.

ECB hiked ELA once again, this time, reportedly, by 'just under' EUR1bn.

The terms of 'repairs' are sketchy for now, but for the economy that shrunk 23% since pre-crisis peak in real terms, we have novel - nay, breakthrough novel - measures to support growth included in the deal:
  1. Corporate tax is rising from rather un-competitive 26% to highly uncompetitive 29%
  2. Corporate profits in excess of EUR500K/pa are hit with 'solidarity' levy of 12%
  3. Personal taxes are up, VAT is up, pensions levies are up, property taxes are up
  4. Debt relief is not on the cards, as per Angela Merkel, the 180% GDP debt mountain " not an urgent question".
Summary of key financials on the 'deal' is here:

In short, we have an equivalent of economic idiocy here: an economy chocked by too much debt is being given a green light to get more debt. In exchange for this debt, the economy will be chocked some more (by some 2.7% of GDP on full year basis), so that more debt given to it can be rolled over with a pretence of sustainability.

As European leaders celebrate this crowning achievement of statism by replaying the same song for the 5th time whilst hoping for a different result. One has to wonder if there is something fundamentally, deeply, inexplicably wrong with the EU logic.

Or may be, just may be, the Greek 'reforms' are a herald of things to come under the Juncker-proposed, ECB et al approved, new Federalismo 2.0 plan? Why, check the leaks on that one: 

Monday, June 22, 2015

22/6/15: Greece v Great Depression

As every well-baked economist would know, there are many ways to pickle misery. Here's one novel jar from the Bloomberg (

The above shows Greek real GDP compared to the U.S.' at the same stage in the Great Depression.

Yeah, I know, Euro with all its promises of stability, prosperity, progress, peace, etc, etc, etc...

22/6/15: IMF Review of Ireland: Part 2: Banks

IMF assessment of Irish banking sector remains pretty darn gloomy, even if the rhetoric has been changing toward more cheerleading, less warning. Here is the core statement:

"Bank health continues to improve, but impaired assets remain high and profitability low. The contraction in the three domestic banks’ interest earning assets continued, albeit at a slower pace in 2014." IN other words, deleveraging is ongoing.

"Nonetheless, operating profitability doubled to 0.8 percent of assets on foot of lower funding costs as well as nonrecurrent gains from asset sales and revaluations (Table 8). Led by the CRE and SME loan books, there was a sizable fall in the stock of nonperforming loans (NPL), by some 19 percent in 2014, although NPLs are still 23 percent of loans." Note, at 23% we are still the second worst performing banking system in the euro area, after Greece.

"This fall, together with rising property prices, allowed significant provision releases while keeping the coverage ratio stable. Profitability after provisions was achieved for the first time since the onset of the crisis. Together with lower risk weighted assets, this lifted the three banks’ aggregate core tier 1 capital ratio by over 1 percentage point, to 14½ percent."

Now, take a look at the chart above: loans volume fell EUR6.5bn y/y (-3.6%), but interest income remained intact at EUR7.9bn. While funding costs fell EUR3.7bn y/y. The result is that the banks squeezed more out of fewer loans both on the margin and in total. Give it a thought: loans should be getting cheaper, but instead banks are getting 'healthier'. At the expense of who? Why, the remaining borrowers. Net trading profits now turned losses in 2014 compared to 2013. Offset by one-off profits.

Deposits also fell in 2014 compared to 2013 as economy set into a 'robust recovery'. It looks like all the jobs creation going around ain't helping savings.

A summary / easier to read table:

Notice, in addition to the above discussion, the Texas Ratio: Non-Performing Loans ratio to Provisions + CT1 capital (higher ratio, higher risk in the system). At 108, things are better now than in 2012-2013, but on average, 2011-2012 Texas ratio was around 104, better than 2014 ratio. And that with 51.7% coverage ratio and with CT1 at 14.5%. Ugh?..

On the other hand, deleveraging helped so far: loan/deposit ratio is now at 108% a major improvement on the past.

Net Stable Funding Ratio (NSFR) - a ratio of longer term funding to longer term liabilities and should be >100% in theory. This is now at 110.5%, first time above 100% - a good sign, reflective of much improved funding conditions for all euro area banks as well as Irish banks' gains.

Liquidity Coverage Ratio (LCR) - monitoring the extent to which banks hold the necessary assets to cover any short-term liquidity shocks (basically, how much in highly liquid assets banks hold) is also rising and is above 100% - another positive for the banks.

Still, the above gains in lending margins - the rate of banks' extraction from the real economy - are not enough for the IMF. "Lending interest rates must enable banks to generate adequate profits to support new lending. While increasing, Irish banks’
operating profitability remains relatively low. Declines in funding costs aided by QE will assist, but there are also drags from the prevalence of tracker mortgages in loan portfolios and from prospects for a prolonged period of low ECB rates. However, with rates on new floating rate mortgages at 4.1 percent at end March, compared with an average of 2.1 percent in the euro area, political pressures to reduce mortgage rates have emerged. The mission stressed the importance of loan pricing adequate to cover credit losses—including the high costs of collateral realization in Ireland—and to build capital needed to transition to fully loaded Basel III requirements in order to avoid impediments to a revival of lending."

Here's a question IMF might want to ask: if Irish banks are already charging almost double the rates charged by other banks, while enjoying lower costs of funding and falling impairments, then why is Irish banks profitability a concern? And more pertinently, how is hiking effective rates charged in this economy going to help the banks with legacy loans, especially those that are currently marginally performing and only need a slight nudge to slip into arrears? And another question, if Irish banks charge double the rates of other banks, what is holding these other banks coming into the Irish market? Finally, how on earth charging even higher rates will support 'revival of lending'?

Ah, yes, question, questions… not many answers. But, per IMF, everything is happy in the banking sector in Ireland. Just a bit more blood-letting from the borrowers (distressed - via arrears resolutions tightening, performing - via higher interest charges) and there will be a boom. One wonders - a boom in what, exactly? Insolvencies?

22/6/15: IMF Review of Ireland: Part 1: Growth & Fiscal Space

IMF published conclusions of its Third Post-Program Monitoring Discussions with Ireland.

The report starts with strong positives:

"Ireland’s strong economic recovery is continuing in 2015, following robust growth of 4.8 percent in 2014. A range of high frequency indicators point to an extension of the solid recovery momentum into 2015, with growth increasingly driven by domestic demand as well as exports. Job creation continued with employment growth of 2.2 percent year-on-year in the first quarter of 2015, bringing the unemployment rate down to 9.8 percent in May."

Actually, based on EH data from CSO, employment growth was even stronger: 2.67% y/y in 1Q 2015 (see here: The survey data is slightly different from the QNHS data.

"Tax revenues rose 11 percent year-on-year during the first five months of 2015, while spending remained within budget profiles, so the fiscal deficit for 2015 is expected to be 2.3 percent of GDP, outperforming the budget targets."

"Banks’ health has improved, but operating profitability remains weak and, despite the recent progress in the resolution of mortgages in arrears, 17.1 percent of mortgages have been in arrears for over 90 days, and of these, almost 60 percent have been in arrears for over 2 years."

All so far known, all so far predictable.

Here is what IMF thinks in terms of forward outlook.

On Fiscal side: "The deficit is likely to come in well below budget again in 2015. This welcome progress should be locked by avoiding any repeat of past spending overruns. The deficit reduction projected for 2016 is too modest considering Ireland’s high public debt and strong growth, making it critical that revenue outperformance— which appears likely— be saved as the authorities intend."

Wait, Spring Statement by the Government clearly does not suggest 'saving' of revenue outperformance as intended policy objective. If anything, spending these 'savings' is on the cards. So a bit more from the IMF:

"Medium-term spending pressures related to demographics and public investment indicate a need to build revenues and it is critical that any unwinding of savings in public sector wages be gradual. Tax reforms should be focused on areas most supportive of job creation and productivity while protecting progress achieved in base broadening."

Again, this does not bode well with the Spring Statement intentions to unwind, over two years, reductions in public sector earnings costs, and reducing tax burden at the lower end of the tax base. Whether these measures are right or wrong, IMF seems to ignore them in their analysis, as if they are not being planned.

And slightly adding depth: "Staff estimates that improvement in the primary balance in structural terms is modest in 2016, at about ¼ percent of GDP, as the reduction in the overall deficit partly reflects an expected decline in the interest bill and a narrowing of the output gap." In other words, efforts / pain are over. We are cruising into improved performance on inertia. IMF does not exactly like that: "A stronger adjustment, of at least a ½ percent of GDP, would also be appropriate in 2016 in view of Ireland’s high public debt and strong growth, implying an overall deficit target of about 1.5 percent of GDP. However, it appears most likely that revenues will exceed official projections, which are for tax revenue growth before measures that is significantly below nominal GDP growth, and also given that revenue outperformance has underpinned Ireland’s track record of over delivering on fiscal targets for a number of years." Wait, what? Not spending cuts drove Irish effort? Revenue outperformance? Aka - taxes and indirect taxes and hidden charges.

So the good boy in the back of the classroom needs to get slightly better: "The commitment of the Irish authorities to comply with their obligations under the Stability and Growth Pact, including the Expenditure Benchmark, means that revenue outperformance in 2016 and later years will not be used to fund additional expenditure; the need for a change from the past procyclical pattern of spending the revenues available was a key lesson drawn from the crisis that is firmly embedded in their new fiscal policy framework."

Yeah, that in the year pre-election? Are they mad, or something?

Just in case anyone has any illusions on what the Fund thinks about the forthcoming injections of pain relief planned by the Government, here it is, slightly hidden in the lengthy discourse about longer-term risks. "Looking to the medium term, sizable adjustment challenges indicate a need to build revenues while the limited fiscal space should be used to support durable growth. The authorities’ expenditure projections account for demographic pressures as growing cohorts of both young and old increase demands for education and health services. …Staff recommended that the authorities consider steps to raise revenues to help address these pressures…"

More revenue to be raised. And yet the Government aims to cut taxes. Oh dear...

Back to the positives: IMF upgraded its growth projections for short-term forecasts:

"Compared with the 2015 Article IV consultation concluded in late March, growth projected for 2015 is revised up to almost 4 percent from 3½ percent, with a more modest increase in 2016." 2016 growth is now projected to be at 3.3% from 3.0% projected at the end of March 2015. 2017 growth forecast was lifted from 2.7% in March to 2.8% now. However, 2018 forest was balanced down to 2.5% now from 2.6% in March report.

Back in March, private consumption was expected to grow 1.5% in 2015, 1.6% in 2016, 2.0% in 2017. This is now revised up to 1.6% in 2015, 1.9% in 2016, with 2017 remaining at 2.0%.

However, IMF revised down its projections for gross fixed investment growth. In March report, the Fund forecast investment to grow 9.5% in 2015, 7.5% in 2016 and 6.0% in 2017. This time around, IMF expects investment growth of 9.2% in 2015, 7.3% in 2016 and 5.5% in 2017.

Interestingly, IMF also introduced some modest upgrades to Irish net exports, though it noted that given exceptionally high rates of growth in goods exports in recent months, even the upgraded forecast might be too pessimistic.

However, with all said and done, the IMF still produces a slightly cautious medium-term outlook: "Staff’s medium-term outlook is little changed from that in the 2015 Article IV consultation, with medium-term growth on the order of 2½ percent being similar to the 3 percent projected by the Irish authorities in their recent Stability Programme Update (SPU)." Which means that, in basic terms, Irish official forecasts are probably within error margin of the IMF forecasts, but are a bit more optimistic, nonetheless.

Quite interestingly, IMF finds no substantive risks to the downside for Ireland, going effectively through motions referencing Greece and domestic debt overhang. Even interest rates sensitivity of the massive debt pile we carry deserves not to be cited as a major concern.

22/6/15: Of Nama and Cromwell via GAA

22/6/15: Another Adrenaline Injection by Dr. ECB

Yesterday, I noted that Greece is now on a daily drip of liquidity injections by ECB via ELA ( and so here we have the latest. Per reports, ECB hiked Greek ELA today to EUR87.8 billion.

Meanwhile, there are rumours of a 'deal' being agreed, albeit only 'in principle'. Draghi is meeting Tsipras later today and we will also have an emergency summit. So a beehive of activities all over the shop.

Sunday, June 21, 2015

21/6/15: ECB ELA for Greece: Welcome to a Daily Drip of 'Solvency'

Two days ago, I speculated on ECB's motives for drip-feeding ELA liquidity provisions to Greek banks ( And I have noted consistently that ELA is now running against available liquidity cushion, meaning Greek banks are now simultaneously, skirting close to ELA limits in terms of

  • Eligible collateral, and
  • ELA funds available to cover deposits outflows.
So, not surprisingly, two links come up today:
  1. Ekathimerini reports that Greek banks have enough ELA-supported liquidity to sustain capital outflows through Monday only: as on the day of EUR1.8 bn ELA extension approved by the ECB< Greek banks bled EUR1.7 billion in deposits, bringing week's total to EUR4.2 billion in outflows, and
  2. Reuters report that the ECB has been all along planning to review/upgrade ELA after Monday emergency summit:
Thing is, Greek banks are now solvent solely down to an almost daily drip-feeding of liquidity by the ECB. Which, sort of, shows up the entire charade of the dysfunctional euro system: the pretence of monetary and financial systems stability is being sustained by not just extraordinary measures, but by an ICU-like mechanics of assuring that a patient is not pronounced dead too soon...

21/6/15: BankCheck Report into Anglo / IBRC Overcharging

So here, as promised, the full BankCheck report on Anglo/IBRC overcharging. I provide no comment. You can click on each individual frame to enlarge.

Saturday, June 20, 2015

20/6/15: Irish Employment by Sector: Latest Data

Here are the latest stats for Irish employment across sectors, based on the EHECS Earnings Hours and Employment Costs Survey Quarterly reported by CSO:

Overall, there were 1,574,800 people employed across all sectors of economy in 1Q 2015, which represents an increase of 2.67% y/y. In 4Q 2014 y/y rise was 2.33%. Current level of employment is 9.9% below 1Q 2008, but since 1Q 2011 (during the tenure of current Government) the economy added some 59,700 jobs - a rate of jobs creation of 14,925 per annum. The rate of jobs creation did accelerate in the last twelve months: between 1Q 2013 and Q1 2014, the economy added 26,800 jobs and between 1Q 2014 and 1Q 2015 it added 41,000 jobs. Nonetheless, compared to 1Q 2008 there were 192,400 fewer workers in the economy at the end of 1Q 2015.

Here is the summary of changes (%) between 2008 average (do note this), 1Q 2014 and 1Q 2015 by sector:

Our 'smart' and 'knowledge' economy currently operates at employment levels in Information & Communication sector of some 59,800 (quite low, surprisingly, given the hype about the sector growth). And this represents an increase of only 1,800 (+3.1%) y/y, and a drop on 1Q 2008 levels of 5,000 jobs. Another category of 'smart'/'knowledge' workers is Professional, scientific and technical activities. Here things are even worse. Total level of employment in this category at the end of 1Q 2015 stood at 79,000, which represents a drop of 5,100 y/y (-6.1%) and a decline of 2,600 on 1Q 2008.

This dovetails with the evidence on STEM-related employment presented here:

Overall, only two areas of activity have managed to post higher 1Q 2015 employment levels than 1Q 2015: Education (+3,900) as well as Human Health and Social Work (+19,000).

20/6/15: Danske Outlook & Forecast for Ukraine

Danske Bank outlook and forecast for Ukraine:

20/6/15: Danske: Outlook & Forecast for Russia

Danske Bank latest outlook and forecasts for Russia: