Clock Will Be Ticking for Greece’s New Government

Darren Williams and Dennis Shen

Greece is holding early parliamentary elections on January 25. A victory for the anti-austerity Syriza party would probably trigger tense negotiations with the country’s official lenders and fresh volatility in Greek government bond markets. But the expected launch of ECB QE should mitigate contagion to the rest of the periphery. (more…)


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Greece Still Needs a Long-Term Growth Plan

Even by the standards of the sovereign-debt crisis, the provisional agreement reached yesterday by euro-area finance ministers and the International Monetary Fund (IMF) on a second Greek rescue package looks like a messy fudge. It is clear that Greece’s euro-area partners are determined to avoid a near-term euro-area exit, but a long-term solution will require a much more effective growth strategy. (more…)


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Euro Area Still in Denial about Failure in Greece

Despite the Greek government’s best efforts, last night’s meeting of euro-area finance ministers failed to approve the release of new funding. We think it’s only a matter of time before Greece gets its money. But the latest delay reflects deep disagreement about how to reduce current unsustainable debt levels. Until the euro area addresses this key issue, caused by the failure of the Greek program, the risk of a disorderly exit from the euro area will remain real. (more…)


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Private Sector Involvement Is Unlikely in Second Portuguese Bailout

With 10-year Portuguese bond yields above 14% (see Display), the market is suggesting that Portugal will soon need another bailout from its euro-area partners. While we share the market’s skepticism about the sustainability of Portugal’s public sector finances, we doubt that policymakers at this stage will seek to impose losses on private sector creditors, as they did in Greece’s second bailout last year. (more…)


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