Tag Archives: debt

Greece

Despite bond sale, Greece is still pretty far from normal

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bog

On Wednesday, a bomb exploded outside the Bank of Greece.Greece Flag Icon

Though it injured no one, it was a stark reminder that, despite today’s apparently successful bond sale, Greece is pretty fucking far from okay, to steal a phrase from Pulp Fiction.

Astonishing just about everyone, Greece held its first bond sale for the first time in four years, raising  €3 billion ($4.2 billion) at a freakishly low yield of 4.95% for a five-year issue. But demand for the bonds was more in the range of €20 billion ($27.8 billion), which is over 10% of current Greek GDP:

The order book includes €1.3bn of orders from the arranging banks, but is a striking confirmation of the ravenous appetite for eurozone periphery debt. One person close to the deal said there had been more than 550 different investor accounts placing orders.

€3 billion is not a lot of financing compared to the €240 billion that Greece has received through two bailouts funded by the ‘troika’ of the International Monetary Fund, the European Commission and the European Central Bank. For Greek prime minister Antonis Samaras and his coalition government, the sale was more a symbolic success than anything else — it’s a signal that Greece is once again open for business in the international bond market and emerging from the worst of its debt crisis:

“The international markets have expressed in the clearest possible manner their trust in the Greek economy, their trust in Greece’s future,” he said. “They have shown trust in the country’s ability to exit the crisis, and sooner than many had expected.”….

Deputy Prime Minister Evangelos Venizelos also hailed the country’s return to the markets, arguing that it was a “major achievement that Greece did not turn into Argentina or Venezuela.” He also launched a strongly worded attack on SYRIZA, which objected to the bond issue, accusing the leftists of being “political parasites that live off the [EU-IMF] memorandum.”

“They should be ashamed of themselves,” he said. “Instead of appreciating this moment of joy for the Greek economy and society, they are miserable.”

Despite the government’s victory lap, Greece is still a mess, it remains stuck in a depression with a political system under duress.

Continue reading Despite bond sale, Greece is still pretty far from normal →

Canada

The narrative of federal spending in Canada ignores provincial debt

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flaherty

I don’t mean to single out any particular post at any particular think tank, but a post from Chris Edwards at the Cato Institute today gets to the heart of why I am so distrustful of think tanks that lean so clearly either to the right or to the left.Canada Flag IconUSflag

The Cato post comes after Conservative finance minister Jim Flaherty (pictured above) unveiled a budget on Tuesday that outlines further spending cuts designed to lower Canadian public debt more deeply, largely keeping to the same fiscal path that prime minister Stephen Harper’s government has set for years.  The post, however, argues that the gap between federal spending in Canada as a percentage of GDP, which is lower, and federal spending in the United States, which is higher, is growing:

In Canada, federal spending fell to just 15.1 percent of GDP in 2013 and the government projects that the ratio will decline steadily to 14.0 percent by 2019 (p. 268). Federal debt as a share of GDP fell to just 33 percent this year.

Then follows some fairly massive generalizations about the state of Canadian and US federal spending over the past two decades and contemporary politics in both countries:

On federal fiscal policy, Canada has had pragmatic centrist leadership for the last two decades, with voters keeping the loony left out of power. In the United States, we’ve had power divided between centrist Republicans and loony left Democrats in recent years….

Pundits often claim that the Republicans are controlled by radical Tea Party elements. I wish that were true, but in terms of policy results there is no evidence of it. Republican and Democratic leaders are apparently satisfied with federal spending, deficits, and debt far larger than acceptable to the centrists in Canada.

And there’s a chart that proves it! See!? Canada good, US bad.

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But there’s no indication that these numbers include spending at the provincial level, which is much more robust in Canada than corresponding spending at the US state and municipal level.  It’s trend that has accelerated in the past two decades, as well, following Canada’s narrow brush with Québec’s independence referendum in 1995.  That makes the chart essentially useless — it’s an apples-to-maple-leafs comparison.   Continue reading The narrative of federal spending in Canada ignores provincial debt →