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Gene Ellis

"Which Eurobonds?" by Jeffrey Frankel | Project Syndicate - 0 views

www.project-syndicate.org/...which-eurobonds-

jeffrey project syndicate

shared by Gene Ellis on 16 Jun 12 - No Cached
  • Any solution to the eurozone crisis must meet a short-run objective and a long-run goal. Unfortunately, the two tend to conflict.Illustration by Paul LachineCommentsView/Create comment on this paragraphThe short-run objective is to return Greece, Portugal, and other troubled countries to a sustainable debt path (that is, a declining debt/GDP ratio). Austerity has raised debt/GDP ratios, but a debt write-down or bigger bailouts would undermine the long-term goal of minimizing the risk of similar debt crises in the future.CommentsView/Create comment on this paragraph
  • it is hard to commit today to practice fiscal rectitude tomorrow. Official debt caps, such as the Maastricht fiscal criteria and the Stability and Growth Pact (SGP), failed because they were unenforceable.
  • The introduction of Eurobonds – joint, aggregate eurozone liabilities – could be part of the solution, if designed properly. There is certainly demand for them in China and other major emerging countries, which are desperate for an alternative to low-yielding US government securities.
  • ...12 more annotations...
  • But Germany remains opposed on moral-hazard grounds: a joint guarantee of Eurozone members’ liabilities would strengthen individual national governments’ incentive to spend beyond their means.
  • The German Council of Economic Experts has proposed a European Redemption Fund (ERF). The plan would convert into de facto 25-year Eurobonds the existing sovereign debt of member countries in excess of 60% of GDP, the threshold specified by the Maastricht criteria and the SGP.
  • But this seems upside down.
  • it offers absolution precisely on the 60%-of-GDP margin where countries will have the most trouble resisting temptation.
  • the main explanation for the absence of US moral hazard is that the right precedent was set in 1841, when the federal government let eight states and the Territory of Florida default.
  • Ever since 1841, the market requires that US states running up questionable levels of debt pay an interest-rate premium to compensate for the default risk.
  • Had the ECB operated from the outset under a rule prohibiting it from accepting SGP-noncompliant countries’ debt as collateral, the entire eurozone sovereign-debt problem might have been avoided.
  • the expansion in the US took place at the federal level, where spending today amounts to 24% of GDP, compared to just 1.2% of GDP for the European Union budget.
  • The version of Eurobonds that might work as the missing long-term enforcement mechanism is almost the reverse of the Germans’ ERF proposal: the “blue bonds” proposed two years ago by Jacques Delpla and Jakob von Weizsäcker. Under this plan, only debt issued by national authorities below the 60%-of-GDP threshold could receive eurozone backing and seniority. When a country issued debt above the threshold, the resulting “red bonds” would lose this status.
  • The point is that the enforcement mechanism would be truly automatic: market interest rates would provide the discipline that bureaucrats in Brussels cannot.
  • Of course, the eurozone cannot establish a blue-bond regime without first solving the problems of debt overhang and troubled banks. Otherwise, the plan itself would be destabilizing, because almost all countries would immediately be in the red.
  • But one thing seems clear. German taxpayers, whose longstanding suspicion of profligate Mediterranean euro members has been vindicated, will not be happy when asked to pay still more for the cause of European integration. At a minimum, they will need some credible reason to believe that 20 years of false assurances have come to an end – that this is the last bailout.
Gene Ellis

German Judges Refer E.C.B. Bond-Buying Plan to European Court - NYTimes.com - 0 views

www.nytimes.com/...ng-plan-to-european-court.html

shared by Gene Ellis on 07 Feb 14 - No Cached
  • German Judges Refer E.C.B. Bond-Buying Plan to European Court
Gene Ellis

German Village Resists Plans to Strip It Away for the Coal Underneath - NYTimes.com - 0 views

www.nytimes.com/...y-for-the-coal-underneath.html

shared by Gene Ellis on 19 Feb 14 - No Cached
  • German Village Resists Plans to Strip It Away for the Coal Underneath
Gene Ellis

The Greek package: Eurozone rescue or seeds of an unravelled monetary union? | vox - 0 views

www.voxeu.org/...eeds-unravelled-monetary-union

shared by Gene Ellis on 29 Oct 13 - No Cached
  • The plan will not work.
  • The IMF has the option of suspending its disbursements and forcing a default, as it did with Argentina.
  • Once the markets realise this, they will further raise the interest that they request to roll over the maturing debt or simply refuse to refinance the debt.
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  • At least, this will clarify the situation: the plan is about bailing out a Eurozone government, in direct violation of Art. 125 of the European Treaty, the so-called no-bail-out clause.
  • The next headache should be contagion.
  • What has been offered to Greece cannot be refused to other Eurozone governments
  • So, one more time, a (dwindling) group of deficit-stricken countries will have to provide money to increasingly large debtors. In fact, this process means that ultimately there is no national debt anymore, at least for the next few years.
  • An alternative to spreading mutual underwriting is debt monetisation.
  • The ECB does not buy assets outright, so the loss would be borne by the banks that used the Greek bonds as collateral for repo operations with the ECB. But banks are the ECB’s counterparties; if they default, the loss is the ECB’s.
  • Was there no other way? It would have been very easy to let Greece go straight to the IMF months ago and reschedule its debt with IMF’s assistance. This would have been a partial default, and the haircut could have been quite small. Most banks that are exposed to the Greek debt should have been able to withstand such losses. With a grace period of, say, three years, Greece would have had the breathing space that the latest plan tries so hard to organise
Gene Ellis

Stanford Professor Michael Boskin: A Five-Step Plan for European Prosperity - Jewish Bu... - 0 views

jewishbusinessnews.com/...p-plan-for-european-prosperity

shared by Gene Ellis on 07 Mar 15 - No Cached
  • Stanford Professor Michael Boskin: A Five-Step Plan for European Prosperity
Gene Ellis

Russia Presses Ahead With Plan for Gas Pipeline to Turkey - NYTimes.com - 0 views

www.nytimes.com/...or-gas-pipeline-to-turkey.html

shared by Gene Ellis on 18 Feb 15 - No Cached
  • Russia Presses Ahead With Plan for Gas Pipeline to Turkey
  • But in recent weeks, the Russian state-owned company Gazprom has shown signs that it is serious about proceeding with what it calls Turkish Stream.
  • Gazprom’s chief executive recently made it clear that Turkey is its new focus — and that if Europe wants more Russian gas then it will need to find its own way to tap into it.
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  • Industry analysts estimate that the cost of Turkish Stream would be about $10 billion for Gazprom, which so far has spent an estimated $4.7 billion on the Black Sea project.
  • Another potential sticking point is Turkey itself. For one thing, the country obtains about 60 percent of its gas from Russia, a dependence the government is not necessarily eager to increase.
  • Mr. Putin already publicly offered a 6 percent reduction to Turkey. But Ankara, which pays substantially more for Russian gas than Germany does, is pressing for a better deal.
Gene Ellis

In Push to Assert Rights, China Plans to Send 2nd Oil Rig to Waters Near Vietnam - NYTi... - 0 views

www.nytimes.com/...ig-to-waters-near-vietnam.html

shared by Gene Ellis on 18 Feb 15 - No Cached
  • In Push to Assert Rights, China Plans to Send 2nd Oil Rig to Waters Near Vietnam
  • though in fact many were owned by proprietors based in Taiwan
Gene Ellis

Reinventing the European Dream by Anne-Marie Slaughter - Project Syndicate - 0 views

www.project-syndicate.org/...reinventing-the-european-dream

shared by Gene Ellis on 19 Dec 12 - No Cached
  • Natural-gas fields in the Eastern Mediterranean are estimated to hold up to 122 trillion cubic feet, enough to supply the entire world for a year. More gas and large oil fields lie off the Greek coast in the Aegean and Ionian Seas, enough to transform the finances of Greece and the entire region. Israel and Cyprus are planning joint exploration; Israel and Greece are discussing a pipeline; Turkey and Lebanon are prospecting; and Egypt is planning to license exploration.
  • But politics, as always, intervenes. All countries involved have maritime disputes and political disagreements. The Turks are working with Northern Cyprus, whose independence only they recognize, and regularly make threatening noises about Israel’s drilling with the Greek Cypriot government of the Republic of Cyprus. The Greek Cypriots regularly hold the EU hostage over any dealings with Turkey, as has Greece. The Turks will not let Cypriot ships into their harbors and have not been on speaking terms with the Israelis since nine Turkish citizens were killed on a ship that sought to breach Israel’s blockade of Gaza. Lebanon and Israel do not have diplomatic relations.
Gene Ellis

Europe's Galileo GPS Plan Limps to Crossroads - NYTimes.com - 0 views

www.nytimes.com/...-plan-limps-to-crossroads.html

shared by Gene Ellis on 07 Feb 13 - No Cached
  • Galileo — first proposed in 1994, more than 20 years after America started its own system, and initially promoted as a big potential moneymaker — “can’t give a direct return on investment, but politically it is very important for Europe to have its own autonomous system,” said Mr. Magliozzi of Telespazio.
  • It is also designed to be far more precise than the American version.
  • Galileo has been financed almost entirely by the European Union since 2007. It is the first and so far only major infrastructure project managed by the European Commission.
  • ...6 more annotations...
  • Critics mocked it as “the Common Agricultural Policy in the sky,” a reference to Europe’s program of subsidies for farmers, which eats up nearly 40 percent of the union’s total budget.
  • A 2011 report to the European Parliament listed a catalog of troubles, noting that Galileo had been particularly blighted in its early years by a familiar problem: political pressure from individual countries to skew the project in favor of their own companies and other immediate interests.
  • It quoted the OHB chief, Berry Smutny, describing Galileo as doomed to fail without major changes and “a waste of E.U. taxpayers’ money championed by French interests.” Mr. Smutny, who disputed the comments attributed to him, was fired by the company.
  • Astrium won an initial Galileo contract for four satellites. But contracts worth $1 billion for 22 more satellites have all gone to OHB, now one of the primary corporate beneficiaries of Galileo. British companies have also done well, a boon that has helped erode Britain’s initial hostility to the project.
  • Washington also asked why, when many European nations were increasingly unable to fulfill their military obligations as members of NATO because of defense cuts, they wanted to splash billions on a project that replicated an existing system paid for by the United States.
  • They acknowledge that Galileo, most of whose services will be free like those of GPS, will not earn much.
Gene Ellis

U.S. Ports Seek to Lure Big Ships After Panama Canal Expands - NYTimes.com - 0 views

www.nytimes.com/...fter-panama-canal-expands.html

u s ports ships panama canal nytimes nytimes com com

shared by Gene Ellis on 21 Aug 12 - No Cached
  • But, he said, containers loaded on the West Coast, which has built up its container yards and highway and rail infrastructure, can outrun those that travel to the East Coast by water, and that can make the difference when speed and dependability are more important than cost alone
  • Besides, he added, costs and fees can shift; Panama can be expected to raise rates for canal passage, and “the railroads are not going to sit idly by” and let the water route undercut their business.
  • After Hurricane Katrina, Gov. Haley Barbour of Mississippi trumpeted plans for a “port of the future” at Gulfport with a 50-foot-deep channel, redirecting some $600 million in federal housing disaster funds on a project he pledged would spur the economy and create bountiful jobs.
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  • To Robert Puentes, a transportation expert at the Brookings Institution, the problem of whether the ports are overbuilding for a Panama payoff is one of planning. “We are the only industrialized country on the planet that doesn’t have a comprehensive freight policy,” he said.
Gene Ellis

Central Bank Sets Bond Plan Meant to Ease Euro Debt Peril - NYTimes.com - 0 views

www.nytimes.com/...unchanged-at-0-75-percent.html

central bank sets bond plan ease euro debt nytimes nytimes com com

shared by Gene Ellis on 06 Sep 12 - No Cached
    • Gene Ellis
      Gene Ellis on 06 Sep 12
       
      ON the open market, mimd
  • The European Central Bank said Thursday it had agreed on a framework for buying the bonds of troubled euro-zone countries on the open market in unlimited quantities, but left the timing unclear.
  • In essence, the bank left the next step to the beleaguered governments. They would be required to ask the E.C.B. formally to begin buying their bonds in the open market and would have to agree to follow detailed conditions for paying down their debt and hewing to fiscal discipline. It would be up to the E.C.B. to determine whether the terms of the agreement were acceptable, and whether the government was meeting those conditions over time.
  • ...2 more annotations...
  • Small companies in Spain and Italy pay more than 2 percentage points more for loans than their German counterparts, according to E.C.B. data.
  • The E.C.B. has already indicated that it will concentrate on buying bonds that mature within two or three years, rather than longer-term bonds.
Gene Ellis

Greek Bank Withdrawals Accelerate - WSJ.com - 0 views

online.wsj.com/...3822204577464783282542366.html

shared by Gene Ellis on 14 Jun 12 - No Cached
  • "As we approach the last few days before the elections I expect deposit withdrawals to rise further," he added. "And I wouldn't be surprised if by Friday we saw outflows of €1 billion to €1.5 billion."
  • Since the start of Greece's debt crisis in late 2009, Greece's banks have lost about one-third of their deposit base as nervous savers have taken their money out of the banks and either sent it abroad, or else stashed it away for safekeeping.
  • In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, but have spiked during periods of political uncertainty.
  • ...2 more annotations...
  • Faced with Greece's increasingly bleak prospects, Crédit Agricole SA is making contingency plans to abandon its troubled Greek bank in the event of Greece leaving the euro zone, according to a person with direct knowledge of the plans, in the first concrete sign of a foreign company signaling it could walk away from its Greek assets.
  • According to the senior banker, the current rate of deposit outflows--of €1 billion or less per day–remains "manageable" since the banks keep large cash buffers on hand to deal with the withdrawals.
Gene Ellis

Utilities Switch Off Investment in Fossil Fuel Plants - NYTimes.com - 0 views

www.nytimes.com/...ent-in-fossil-fuel-plants.html

utilities switch investment fossil fossil fuel fuel plants

shared by Gene Ellis on 10 Jan 14 - No Cached
    • Gene Ellis
      Gene Ellis on 10 Jan 14
       
      Note:  a LARGE power station =s 40 direct jobs.
  • workers at the large power station known as Keadby 1 are preparing to shut it down at the end of the summer, with the loss of about 40 jobs.
  • fluctuations in global energy markets have made the natural gas power plant unprofitable
  • ...14 more annotations...
  • It has also delayed new energy investments and is planning to close almost a quarter of its fossil fuel power plants,
  • European energy companies, struggling to respond to weak demand in a flatlining economy, say they need guaranteed pricing to keep open unprofitable plants or to invest in new ones.
  • Their revenue is being hit by dwindling demand for electricity and by new wind and solar projects that undercut the price of the energy produced from many fossil fuel plants.
  • At the same time, record-low prices on carbon emissions trading markets, which were introduced to encourage clean and efficient energy production and use, have perversely become a disincentive to investment.
  • Many of the Continent’s aging power stations, particularly those that burn highly polluting coal, are earmarked for closure by 2020 to meet stringent local environment regulations.
  • Without these investments, industrial companies in Europe may face higher energy prices when local economies eventually recover,
  • “Energy utilities are facing a perfect storm,”
  • In a bid to generate 20 percent of the European Union’s electricity from renewable sources by 2020, Germany, Spain and other E.U. countries have provided hefty subsidies to wind and solar farms, which now constitute a sizable minority of daily electricity generation, often surpassing the 20 percent target.
    • Gene Ellis
      Gene Ellis on 10 Jan 14
       
      In effect, a cheaper overall form of energy (non-renewables) had to compete with heavy subsidies to renewables, which, once built, had low operating costs.  They cannot compete and do not invest, and there are major problems w/investing more in renewables (they are overall more expensive, and they have built-in faults, producing electricity erratically, or during the wrong times.)  The high costs of energy also lie with government, who cemented long-term deals with the ex-USSR linking other energy prices to the price of oil.  In short, they shot themselves in the foot.  Several times.
  • Despite the upfront costs associated with green energy projects, they are inexpensive to run. In contrast, Europe’s gas and coal plants, which also provide backup power when renewables cannot operate, need constant spending on fossil fuels.
  • European utilities like E.On of Germany have announced plans to shut down less-polluting natural gas-fired plants that have been undercut by dirtier coal-burning generators benefiting from a flood of low-cost coal imports and low carbon emissions prices.
  • Policy makers are debating a system of support payments to keep uneconomic power plants open,
  • “Without long-term signals of energy prices, investment won’t happen.”
  • Some analysts also expect domestic regulators to eventually create financial incentives for companies
Gene Ellis

Italy struggles with Plan B if Russian gas supplies cut | Reuters - 0 views

in.reuters.com/...as-italy-idINL5N0QV30B20140826

shared by Gene Ellis on 05 Feb 15 - No Cached
  • Italy struggles with Plan B if Russian gas supplies cut
Gene Ellis

EU energy saving plan targets Russian gas links - FT.com - 0 views

www.ft.com/...7e-11e4-a581-00144feabdc0.html

shared by Gene Ellis on 05 Feb 15 - No Cached
  • July 23, 2014 6:40 pm EU energy saving plan targets Russian gas links
  • According to EU estimates, a 25 per cent target would cut EU gas imports by about 9 per cent, while a 35 per cent target would slash gas imports by 33 per cent by 2030.
  • Eastern European nations fear they will shoulder a disproportionate burden in reaching tough targets because of how costly it would be to overhaul inefficient Soviet-era central heating systems that dominate their cities.
Gene Ellis

Nouriel Roubini maps out the Kremlin's plan for a re-divided world. - Project Syndicate - 0 views

www.project-syndicate.org/...-s-plan-for-a-re-divided-world

shared by Gene Ellis on 05 Feb 15 - No Cached
  • Russia’s goal is not to create another North American Free Trade Agreement; it is to create another EU, with the Kremlin holding all of the real levers of power.
  • And, once members give up their sovereignty over fiscal, banking, and economic affairs, they may eventually need a partial political union to ensure democratic legitimacy.
  • But the first step is a customs union, and, in the case of the Eurasian Union, it had to include Ukraine, Russia’s largest neighbor to the west.
  • ...4 more annotations...
  • There is even talk of Russia and China creating an alternative international payment system to replace the SWIFT system, which the US and Europe can use to impose financial sanctions against Russia.
  • But Putin is ambitious, and – like other autocrats in Central Asian nations – he may remain in power for decades to come. And, like it or not, even a Russia that lacks the dynamism needed to succeed in manufacturing and the industries of the future will remain a commodity-producing
  • superpower.
  • US President Barack Obama says that this is not the beginning of a new Cold War; current trends may soon suggest otherwise.
Gene Ellis

They saved the eurozone; they just forgot to save the people - Vox - 0 views

www.vox.com/...just-forgot-to-save-the-people

shared by Gene Ellis on 05 Feb 15 - No Cached
  • They saved the eurozone; they just forgot to save the people
  • The only problem is vast swathes of the continent remain an economic disaster area. They saved the eurozone, but not the economies that it comprises or the people who live there.
  • So what happened? Well, recall the problem. A bunch of countries that had previously been considered substantially less creditworthy than Germany joined the euro, and immediately saw a huge reduction in their borrowing costs. That led to irresponsible budgeting in Italy, a lot of private borrowing in Spain and Ireland, and a bit of both in Greece. Then after the global financial crisis hit, all these countries wound up in recession.
  • ...1 more annotation...
  • In stepped Mario Draghi, chief of the European Central Bank, with a speech and a plan. The plan was called Outright Monetary Transactions and the speech said Draghi would do "whatever it takes" to prevent a eurozone government from being forced into default or out of the eurozone
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