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Gene Ellis

Ireland's Government Says It Will Curb a Tax Strategy That Faced U.S. Scrutiny - NYTime... - 0 views

www.nytimes.com/...gy-that-faced-us-scrutiny.html

shared by Gene Ellis on 11 Jun 14 - No Cached
  • Ireland’s Government Says It Will Curb a Tax Strategy That Faced U.S. Scrutiny
Gene Ellis

Big trouble from little Cyprus - FT.com - 0 views

www.ft.com/...e5-11e2-ae9e-00144feabdc0.html

little cyprus trouble

shared by Gene Ellis on 20 Mar 13 - No Cached
  • The banks stand on the edge of collapse. But it is the European Central Bank that has pulled the plug by threatening not to accept Cypriot government debt as collateral against liquidity support.
  • A restructuring of public debt is still likely. As Hamlet advises: If it be not now, yet it will come.
  • Is there no alternative to the bail-ins? Yes: direct bank recapitalisation by the eurozone, for which the sum required is a small matter. If the banking union had been up and running, that would have happened. It is not, presumably because core countries do not want to bail out mismanaged banking systems,
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  • A big question is why ordinary Cypriot taxpayers should rescue banks at all?
  • The first concern is the deal itself. The decision to impose losses on insured deposits is indeed a big error. (Yes, it is a default, not a tax.)
  • Banks have so little loss-absorbing capacity that they stand permanently on the edge of disaster.
    • Gene Ellis
      Gene Ellis on 20 Mar 13
       
      Very good point.  
  • The eurozone must either make the industry far more robust, by hugely increasing equity capital, or consolidate fiscal capacity and tighten regulation, to ensure adequate eurozone-wide oversight and fiscal support.
  • Banking is dangerous everywhere. But it still threatens the eurozone’s survival. This has to change – and very soon.
Gene Ellis

Hot Money Blues - NYTimes.com - 0 views

www.nytimes.com/...krugman-hot-money-blues.html

shared by Gene Ellis on 25 Mar 13 - No Cached
  • for the time being, and probably for years to come, the island nation will have to maintain fairly draconian controls on the movement of capital in and out of the country.
  • It will mark the end of an era for Cyprus, which has in effect spent the past decade advertising itself as a place where wealthy individuals who want to avoid taxes and scrutiny can safely park their money, no questions asked.
  • To some extent this reflected the fact that capital controls have potential costs: they impose extra burdens of paperwork, they make business operations more difficult, and conventional economic analysis says that they should have a negative impact on growth (although this effect is hard to find in the numbers). But it also reflected the rise of free-market ideology,
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  • It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened.
  • But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.
Gene Ellis

The Greek Austerity Myth by Daniel Gros - Project Syndicate - 0 views

www.project-syndicate.org/...ty-myth-by-daniel-gros-2015-02

shared by Gene Ellis on 15 Feb 15 - No Cached
  • The Greek Austerity Myth
  • Greece actually spends less on debt service than Italy or Ireland, both of which have much lower (gross) debt-to-GDP ratios. With payments on Greece's official foreign debt amounting to only 1.5% of GDP, debt service is not the country's problem.
  • The new Greek government's argument that this is an unreasonable target fails to withstand scrutiny. After all, when faced with excessively high debt, other European countries – including Belgium (from 1995), Ireland (from 1991), and Norway (from 1999) – maintained similar surpluses for at least ten years each, typically in the aftermath of a financial crisis.
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  • To be sure, one can reasonably argue that austerity in the eurozone has been excessive, and that fiscal deficits should have been much larger to sustain demand. But only governments with access to market finance can use expansionary fiscal policy to boost demand.
  • Had Greece not received financial support in 2010, it would have had to cut its fiscal deficit from more than 10% of GDP to zero immediately. By financing continued deficits until 2013, the troika actually enabled Greece to delay austerity.
  • Of course, Greece is not the first country to request emergency financing to delay budget cuts, and then complain that the cuts are excessive once the worst is over. This typically happens when the government runs a primary surplus. When the government can finance its current spending through taxes – and might even be able to increase expenditure, if it does not have to pay interest – the temptation to renege on debt intensifies.
  • The practical problem for Greece now is not the sustainability of a debt that matures in 20-30 years and carries very low interest rates; the real issue is the few payments to the IMF and the ECB that fall due this year – payments that the new government has promised to make.
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