Greece Prepares To Leave The E.U, Japan About To Spiral Down The Tubes, Global Trade Volume Tumbles…
Greece Prepares To Leave The E.U…
Speculation and expert comments are thrown around once more – or still – like candy on Halloween. Let me therefore retrace what I’ve said before. Because I think it’s really awfully simple, once you got the underlying factors in place.
But first, if one thing has become obvious after Syriza was elected to form a Greek government on January 25, it’s that the party is not ‘radical’ or ‘extremist’. Those monikers can now be swept off all editorial desks across the world, and whoever keeps using them risks looking like an awful fool.
All Syriza has done to date, when you look from an objective point of view, is to throw out feelers, trying to figure out what the rest of the eurozone would do. And to make sure that whatever responses it got are well documented.
Because of course Greece (through Syriza) is preparing to leave the eurozone. Of course the effects and consequences of such a step are being discussed, non-stop. They would be fools if they didn’t have these discussions. And of course there will be a referendum at some point.
There’s just that one big caveat: Syriza insists on needing a mandate from its voters for everything it does, whether that may be kowtowing to Greece’s EU overlords or walking away from them. At present, however, it doesn’t have a mandate for either of these actions.
The best it can do is to drag out negotiations as much as it can, and let Europe openly assert its perceived superior power over the Greek population as much as it wants to, complete with more iron-fisted demands for austerity, more budget cuts, more asset sales. Tsipras and his people will let this go on until the Greeks are even more fed up with Brussels than they already were when they elected Syriza in the first place.
It’s a subtle game, but it’s the only one open to Tsipras and his crew. Even if they’ve long concluded that trying to negotiate a deal with Germany et al was a lost cause way before talks started, Syriza has to go through the motions until it is confident the people of Greece are ready to vote in a referendum on eurozone membership.
A risky game, since it could bring back ‘the old guard’ of the handful of families that have governed the country for decades and that were willing co-operators with the Troika, but at the same time it’s the only game in town at the moment.
Tsipras needs to explain to the Greek people that the double mandate of staying inside the eurozone and at the same time ending austerity is in fact an empty mandate, because the eurozone refuses to allow it.
He needs to explain that this means the eurozone refuses to recognize the democratic values of one of its member states, voting to change policy. Brussels is in effect telling the Greek people on a daily basis that they don’t matter. That’s what Tsipras has to make clear, and then he can call the referendum.
It should be obvious that this whole mandate question changes potential actions by Athens to a huge degree. But from what I read every day, it doesn’t seem to be. Even within Tsipras’ own support base, perhaps some don’t understand what is going on. Either that or they’re part of the strategy. Judge for yourself:
Greek Crisis Nears A Turning Point
Stathis Kouvelakis, who teaches political theory at King’s College in London and is a member of Syriza’s central committee, says the party has to face up to the reality of its recent retreat on its election pledges and the nature of the forces arrayed against it. In particular, Kouvelakis notes the successive steps taken by the ECB to restrict the flow of liquidity to the Greek economy, shutting down or limiting Greek access to various types of ECB financing…
Japan About To Spiral Down The Tubes
I think I’ve mentioned this deflation thing before…
Annual core consumer inflation in Japan, the world’s third-largest economy, stopped rising for the first time in nearly two years in February.
The core consumer price index (CPI) was flat from a year ago, stripping out the effect of last year’s sales tax increase in April.
The last time the core CPI did not rise was in May 2013, when it was flat.
The latest figures are moving further away from the Bank of Japan’s (BOJ) inflation target of 2%.
The headline core CPI, which includes oil but not fresh food prices, rose 2% from a year ago, just below market expectations of a 2.1% rise.
More stimulus ahead?
Japan’s economy came out of a recession in the fourth quarter of last year, but its recovery remains fragile on sluggish household and business spending…
Global Trade Volume Shits The Bed: Biggest Value Plunge Since Lehman
Back in the beginning of March, Søren Skou, the CEO of Maersk the world’s largest container-shipper warned that global trade is slowing down. Specifically, he said that global trade growth could slow this year from recent 4% growth rates, as Chinese, Brazilian and Russian economies disappoint.
“Growth from a historical perspective is quite sluggish. It has a huge impact for us as an industry… The economies in Europe are still very sluggish. Brazil, Russia and China: those three economies used to drive a lot of growth, and right now we are not really seeing that to the same extent. The only real bright spot is the US, and even the US is good but not great.”
Today we have proof just how accurate Skou was not only about the collapse in global trade in recent months, but that his call for the end of a US decoupling – something that only we called far in advance of the Atlanta Fed extrapolating a 0.3% Q1 GDP – was also spot on.
Presenting the latest data from the CPB Netherlands Bureau for Economic Policy Analysis, according to which in January world trade by volume dropped by a whopping 1.4% from December: the biggest drop since 2011!
Banks Rating: A Choppy Year Ahead…
We believe FY16 is going to be another choppy year where ROEs (returns on equity) are unlikely to improve materially. Falling NIMs (net interest margins), high credit costs, weak loan growth and high equity raising, particularly by the PSU banks, should result in earnings downgrades and poor ROE. We maintain our counter-consensus cautious stance on the banking sector and stick with private banks. Yes, Axis and ICICI are our top picks in the sector. We are 23% below consensus on average for our EPS (earnings per share) numbers on PSU banks for FY16e and FY17e…