The consensus, such as it is, on the eurozone crisis was neatly summed up on Monday by Hugo Dixon, author and editor at large of Reuters News: “The euro crisis is sleeping, not dead.”

What about the crisis in Greece? Over the past four to five years Europe, supported by the International Monetary Fund, has invested more time, effort and money in Greece than in any other struggling eurozone state. The aim is to reform a country so inefficiently governed, so riddled with corruption and so burdened with debt that it seemed, for certain spells in 2011 and 2012, to pose a threat to the eurozone’s survival.

So it seems reasonable to ask: if this time, effort and money have not changed Greece for the better, what has it all been for? Read more

  • Martin Wolf thinks private banks should be stripped of their power to create money.
  • Voting in Mumbai has been a tale of two cities as the most downtrodden residents of India’s financial capital have turned out to vote in large numbers.
  • The Naples tailoring industry has adapted to the 21st Century better than the city in which it resides.
  • Despite concerns over its reliance on the GCC, Egypt is now well placed to engage and negotiate some favourable terms from the IMF.
  • Emerging economies such as Mexico are the fastest-growing source of demand for many of the big food and drinks companies, but intensifying pressure from health authorities in developed markets could deprive them of growth opportunities.

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By Jonathan Soble

Sermons from the IMF tend to make Japanese leaders fidget nervously in their pews – all fire and brimstone about budget deficits and the need for austerity. But Christine Lagarde’s warning about the evils of deflation is more likely to elicit a full-throated “amen”.

Successive Japanese administrations have promised to end deflation – the “ogre”, in Ms Lagarde’s description, that has menaced the country’s economy since the late 1990s. But under Shinzo Abe, prime minister since December 2012, and his central bank governor, Haruhiko Kuroda, deflation-fighting has become the overriding priority.

They have been getting results so far: prices of consumer goods excluding fresh food are rising nearly 1 per cent year-on-year, thanks to the Bank of Japan’s ultra-accommodative monetary policy and the related plunge in the value of the yen, which has pushed up the cost of imports. Read more

♦ Zhou Yongkang, a former security chief and member of the Chinese Communist party’s Standing Committee of the politburo, looks set to pay the price for defending Bo Xilai as China cracks down on corruption.
♦ Although Ireland has been lauded for its austerity programme and is about to leave the EU and IMF bailout, concerns persist that its recovery will run out of steam.
♦ Michael Goldfarb at the New York Times thinks the London property market “is no longer about people making a long-term investment in owning their shelter, but a place for the world’s richest people to park their money at an annualised rate of return of around 10 percent.
♦ Take a look at these photos: the Mark Twain branch of Detroit public library is another casualty of the city’s bankruptcy.
♦ Yassin Al Haj Saleh, who was jailed for 16 years under the Assad regime and whose family was jailed by Islamist rebels, says a poignant goodbye to Syria. Read more

A protestor outside the Greek parliament (Milos Bicanski/Getty Images)

It’s no secret in Athens that austerity-weary Greeks would like to see a grand coalition emerge from Sunday’s elections in Germany. The participation in government of Peer Steinbrück and his Social Democrats, say café pundits, could bring a softening of the “keep-them-on-the-reform-treadmill” approach associated with Angela Merkel’s previous term as chancellor. Read more

Chief justice Adly Mansour is sworn in as interim president the day after Mohamed Morsi is ousted (Getty)

Among Egyptians of all political stripes, there is a pervading conviction that talented and top-notch specialists who know their jobs well can help fix the nation’s myriad problems. The interim government installed by the military after the overthrow of Mohamed Morsi’s Islamist-dominated government has begun a flurry of appointments of so-called technocrats to key government posts.

It has appointed economist Hazem Beblawi as prime minister and named another noted economist, Ahmed Galal, as finance minister. It has begun assembling a constituent assembly that will be filled with experienced judges and legal experts. Mohamed ElBaradei, the former UN nuclear chief and Nobel laureate, has been sworn in as a vice-president for foreign affairs.

But the belief that a government of competent, cleverly-placed and politically neutral technocrats can solve problems as deeply entrenched as those Egypt faces is at best questionable and at worst fantasy. Read more

♦The US National Security Agency and the FBI are tapping directly into the central servers of nine leading internet companies. Glenn Greenwald, who broke the story for the Guardian, has been focused on government surveillance for years and the article is expected to attract an investigation from the justice department.
♦ Turkey is having its 1969, writes Ben Judah, and now it needs its Charles de Gaulle.
♦ Recep Tayyip Erdogan’s absence in Turkey this week has highlighted the difference in style between him and Abdullah Gul, the president.
♦ Ollie Rehn, the European Commission’s economic chief, has lashed out at the IMF’s criticism of the first Greek bailout, accusing the fund of revisionist history.
♦ What are the choices for Syrian citizens now? They are all grim and make the Geneva talks more urgent than ever, says Charles Glass.
♦ The humanities division at Harvard University is attracting fewer undergraduates amid concerns about the degree’s value in a rapidly changing job market. Read more

♦ Why was the Turkish media’s coverage of the protests so inadequate? – it is a “compromised media sector that is largely the property of conglomerates with wide-ranging interests, and a Turkish state that exercises particular sway over business life.”
♦ The protests have shaken Turkey but will not topple the prime minister, says Turkish journalist Mustafa Akyol.
♦ Protesters are using gaming lingo in their fight against the government.
♦ Poetry magazine has dedicated their June issue entirely to poetry composed by and circulated among Afghan women.
♦ The IMF admits to errors in its handling of Greece’s first bailout. Here’s some context from FT Alphaville’s Joseph Cotterill.
♦ Take a look at the BBC’s view from Qusair, of a city that has disappeared. Read more


Friday’s events from the World Economic Forum feature an address by Mario Draghi, president of the European Central Bank, and sessions looking at the challenges faced by, and presented by, the fast-changing Arab world. Reports from FT writers in Davos and by Ben Fenton, Lina Saigol and Lindsay Whipp in London

17.03: The Davos Live Blog is closing down now but for more reading and insight on today’s events, please visit the FT’s in depth page on the World Economic Forum.

16.41: Gideon Rachman, titular proprietor of this blog, has written his surmise from the earlier session on Syria.

16.16: Asked by the Amercian moderator of his panel session about corruption and banking regulation, Nigeria’s central bank governor Sanusi displays a little frustration:

He said: “We are the only country which has taken people out of banks and put them in jail. No bankers in your countries have gone to jail.”

16.12: Martin Wolf has recorded his view on the politics and economics at play in a “low-intensity” Davos this year:

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There was a big kerfuffle in October when the IMF made a point of saying that it (along with a bunch of other forecasters) had underestimated the effect of fiscal tightening on European economic growth over the past couple of years, with obvious implications for the troika’s austerity programmes for the likes of Ireland, Greece and Spain.

The admission got some predictable pushback from troika members who have drunk deep from the austerian well. It was also questioned by my colleague Chris Giles, who pointed out that the results were highly sensitive to the inclusion in the sample of outlier countries – especially Germany (which, despite its frugal prescription for others, has itself followed expansionary fiscal policy and enjoyed good growth) and Greece (the opposite) – and possibly the exclusion of the Baltic states, which followed aggressive fiscal tightening to better effect than Greece. Read more

With friends like these…. Jean-Claude Juncker and Christine Lagarde. (AFP)

It’s not as if the troika of eurozone rescue lenders never falls out, but usually it takes a not-in-front-of-the-children attitude to airing its rows. A refreshing change on Monday night, as my colleagues Peter Spiegel and Josh Chaffin report, when the eurogroup summit, while not actually deciding anything substantive, made sure it would stand out from the dozens of other such gatherings by hosting a very public argument between the eurogroup’s Jean-Claude “We all know what to do, we just don’t know how to get re-elected after we’ve done it” Juncker and the IMF’s Christine Lagarde.

The actual substance of the spat looks laughably trivial. It’s about whether Greece hits its 120 per cent of GDP debt target in 2020 or in 2022, which, given the huge uncertainties in forecasting debt dynamics, is about as precise as a Florida election count. The 120 per cent target is itself pretty arbitrary, apparently based on what seems to be sustainable in Italy, which is a very different country with a more flexible economy and captive domestic investor base for government bonds. Read more

IMF headquarters in Washington. Saul Loeb/AFP/Getty Images

Saul Loeb/AFP/Getty Images

Yesterday, I was all “the emerging markets have a point about running the IMF”. Read more

Giving emerging markets their rightful place in running the world economy has now been a staple summit platitude for years. Getting everyone to agree how to calibrate hegemony is a bit trickier.

The IMF is struggling with this at the moment, as its shareholder countries remain a long way apart on revising the “quota“, or voting share, given to each nation on the fund’s executive board. (For a sense of the complexity and intractability, think the Schleswig-Holstein Question but with Excel spreadsheets.) Read more

Here are today’s reading nuggets for you:

No word left minced in this fairly fierce resignation letter (obtained by CNN) sent by Peter Doyle, who is quitting the European department of the IMF after 20 years at the Fund, attacking particularly its role in the eurozone crisis.

The money quotes:

After twenty years of service, I am ashamed to have had any association with the Fund at all…

This is not solely because of the incompetence that was partly chronicled by the OIA [Office of Internal Audit and Inspection, though he may be referring to this document by a different watchdog body] report into the global crisis and the TSR [Triennial Surveillance Review] report on surveillance ahead of the Euro Area crisis. More so, it is because the substantive difficulties in these crises, as with others, were identified well in advance but were suppressed here…

Further, the proximate factors which produced these failings of IMF surveillance – analytical risk aversion, bilateral priority, and European bias  - are, if anything, becoming more deeply entrenched, notwithstanding  initiatives which purport to address them.

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Hillary Clinton and Latvian foreign minister Edgars Rinkevics on June 28 (Ilmars Znotins/AFP/GettyImages)

Hillary Clinton and Latvian foreign minister Edgars Rinkevics on June 28 (Ilmars Znotins / AFP/ GettyImages)

Visiting Latvia on Thursday, Hillary Clinton praised the Baltic state for taking “very difficult” austerity measures that would ensure a “stable, prosperous future”.

The US secretary of state is not the only high-profile figure praising Latvia’s economic record.

Christine Lagarde, the IMF managing director, dropped in this month and proclaimed its austerity programme an “inspiration” for heavily-indebted eurozone countries.

Latvia and its Baltic neighbours Estonia and Lithuania suffered the world’s steepest economic contractions in 2009 amid swingeing austerity measures. But now they find themselves in the frontline of the debate over austerity versus growth as the best way to tackle the eurozone’s debt problems. Read more

10-year Spanish bonds over past month - Bloomberg

Yields on Spanish 10-year bonds over the past month – Bloomberg

The market reaction to the Spanish bailout continues to validate the infallible eurocrisis trading rule of “buy on the summit, sell on the communiqué”. Why so negative, especially for Spanish sovereign debt?

As has been extensively pointed out, the Spanish rescue is a roundabout way to do a bank recapitalisation. Instead of taking direct equity stakes in the banks, the EFSF/ESM has had to lend via FROB, Spain’s bank rescue fund, thus increasing Spain’s sovereign debt load and raising all sorts of tortuously tricky questions about seniority.

So why do it this way? It’s the old story of policy architecture not reflecting the realities of the world economy. Read more

Could the IMF help bail out Spain? Tricky one. As goes the EU, so goes the IMF, only more so. Read more

Dr Jan Fidrmuc, Department of Economics and Finance and Centre for Economic Development and Institutions, Brunel University

Anti-austerity protestors take to the streets in central Athens earlier this year. Getty Images

Anti-austerity protestors take to the streets in central Athens earlier this year. Getty Images

Following the rejection of EU imposed austerity measures by the overwhelming majority of Greek voters, eurozone finance ministers have once again come to Brussels to try and save the single currency in what is being described as a ‘crucial 48 hours’.

Two thirds of the Greek electorate voted for parties opposed to the austerity measures required by the European Commission, ECB and IMF as a precondition of a further bailout; despite the outgoing government pledging to adhere to these measures.

Without compromise either by the Greeks accepting austerity measures or the EU offering concessions on the proposed package, another election is inevitable. In this case the bailout package will be suspended, Greece will default on its debt and an exit from the eurozone may follow. None of this will offer much respite for the struggling Greek economy.

In the past the EU offered concessions to voters having rejected EU treaties, however this time there is little political will, and not only in Germany, to offer sweeteners to the Greeks to help them swallow the bitter pill of fiscal adjustment.

Why then are the Greeks fighting against the support from the EU? And should the rest of the EU let them resist or should they be offered a sweeter deal after all?

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So says, well, the IMF in the staff report produced as fodder for the executive board to OK a €28bn loan to Athens on Thursday.

Not only is the Greek programme itself on a knife-edge – super-sensitive to yet more growth shortfalls, doubts over political commitment to implementation, the usual – but the Fund is close to the limits of its own flexibility on how much it can lend to a single country, under its snappily-named “exceptional access” criteria. Read more