Bailout Blues

Busted Bailout

The Bailout Bias

Why the Greek Bailout Failed

Spain like Greece is spiraling into depression, and may need a full scale bailout by the troika (the ECB, the European Commission, and the International Monetary Fund). Meanwhile, austerity fatigue in the eurozone periphery is increasingly clashing with bailout fatigue in the core.

Moreover, fiscal and sovereign debt strains are becoming worse as interest rate spreads for Spain and Italy have returned to their unsustainable peak levels. Indeed, the eurozone may require not just an international bailout of banks (as recently in Spain), but also a full sovereign bailout at a time when eurozone and international firewalls are insufficient to the task of backstopping both Spain and Italy.

Moreover, Greece could exit the eurozone in 2013, before Spain and Italy are successfully ring fenced Spain like Greece is spiraling into depression, and may need a full scale bailout by the troika (the ECB, the European Commission, and the International Monetary Fund). Meanwhile, austerity fatigue in the eurozone periphery is increasingly clashing with bailout fatigue in the core.

After a bank s shareholders are wiped out and its creditors take an 8 haircut, the European Fund transforms itself into a bailout fund, justifying some of Germany s fears. And there is no explicit prohibition of some form of national government bailout.

Will the bailout work? We have national debt, Detroit, currency valuations, healthcare, all these issues facing us.

With its international reserves dwindling, the country cannot finance these gaps with its own dollar resources. The International Monetary Fund has estimated that Ukraine will need 15 billion in outside help in 2015, in addition to the 17 billion bailout that it received last year.

The fact is that only the US and the massively over represented countries of the European Union supported the Greek bailout. Indeed, the major emerging economies all strongly opposed it, with the Brazilian representative calling it a bailout of Greece s private debt holders, mainly European financial institutions.

The IMF learned this in 1997, when an inadequate bailout of South Korea forced a second round of negotiations. In Greece, the problem is even worse, as the 86 billion ( 94 billion) plan now under discussion follows a 110 billion bailout in 2010 and a 130 billion rescue in 2012.

They belonged to a global institution, the International Monetary Fund, and to a pair of regional ones, the European Commission and the European Central Bank. Their mission was to negotiate the terms and conditions of a financial bailout of Greece.

Delaying bank restructuring is costly, in terms of both the eventual bailout costs and the damage to the overall economy in the interim.

Nonetheless, the international financing that Ukraine has received, though invaluable, remains insufficient to support genuine recovery and reform. The latest bailout program foresees about 40 billion in funding, nearly half of which will come from the IMF, over the next four years.

So I think that the oil blowout, the bank bailout, the mortgage crisis and all these things are absolutely symptoms of the same cause.

So I think that the oil blowout, the bank bailout, the mortgage crisis and all these things are absolutely symptoms of the same cause.

The ESM is Ireland s insurance policy as we work our way out of the bailout program with the troika (the European Commission, the ECB, and the International Monetary Fund) and return to the markets. Most importantly, the fiscal treaty promises to ensure responsible budgeting throughout the eurozone.

We do that corporate whether it's a bailout, an oil spill, a recall we pretend like what we're doing doesn't have a huge impact on other people.

As a result, taxpayers may need to pay twice, once for the bailout and again for the low quality debt they have incurred during the bailout, as the austerity programs unveiled in Europe attest. Paradoxically, the growing sense that a catastrophe has been averted has given rise to a growing demand for governments to cut public and social spending, and to refrain from proposing investment programs.

It was kind of interesting because in the morning, from 9 to 11, they were discussing the bailout package how many billions to invest in saving the Danish economy.

ATHENS Germany s arguments against introducing Eurobonds, expanding the eurozone s bailout fund, and instituting a comprehensive system of economic governance are transparent and easy to understand. But are they right?

Because there is no current blueprint for this move, one can only speculate about what it would look like. One option is for large EU countries to construct a bailout package.

It may seem strange to make middle income countries pay for their own bailout insurance, but it isn t. They have much more at stake in IMF policies than do rich countries.

Moreover, international investors can buy and sell real estate far more easily in the US than in most of Europe. And the absence of a Europe wide fiscal policy creates significant uncertainty about how the European Central Bank would finance itself if it suddenly faced large losses on junk bank debt after a big bailout.

As for the UK s serial dependence on the IMF from the mid 1950 s to the mid 1970 s, there were actually only two episodes the 1956 bailout during the Suez crisis and the 1976 bailout that preceded the winter of discontent when strikes in many essential industries even the dead went unburied practically brought the country to its knees. (It hardly needs stating that borrowing money from the IMF is not a default.)

Governments should not only avoid protecting bondholders after the fact, when the details of a bailout are worked out but should also make their commitment to this approach clear in advance. Some of the benefits of a government policy that induces bondholders to insist on stricter terms when financial firms take larger risks would not be fully realized if bondholders believed that the government might protect their interests in the event of a bailout.

Another is the treaty s no bailout clause. Most member states, including Germany, have violated the first rule, surreptitiously or not, while for several the second rule has been overwhelmed by expensive financing packages.

If this mismanagement continues, not only Greece but also European unity will be fatally undermined. To save both Greece and Europe, the new bailout package must include two big things not yet agreed.

In relative terms, Greece received most of Europe s bailout money and showed the largest increase in unemployment. The official loans granted to the country by the European Central Bank and the international community have increased more than sixfold during the past five years, from 53 billion ( 58 billion) in February 2010 to 324 billion, or 181 of GDP, now.

BERLIN With Greece s economic crisis still raging, prominent voices, ranging from Nobel laureate economists like Paul Krugman to officials like US Secretary of the Treasury Jack Lew, are calling for more lenient bailout terms and debt relief. Even the International Monetary Fund which, along with other European lenders, has provided Greece with emergency financing recently joined that call.

Since the onset of the crisis, Greece has received massive financing from the so called troika the European Commission, the European Central Bank, and the International Monetary Fund. It received bailout packages in 2010 and 2012 totaling 240 billion ( 266 billion), including 30 billion from the IMF, more than triple Greece s cumulative limit for IMF borrowing.

The last bailout program from the troika (the International Monetary Fund, the ECB, and the European Commission), initiated in 2010, foresees a primary budget surplus (which excludes interest payments) of 4 of GDP this year. That would be slightly more than is needed to cover interest payments, and would thus allow Greece finally to begin to reduce its debt.

WARSAW The seemingly never ending debate over the eurozone s fiscal problems has focused excessively on official bailouts, in particular the proposed purchase of government bonds on a massive scale by the European Central Bank. Indeed, we are warned almost daily by the International Monetary Fund and others that if bailout efforts are not greatly expanded, the euro will perish.

Alternatives to a debt restructuring are fast disappearing. A full blown official bailout of Greece s public sector (by the International Monetary Fund, the European Central Bank, and the European Financial Stability Facility) would be the mother of all moral hazard plays extremely expensive and politically near impossible, owing to resistance from core eurozone voters starting with the Germans.

Investors withdrew in droves from what was once deemed the Celtic Tiger. The government had no choice but to request a bailout from the troika the International Monetary Fund, the European Central Bank, and the European Commission thereby transferring an important component of national economic governance to an ad hoc, fragile, and sometimes feuding group of institutions.

The existing business model allows them to take the upside when they win, and hand over the downside to taxpayers when they lose. This encourages excessive risk and threatens repeated cycles of boom bust bailout.

BALTIMORE As each new day brings word of another Wall Street bailout even more colossal than the last, one question presents itself with ever increasing force why does America s economy perform so badly under Republican presidents?

BALTIMORE As each new day brings word of another Wall Street bailout even more colossal than the last, one question presents itself with ever increasing force why does America s economy perform so badly under Republican presidents?

Unfortunately, stimulus spending and the related bailout of the financial system, together with the recession s effect on revenues, contributed to fiscal deficits on the order of 10 of GDP in most advanced economies. According to the International Monetary Fund and others, these economies ratio of public debt to GDP will surpass 110 by 2015, compared to 70 before the crisis.

LONDON Germany has been leading the opposition in the European Union to any write down of troubled eurozone members sovereign debt. Instead, it has agreed to establish bailout mechanisms such as the European Financial Stability Facility and the European Financial Stabilization Mechanism, which can lend up to 500 billion ( 680 billion) combined, with the International Monetary Fund providing an additional 250 billion.

This is a dangerous idea, for several reasons. For starters, the IMF s research and similar studies show that the likelihood of a bailout over the life of the bonds already issued by banks is indeed now lower.

The creditor debtor split was thrown into sharp relief this summer, during the negotiations over Greece s third bailout agreement. Germany, the leading proponent of austerity and the most influential creditor, was accused of insufficient flexibility and solidarity

For example, the Dodd Frank legislation specifies that all large financial institutions should draw up meaningful living wills specifying how they could be allowed to fail, unencumbered by any kind of bailout, if they again became insolvent.

Even if a bailout plan were implemented quickly which appears increasingly unlikely there would be some credit contraction. The US economy has been sustained by a consumption boom fueled by excessive borrowing, and that will be curtailed.