EUROZONE / GREECE / ARGENTINA / ITALY: The Argentine Default Examined; A Model For Athens? Italy May Be Next Victim.

GUARDIAN/ H.Stewart


Feel like wading into the economic weeds again?
Heather Stewart re-examines the Argentine default...when Buenos Aires drew a dangerous but ultimately successful bright line default...as a possible model for Greece.


"It was a successful default,"says leftist USA economist Weisbrot. "Their economy reached the post-crisis level of output within three years, which is going to take Greece 10 years if they're lucky. They took 11 to 12 million people out of poverty in that time."


"The parallels are really striking," says IMF and World Bank monitor Peter Chowla. "Argentina had an IMF loan, which required austerity, and it failed for more than a year, and then they decided to double down, give them another loan and demand more austerity."


AND: Are the bond vigilantes now focusing again on Italy?
Its bond spreads vs Germany are greater than ever...and investors are disturbed by the growing rift between Berlusconi and FinMin Giulio Tremonti. Tremonti has refused to approve new tax cuts.
Also...Germany may be pushing again for investors to swap current Greek bonds  for new debt with longer maturities.
http://www.nytimes.com/2011/07/11/business/global/italy-becoming-a-bigger-priority-for-euro-zone.html

EUROZONE/ GREECE / FRANCE: Sarkozy's Plan To Save The World, Euro...But Especially French Banks; Lagarde Takes The IMF Reins.

BBC/ R. Peston, Analysis

Factoid as reported in today's WSJ:  French banks' exposure to Greek debt is $56.7bn...while German banks hold $34bn.


France's President Sarkozy has proposed a complex Greek debt rollover/reinvestment scheme for investors...featuring 50% of proceeds reinvested in 30 year bonds at 5.5% up to 8%...with 20% in zero coupons.
What does it mean...and why is it important?

BBC biz editor Peston wades into the economic weeds.

BBC: "...if there were a default by the Greek state even on a tiny element of what it owes, bankers would be forced in one fell swoop to write down the value of their loans to the government and probably take losses on associated credit too.

AND:"... if you are curious about why France and Germany appear to be the bosses of the process of attempting to secure Greece's financial future, it is not just that they have the biggest economies in the eurozone: their banks have the most to lose from a Greek default, with French banks most exposed.

"...that $100bn of potential losses for non-Greek banks becomes multiplied by many times if a Greek default were to spark more acute financial woes for the dominoes next in line, Ireland and Portugal." 

And...then there's the unthinkable default... giant Spain!

Also...as added insurance...Sarkozy's former FM...Cristine Lagarde will almost immediately take over at the IMF. That by itself is highly unusual. 

Will she endorse Sarkozy's plan?

Do old shoes feel more comfortable than a new pair?

Bien sur, mon cheri...bien sur!

For OPINION by Peter Chowla. Lagarde may be the first woman boss but she's not a reformer.

"Lagarde's first instinct after the announcement of her appointment was to continue pushing the country ( Greece) towards a downward spiral of austerity, unemployment, and recession."

http://www.guardian.co.uk/commentisfree/2011/jun/29/christine-lagarde-imf-reform

IMF / EUROZONE : Economist Dean Baker : The IMF Is Clueless.

GUARDIAN / OPINION, economist Dean Baker


"Much of the world remains mired in the worst downturn since the Great Depression; a downturn that the IMF totally failed to predict, as noted by the IMF's own Independent Evaluation Office.

This was not a minor mistake; this was a horrendous failing. It's comparable to the surgeon amputating the wrong leg or leaving his operating tools inside the patient. This is the sort of incredible mess-up that most people lose their jobs over and likely never find work again in the same field.

Yet, as far as the world knows, not one person at the IMF lost their job. In fact, it's not even clear that anyone missed a scheduled promotion. As far as anyone can tell, an economic downturn that ruined the lives of tens of millions of people around the world has had no impact whatsoever on the people who actually have the responsibility for preventing such calamities, at the IMF and in other major governmental and international financial institutions."

IMF : 23 May UPDATE: More Candidates Emerge; A Challenge From "Down Under" Over Chief.

LINK CHANGE/ AFP

       Australia and South Africa are challenging the convention...since 1944...of appointing a European as head of the IMF.
      They want new IMF management to be chosen on merit...rather than by nationality.
      So, they are backing former South African FM Trevor Manuel (above).
      The two nations may have the support of some emerging powers including China and India.
      Brasil's FM Guido Mantegna recently he said he would support the eurozone's choice.
      But, Switzerland just announced it would not necessarily back a European for new managing director.
      Britain has endorsed Lagarde.
     Australia's neighbor...New Zealand...has also announced its support for her.
     Mexico is backing its own Augustin Carstens...while former Soviet bloc countries are favoring long, long shot  Kazakhstan's Grigori Martchenko.

IMF: Board Predicts New Chief...By 30 June; Lagarde Now Heavy Favorite.

BLOOMBERG/

     Shakour Shaalan, the IMF Executive Board's dean, predicts the board will select a new managing director...by 30 June.
     Meanwhile the jockeying for the top job just became a little clearer...after Brasil's FM Guido Mantegna announced his nation would back the EU candidate--a huge reversal of position.
    Brasil has been one of the most vocal advocates...for a new emerging nations IMF chief.
    The USA has been trying hard...to appear neutral.
     But Mexico is reportedly considering nominating its c.banker Augustin Carstens.
    Clearly in the lead however...is France's FM Cristine Lagarde, 55 (above).
    Italy, Sweden and now reportedly Austria...are backing Lagarde.
    Angela Merkel has lauded...but not yet openly supported her.
    "Christine Lagarde has outstanding credentials,”said Swedish FM Anders Borg.
    Her sex is an “advantage”since “half of the world has not been represented as managing director”of the IMF, he said.
     One observer claims Lagarde is now the “odds-on” favorite for the job after being a “20-1 outsider when betting began.”
     Yet there is a significant blip that must be resolved...a two-decades dispute involving a supporter of President Sarkozy and a settlement of nearly $600 mn usd paid to him by the French taxpayers...that was approved by Lagarde.

IMF/EUROZONE/BRASIL/POLAND: 17 May UPDATE: Strauss-Kahn's Arrest Feeds Need For IMF Chief Selection Change.

BLOOMBERG/ S. Rastello

   Brasil and other emerging economies have long been lobbying for more voice in selection of the IMF head.
    With the arrest of Managing Director Dominique Strauss-Kahn for attempted rape, those efforts may finally come to fruition.
    Strauss-Kahn, a former French FM, was chosen to a five-year term in 2007 due to an informal agreement from the end of World War II...where a European heads the IMF...while an American leads the World Bank.
 “This event is likely to put into play the leadership and governance structure of the IMF in a dramatic and unanticipated manner,” said a former IMF official.
   “There’s going to be pretty frantic diplomatic agitation” if Strauss-Kahn resigns, said Nicolas Veron, senior fellow at Bruegel, a Brussels-based economics research group. “It’s the first time that the competition is so internationally open.”

    German Chancellor Angela Merkel said that European leaders would propose a candidate to lead the IMF if Strauss-Kahn resigns. She added that “in the mid-term, developing countries have a right to the post of IMF chief” and that “in the current situation, when we have a lot of discussions about the euro, Europe has good candidates to offer.”
     Could Poland's Marek Belka be that candidate.?
     Polish central bank governor Belka is from Europe. He’d probably be backed by Germany. He worked at the IMF. And he's from an emerging market.
http://blogs.wsj.com/emergingeurope/2011/05/16/polands-belka-ticks-many-boxes-for-new-imf-chief/ 

 NEW!!!: More candidates are mentioned To Succeed DSK:
   Turkey's Kemal Dervis, French FM Christine Lagarde, South Africa's Trevor Manuel, Mexico's Agustin Carstens and India's Montek Singh Ahluwalia...are briefly profiled.
http://en.mercopress.com/2011/05/17/potential-candidates-to-succeed-strauss-kahn-as-head-of-the-imf?utm_source=feed&utm_medium=rss&utm_content=main&utm_campaign=rss

EUROZONE / IMF: 16 May UPDATE: Dominque's Lawyer Says It Ain't So; France Defends Strauss-Kahn's Innocence Until Proven Guilty; Arrest Dismays Distressed Greeks; Bail DENIED.

 LINK CHANGE: NYTIMES

    A NYC judge has denied bail for Dominique Strauss-Kahn...on grounds that he is a flight risk.
    The shocking arrest of IMF head Strauss-Kahn in NYC for sexual abuse has also unnerved Greek officials.
    Strauss-Kahn was to attend a eurozone finance ministers meeting Monday in Brussels to discuss worsening debt problems there.
     Dominique Strauss-Kahn, 62, (pictured above) managing director of the IMF for the past 3.5 years, was arrested in NYC and accused of attempted rape and 6 other charges...5 of them felonies...against a 32-year-old chambermaid in the Sofitel hotel. The maid reportedly worked at the hotel for 3 years.
    He was arrested while boarding a plane bound for Paris.
    The French government has declared that he “is innocent until proven otherwise”.
    His lawyer and his wife have told the media that “his client will plead not guilty of the crimes alleged against him”.
     One observer described the 7 charges as..."the worst case scenario" for the defendant.
     Since he was in NYC on private business...there can be no immunity claim...say some experts.
    A police spokesman says the woman claimed she entered Strauss-Kahn's room at about 1pm when "...he came out of the bathroom naked, ran down a hallway to the foyer where she was, pulled her into a bedroom and began to sexually assault her, according to her account. She pulled away from him and he dragged her down a hallway into the bathroom where he engaged in a criminal sexual act, according to her account to detectives. He tried to lock her into the hotel room."
      The maid picked-out his photo and was treated for rape...with forensic DNA samples taken.

      Noted criminal lawyer Benjamin Brafman (above) said :"This battle has just begun." 
     Strauss-Khan has favored giving Greece another financial lifeline to prevent collapse...despite recently angering Greeks when he described them as being "in deep shit".
     In 2008, the IMF cleared the thrice married Strauss-Kahn of harassment and favoritism over an affair with a Hungarian economist colleague...calling it a "serious error of judgement".

     Now, another woman is claiming he sexually harassed her in 2003.

    French journalist/novelist Tristane Banon (below) told LE FIGARO that the episode occurred during an interview when she was just 22.
    She described Strauss-Kahn as a "rutting chimpanzee."

        What is it about these powerful silverbacks?
        All these new revelations are all too reminiscent of Italy's  pathetically lecherous old PM...Silvio Berlusconi...but allegedly...without consent!

BRASIL / PORTUGAL: 30 Mar. UPDATE: Lula Cautions Lisboa: Don't Take Bail-out!; New S/P Downgrade Just Above Junk; Dilma May Aid Former Colonial Power By Buying Debt.

AP/ H.CHRONICLE

   Brasil's ex-president Lula da Silva is warning Portugese pols NOT to take an IMF bail-out...even as Standard and Poor's downgraded Lisboa's debt...to just one notch above a junk rating.
    Lula said: "The IMF won't resolve Portugal's problem, like it didn't solve Brasil's. Whenever the IMF tried to take care of countries' debts, it created more problems than solutions."
    Lula has long criticized the IMF for espousing "orthodox and recessive concepts."
    Meanwhile, outgoing PM Jose Socrates (pictured hugging Lula) insisted again that his government "is determined not to ask" for a bailout. "I'm sick of saying we won't."

UPDATE:  Brasil President Dilma Rousseff is studying ways to help Portugal...either by buying its new debt offerings...or even by buying back some of the debt it currently owns.
    Brasil escaped Portugal's control in 1822.  Its economy is now almost 10 times larger than Portugal's.
 http://www.guardian.co.uk/business/2011/mar/30/brazil-considers-helping-portugal

URUGUAY: IMF Chief Strauss-Khan Praises Mujica's Economic Management.

M.PRESS/
     IMF Managing Director Dominique Strauss-Khan
(pictured in suit with President Mujica) praised the management and achievements of the Uruguayan economy on his first and perhaps last visit to Montevideo.
   “I must congratulate the different Uruguayan officials for the way they have coped with the crisis”, he said. He said Uruguay has achieved formidable economic progress in the past decade and brought an sizable increase in the nation's standard of living.

SERBIA: PR Offensive For EU Membership Underway But No Loan Agreed With IMF.

G.POST/ ANALYSIS/ Teri Schultz /
     Serbia is getting aggressive about speeding its path to EU membership.
     There were a series of raids in Belgrade this week seeking fugitive Ratko Mladic (pictured), the former Bosnian Serb leader charged with genocide for his alleged role in the killing of 8,000 men and boys in Srebenica.
    And recently it bumped-up the reward fot Mladic's capture from $1.4 million to $10 million usd. In addition there was the recent apology for a Croatian massacre.
   But the EU seems unimpressed and taking a more relaxed path.
  Also, the IMF can't agree with Serbia over its next $4.3 billion tranche payment of a bailout loan... because it is failing so far to narrow the 2011 budget deficit to 4 percent of GDP from 4.8 percent this year. “I don’t think that anything went really wrong in the talks, it’s just not easy to come up with a 2011 budget in line with fiscal rules,”said Prime Minister Mirko Cvetkovic. “We have made progress, but we still aren’t there.”

FOR IMF Tranche story, SEE:
http://www.bloomberg.com/news/2010-11-05/imf-leaves-serbia-without-agreement-on-loan-payments-talks-to-continue.html

CHILE: Economy Expands By 7.6%; Fastest Pace In More Than 5 Years.

BLOOMBERG/ Sebastian Boyd and Randy Woods /

  Thru August, Chile's economy increased at its fastest pace -7.6 percent- in more than five years...even as it recovers from a powerful February earthquake and serious aftershocks.
The IMF estimates Chile will expand by 5 percent this year and 6 percent in 2011, the fastest pace since 2004.

ARGENTINA: Boudou Refuses IMF Audit.

M.PRESS/        Economy Minister Amado Boudou (pictured) declared that he is barring the IMF from doing its annual “Article IV” revision for Argentina since 2006.
     Boudou believes the IMF caused the country's worst-ever economic crisis in 2001-02.  "Argentina had a very bad time when the Fund was involved in its policies,” he stated. “We don't need them to lend us money. We don't accept the conditions” the IMF would impose under a loan agreement.
      A new review is key to the repayment of  $7 billion usd in defaulted debt Argentina owes to the Paris Club of creditor nations.

ROMANIA: IMF Demands It Must Pay Old Debts...To Get $1.1 Billion Tranche.

BLOOMBERG/ Andra Timu and Irina Savu/    The government of PM Emil Boc (pictured) must prove to the IMF that it has paid $567 million usd to private health-care companies before late September to receive 900 million euros ($1.1 billion usd) of a 20 billion-euro bailout from the IMF, European Commission and other international lenders. Romania is the EU's second poorest country. The IMF lender has “been very concerned with the arrears problem because it’s a vicious circle when the government doesn’t pay its bills,” said an official.

BULGARIA: Economist Edward Hugh Analysis.

easterneuropeeconomyblogspot/    This blog doesn't normally cover Bulgaria because keeping-up with about 25 other countries is more than enough work...but we do try to feature Brit Edward Hugh's always thorough analyses. The Barcelona based, virtually self-taught economist does his thing here...on Bulgaria's economy. Beware: heavy slogging, full of charts and graphs.
HUGH: "...the question as to whether potential output growth in Bulgaria in the years to come is going to be markedly lower than it was during the boom years. As the IMF point out, the current recession was preceded by an investment boom in construction, real estate and the associated financial sectors. Now that the boom (which was always unsustainable, Bulgaria's current account deficit in 2007 hit almost 27% of GDP) is well and truly over in these sectors, the strong associated decline in investment could have large negative effects on output. Moreover, it will take considerable time before the excess labor and resources that are no longer needed in these sectors can be absorbed by other sectors, which suggests that the rate of unemployment may rise yet further and remain higher for some considerable time. Not a uniquely Bulgarian story, but none the less important for that."

HUNGARY: PM Orban's New Hungarian Revolt Vs IMF And Central Banker.

NYTIMES/ LANDON THOMAS Jr./         PM Viktor Orban continues stirring the populist pot by blaming central bank head Andras Simor for his nation's recent economic crisis. Plus, Orban wants to reduce Simor's huge $458,000 annual salary...by 75%. Orban's meddling makes the EU and the IMF uncomfortable. So does the PM's efforts to levy a new tax on banks.
As Landon Thomas observes Orban is tapping into the social resentments that got him into office and may spread to other nations as they try to impose fiscal discipline on their citizens.

HUNGARY: PM Orban Standing-up To IMF And EU.

WSJ/ GORDON FAIRCLOUGH /  
    New PM Viktor Orban believes he is promoting a "patriotic economic policy" and preserving economic independence by resisting some IMF and EU requirements. Especially in a tiff with them over a new bank tax, Orban insists that after October, Hungary can go it alone without the financial safety net afforded by following IMF/EU dictates.

FAIRCLOUGH:    "It's an economic freedom fight," said a senior official in Mr.Orban's administration. "We are getting back the financial independence of the country."
Hungary's rebellion against the budget-cutting approach of the IMF and EU is an unwelcome development for leaders of the two organizations, who also are trying to enforce austerity programs for other governments, such as Greece's, that have been bailed out after amassing large public debts."
"No one should decide for us what we should do with the Hungarian economy. A state should be sovereign," said Agnes Naray-Szabo, a 26-year-old high school teacher who says she thinks Mr. Orban and his Fidesz Party have been doing a good job.

HUNGARY: Moody's And S&P May Downgrade Credit Rating To "Junk" After PM Rejects IMF.

REUTERS/      Moody's may downgrade Hungary's Baa1 credit rating because of increased uncertainty over its fiscal outlook and economic prospects while S&P has revised its outlook to negative from stable, while affirming its BBB-/A-3 rating, which is already lower than Moody's. PM Viktor Orban just announced that his new government no longer needs help from the IMF and that he won't seek to extend an emergency financing agreement of nearly $20 billion euros it signed in 2008.
(Web foto of V.Orban)

HUNGARY: IMF Talks End Abruptly With $20 Billion Euros At Stake; Big Forint Sell-off.

REUTERS/     The IMF abruptly ended two weeks of talks with PM Viktor Orban over disagreements about plans to control budget deficits. At stake is $20 billion euros. “This is definitely negative for bonds and negative for the currency, both in speculative terms and in real flows,” said Nomura economist Peter Attard Montalto. “For an IMF statement, it’s pretty damning." Investors sold off the currency, the forint, to a 14-month low, while bond costs soared. The governments of Romania and Latvia may be challenged next.
(V.Orban foto)

ROMANIA: Some Wish For Ceausescu's "Old Order."

BLOOMBRG/     Romanians are facing severe budget cuts to avoid becoming the next Greece which makes some long for the ordered days of dictator Nicolae Ceausescu. To them Ceausescu stood for “order and stability." Now PM Emil Boc faces a no-confidence in parliament over budget-cutting measures to reduce public wages by 25% and pensions and jobless benefits by 15%. The IMF and investors have poured 22.4 billion euros into Romania since it joined the EU.
 (Foto of PM Emil Boc)

PERU: IMF Chief Praises Garcia For 2010 Projected 5-7% Growth.

MERCOPRESS/      "Peru's economic policies enforced in recent years are correct, and that is the reason why the country survived the last international financial crisis without suffering great consequences” gushed IMF chief Dominique Strauss-Kahn about President Alan Garcia's management. ”Peru's international reserves (of more than 35 billion US dollars) are extraordinary, and we estimate an economic growth of 5 to 7% this year; it is a high and significant figure," he went on.