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Council on Foreign Relations Global Economics Monthly
Issue 2 | July 2013

This is a preview of a new monthly newsletter from Steven A. Tananbaum Senior Fellow for International Economics Robert Kahn. In it, he analyzes major developments and trends affecting macroeconomic policy and financial markets. You are not subscribed to the newsletter. We invite you to do so at this link.

Global Economics Monthly

Lessons Learned From Greece

Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics

What is in the espresso at the International Monetary Fund (IMF)? In well-publicized discussions of debt restructuring and the Greek crisis, the IMF has shown refreshing candor and clear-headed analysis of what has gone wrong. The Fund readily admits that mistakes were made, to which European policymakers have taken offense. Beyond the headlines, the reports provide hints of how the Fund's involvement, and the broader strategy for resolving debt crises, is likely to evolve in coming years. Mostly, the change is for the better.

Too Little, Too Late

The IMF's core insight is that recent debt restructurings have come too late and have often been insufficient to restore creditworthiness. The answer in some cases is to pull the plug earlier. For example, the Fund acknowledges that Greece deserved support in 2010 despite severe doubts about creditworthiness (doubts that could have been more properly acknowledged at the time), and that a restructuring should have taken place in early 2011 when it became clear the bailout program was failing. Read the Full Monthly Report

Public Debt-to-GDP and Timeline of Debt Restructuring and Fund Arrangements: Chart: Greek debt sustainability over time

Source: Read more »

Looking Ahead: Kahn's take on the news on the horizon

Greek Aid Cutoff?

The Greek program has a financing gap in 2014. Will the Fund approve a disbursement in July? Perhaps, but a showdown over shortfalls in official aid is coming soon.

China's Shadow Banking Sector

Allowing shadow banks to fail could be a sign of needed discipline, or the canary in the coal mine for bigger problems.

The Fed's Unemployment Threshold

Expect a debate to heat up on lowering the threshold for exit from 6.5 to 6 percent. Does it matter?

From the Macro and Markets Blog

European Banking Union: Small Steps

Robert Kahn

We are seeing the outlines of a European banking union in recent discussions of common rules for resolving a failed bank. However, consensus has yet to be reached over the allocation of losses. Read more »

G8 Economic Scorecard: No Runs, No Errors

Robert Kahn

Regarding economic issues at the G8, leaders appear to have some consensus on common principles and first steps. If the absence of failure is a success, then the summit looks to have succeeded. Read more »

No Break for Periphery Banks

Robert Kahn

EU ministers are making little progress on terms under which the European Stability Mechanism (ESM) would recapitalize weak banks. Discussions are moving away from last year's promise to break the link between troubled periphery banks and their sovereign, and current recapitalization funds are inadequate to cover losses in a downside scenario. Read more »

More from CFR's Center for Geoeconomic Studies

The Maurice R. Greenberg Center for Geoeconomic Studies (CGS) works to promote a better understanding of how economic and political forces interact to influence world affairs. Visit the CGS site to learn about two new books from CFR's Benn Steil and Jagdhish Bhagwati, read the latest Chart Book and much more!


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