The Troika and financial assistance in the euro area: successes and failures

Bruegel report here.

19 replies on “The Troika and financial assistance in the euro area: successes and failures”

This is one ‘sad sack’ report. So many ‘unexpected’ expectations. Sop many ‘underestimated’ estimations. So many unanticipated’ anticipations.

from the conclusions:

“In particular in Ireland, the collapse of the housing bubble [sorry, its still collapsing chaps!] left the state and the economy in the need of a deep structural adjustment that HAS BEEN SUCCESSFULLY MANAGED” – (my emphasis).

This conclusion cannot be true.

If I am to understand this report correctly , the persons who devised and implemented the ‘programmes’ are damned to hell. Useless, ideological, intellectual midgets all.

“Growth prospects are still unsatisfactory and far too weak to address the unemployment challenge.”

Well, at least that got that correct.

A home represents a highly leveraged exposure to a single,stationary plot of ground,about the riskiest asset one can imagine. Property bubbles don’t grow out of thin air. They have a solid basis in reality,but reality as distorted by a misconception.

An important part of what happens during a property bubble is mediated by the marketplace,and by prices that are observed there and subsequently amplified by the broadsheet media. The broadsheet media weave stories around price movements,and when these movements are upward,the broadsheet media tend to embellish and legitimize “new era” stories with extra attention and detail. Feedback loops appear, as price increases encourage belief in “new era” stories, promote the contagion of these stories, and so lead to further price increases. The price-story-loop repeats again and again during a speculative bubble.

Ninety five per cent of all property sold in Ireland,is sold by surveyors/estate agents and they controlled where the property advertising money was spent. Almost all of this money was spent with the broadsheet media and the Irish Times,the owner of the property portal, got the largest share. During the years the bubble inflated, the Irish Times revenue from property advertising was a substantial part of their gross income,and the surveyors/estate agents were allowed free rein with their puff pieces and property propaganda. Essentially this newspaper became the largest property market in the state with a newspaper bolted on.
The paper of record morphed into the paper of property.
Below is the link to the elementary property valuation error that bankrupted Ireland;

@ Brian Woods Snr

These are essentially deskbound people who are not familiar with the economies they are judging.

It’s common and when foreign journalists misreport on a familiar back yard, it should induce caution about reports on unfamiliar places to ourselves.

@ seafóid

George Osborne is right to acknowledge that challenges remain.

The main indicators are still looking good relative to a year ago.

For October to December 2013, 77.1% of men aged from 16 to 64 were in work, up from 76.6% a year earlier and 75.4% two years earlier, but lower than before the 2008-09 downturn. For October to December 2013, 67.2% of women aged from 16 to 64 were in work (the highest figure on record), up from 66.5% a year earlier and 65.4% two years earlier.

The US labour participation rate at 63% is at the lowest since 1978.

Given that 0.7% Dutch growth is the best in the class and described by the FT as “brisk” 5 years post Lehman it’s hard to see that then Troika was successful.

I don’t believe that giving bondwallahs the kid glove treatment was in the best long term interest of growth.

@ Michael

House prices in London are up 10-15% in a year.
That is not sustainable and it’s not good for the UK economy in terms of resilience.

A bog standard flat in zone 2 is now around 250-300K

Barclays will lend up to 330K on a salary of 60K. Deposit of 60K. What FTB can save that ?
Repayments £1,100 – £1,319 per month over 25 years

And what happens if interest rates go up?

There was a piece on one of the UK TV news progs: lenders were giving x7 times salary to borrowers in some districts in metro London. Commentators described the situation as mad and un-sustainable.

Learned nowth, forgot nowth.

“And what happens if interest rates go up?”

I expect that taxpayers will be rectally assaulted, again!

Do I really need to read this report? Now? Methinks I’ll think on it …

From whose perspective? In whose interests?

Some kind soul might give me a one sentence, not exceeding ten words, summary.

David, it admits of many grievous errors (eg: the austerity programmes) but never once mentions a nosmet ipsi culpae for ‘the unexpected’, ‘the unintended’ and ‘the unanticipated’ harm caused by the programmes. Spare yourself the trauma.

@ MH: ” … it should induce caution about reports on unfamiliar places …”

That’s an understatement. And they have the unmitigated arrogance to threaten us with a force majeur if we fail to TINA!

I got some Swiss bank mortgage data the other day. Prices up 100% in 12 years. Interest rates down from 4.5% to 1.0% over the same period. Rates were actually 4.5% just before Lehman. The bank shows you how much less interest you pay now compared to 2008 on a 10 year fix, 225k versus 139k . No brainer. Until rates go up. Then underwater punters will be lectured about risk. It is always the same. And most punters do not understand interest rate risk.

“Royal Bank of Scotland is preparing a dramatic retrenchment that would see it become a much smaller UK retail and commercial bank in a move that is expected to slash staff numbers by at least 30,000 in the coming years.
The restructuring will form part of a brutal series of cost-cutting measures and disposals led by new chief executive Ross McEwan, which are expected to lead to a reduction of about a quarter in the group’s headcount over the next three to five years.In a video posted on RBS’s website this week, Mr McEwan said: “My aspiration is not to run the world’s biggest bank. My aspiration is to run the best bank in the UK – nothing to do with size. A lot of our costs are old costs related to a big global group that we are not any more.””

The EZ banking sector needs the same medicine
RIP Fred the Shred’s dream

Interest rates can be ‘managed’ – for quite a while yet. The boyze know what will happen if interest rates start to move up: BOOM! – as in Big Boom.

What they might be missing is the slow, steady, inexorable upward trend (annual) in the price of crude oil. That price ‘feeds’ through into lots and lots of stuff that we consume.

In order to maintain, not to mention increase, crude production (hence the liquid hydrocarbon fuels we must have), you have to spend more and more money (in the form of credit). So where will all this extra credit come from? The banks seem to be having a real good time with those property and stock bubbles that they are blowing – again! Diverting the QE credit toward crude oil production is not such an attractive option.

So which ‘need’ wins out? Speculative profit or liquid fuels? I suppose Wall Street and the City are working on a substitute fuel. Stands to reason – ???

The global financial crisis might well have decreased the global demand for liquid fuels in the US, UK, EU and Japan. But the BRICS and some others have mopped up the surplus – and some. The former cannot ‘afford’ to resume economic growth (ie: business as usual). Crude oil price would increase rapidly – and look what happened in 2008 when it went (quite briefly) off the scale! !MOOB

And watch for the Global Nett (for) Export of crude oil; not the total produced. All the nett importers have to ‘dip their beaks’ in that Nett Tank. And, its getting smaller by the day!

Fun times ahead.


Crude is still really expensive compared to 10 years ago. It must be a contributory factor to the general economic lethargy. Not in the models either, I bet. Those mathematical growth assumptions are very tricky now, aren’t they ?

I wonder how much energy goes into producing one barrel of refined Canada tar . Would it be a quarter of a barrel ?

The Lancet has an article out on the many benefits the Troika reforms have brought to Greece.

The best of these is the return of malaria after a 40 year gap. I kid you not – that is the best one.

From the UK Independent:

Tough austerity measures in Greece leave nearly a million people with no access to healthcare, leading to soaring infant mortality, HIV infection and suicide

The Lancet: Greece’s health crisis: from austerity to denialism

Make no mistake, the Troika are incompetent heartless ideologues.

@ Seafóid: (been away from desk):

” It must be a contributory factor to the general economic lethargy.”

It surely helps!

“Not in the models either, I bet.” Not funny that. I seem to recall something from ECON 101 about ‘substitutes’ kicking in when the real thing gets a tad ‘dear’. Examples were fillet steak, mince and chicken. Mindboggling. You would think that after 150 years of ‘oil’ the farthing would have dropped with one almighty clang. Not a bit of it. Models of Incompetence.

DO NOT ask about the Tar Sand! You would not like the answer. One-half might be closer, since the cost of cleaning up the toxic sludge has to be factored in – which it is not!

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