BREXIT

Aug, 15, 2016

Brexit could be delayed

  1. News: Britain’s exit from the European Union could be delayed until at least late 2019
  2. Why? Because the government was too chaotic to start the two-year process early next year
  3. Context: Britain voted to leave the EU on June 23
  4. Roadblock: Views differ over when it should invoke Article 50, which sets the clock ticking on a two-year deadline to leave the bloc, with some senior politicians calling for a quick departure
  5. Prime Minister Theresa May, who campaigned for Britain to remain in the EU and leads a cabinet of ministers from either side of the debate
  6. She has said she will not trigger Brexit talks this year as Britain needs time to prepare
Jul, 15, 2016

BoE keeps interest rates unchanged

  1. News: The Bank of England (BoE) kept its interest rates unchanged in minutes of its July meeting
  2. Investors had expected the first cut in more than 7 years with Britain’s economy reeling from last month’s Brexit
  3. The BoE said it was likely to deliver stimulus in 3 weeks’ time, possibly as a package of measures
Jul, 14, 2016

David Cameron quits, Theresa May the new British PM

  1. News: Theresa May took over as Britain’s new Prime Minister, replacing David Cameron
  2. The new PM promised a ‘bold, new, positive role’ for the country less than 3 weeks after its vote to leave the EU (Brexit)
  3. Immediate concerns: EU leaders are pressing for a swift exit of Britain following the vote
  4. Even Scotland is planning to vote to exit from UK
  5. Cameron had called the referendum and campaigned to stay in the EU
Jul, 09, 2016

UK-India Free Trade Agreement

  1. News: India and UK are in talks of signing a new bilateral UK-India Free Trade Agreement (FTA) after Brexit
  2. EU-India FTA will see some modifications given that UK has opted to leave EU
  3. Brexit will affect India’s interests on those tariff lines where concessions were being considered in the proposed India-EU FTA
Jul, 06, 2016

Hungary welcomes Brexit-hit firms

  1. News: Hungary has offered to “incentivise” Indian companies hit by the Brexit
  2. Indian companies may leave the UK as the European Union (EU) is unlikely to subsidise UK-based international companies for long
  3. Context: Hungary is one of the major countries affected by the Brexit referendum as nearly 1 lakh Hungarian workers, facing an uncertain future in the UK, may return home seeking new jobs
  4. Hungary’s quest for finding Indian investment is partly influenced by the need to meet the challenge of Brexit
Jun, 27, 2016

Scotland considers independence from the UK for the second time

  1. News: Scotland’s government is preparing a legislation allowing a second independence referendum while continuing discussions on its place within the EU
  2. Scotland is a country that is part of the UK and covers the northern third of the island of Great Britain
  3. Context: Though UK voted an overall 52-48% to leave the EU, Scotland voted 62-38% to remain in the EU – ie, sharp contrast with the UK
  4. Background: The first time when Scotland demanded independence from the UK was through a referendum in 2014, which was rejected by 55-45%
  5. Scots opted to remain part of the UK in 2014 because they believed that was the only way to guarantee EU membership
Jun, 27, 2016

Post Brexit chaos in UK

  1. Scotland might hold a second referendum on independence from the UK, as Scotland wanted to stay in the EU, in sharp contrast with the UK’s decision to leave
  2. If Scotland does hold a referendum, it might lead as an example for neighbours to follow their lead
  3. Even Northern Ireland had voted to stay in the EU – hence they might consider reunificatio with Ireland
  4. Also, even London might declare independence from the UK – a petition to the Mayor is attracting more support
Jun, 25, 2016

Free trade talks with EU to be modified

  1. News: Proposed India-EU Free Trade Agreement (FTA) will see some modifications and moderations due to Brexit
  2. No immediate impact on India’s trade and investment with the UK and the EU
  3. Because trade and investment with the 2 are currently happening not on the basis of an FTA but on a bilateral basis
  4. There won’t be a separate FTA with the UK due to Brexit
  5. Background: India-EU FTA negotiations have been deadlocked since 2013 due to several differences
Jun, 25, 2016

Brexit and India - Short-term impacts

  1. Centre and RBI working on mitigating short-term impacts due to Brexit
  2. Trade: No immediate impact on India’s trade and investment with the UK and the EU
  3. Proposed India-EU Free Trade Agreement (FTA) will see some modifications and moderations
  4. Currency: Negative effects as British Pound gets weaker:
  5. Put pressure on India’s exports, especially in the IT sector as Europe is the 2nd largest market
  6. Positives as British Pound gets weaker:
  7. Buying a home in the UK would be cheap
  8. Trips to UK will be cheaper
  9. Increase in Indian students choosing UK for their higher education
Jun, 25, 2016

Brexit and India - Long-term impacts

  1. Govt: Indian economy has enough ‘firepower’ to deal with the Brexit situation
  2. According to the government and the RBI, India will not suffer from any long-term impact of Brexit due to:
  3. Strong domestic fundamentals
  4. Low short term external debt
  5. Sizeable foreign reserves
Jun, 24, 2016

Divided Kingdom leaves EU

  1. Official results: The ‘Leave’ side prevailed 52% to 48% in Thursday’s vote, which had a turnout of 72%
  2. Why Leave? To take greater control of its economy and its borders
  3. Impact: Shattering the stability of the continental unity forged after World War II
  4. Financial authorities around the world have warned that a British exit will reverberate through a delicate global economy
  5. The U.K. is the first major country to decide to leave the bloc
  6. EU had evolved from the ashes of the war (World War II) as the region’s leaders sought to build links and avert future hostility
Jun, 23, 2016

RBI assures market of liquidity in case of ‘Brexit’

  1. News: RBI has assured the market of liquidity if necessary, as fears of Brexit remains
  2. The RBI governor reassured that RBI was prepared to curb any volatility and reiterated that the country has plenty of reserves
  3. Brexit: Possibility that Britain will withdraw from the European Union
May, 14, 2016

Brexit: IMF warns of economic ruin

  1. Context: Brexit- in-out referendum in England to be held on June 23
  2. IMF: Vote to leave the EU would be costly in the long run, even after the uncertainty has been resolved
  3. Short term: Risk of an adverse market reaction to a leave vote
  4. This could be in the form of a depreciation of the sterling and large contractions of investment and consumption
  5. Earlier: The governor of the Bank of England had warned that a Brexit vote could push the U.K. into recession
Apr, 04, 2016

Greece demands IMF explanation over leaked transcript

  1. Context: Greece demanded an explanation from the IMF after an apparent leaked transcript
  2. Transcript: Suggested the IMF may threaten to pull out of the country’s bailout as a tactic to force European lenders to offer more debt relief
  3. Background: EU/ IMF lenders will resume talks on Greece’s fiscal and reform progress in Athens this month
  4. Aim: To conclude a bailout review that will unlock further loans and pave the way for negotiations on long-desired debt restructuring
Sep, 22, 2015

Syriza wins again in Greece

  1. The Syriza party won the polls yet again and Alexis Tsipras will be back as the Prime Minister of Greece for the next 4 years.
  2. The newly elected government has to take measures to overcome the debt crisis and to develop the economy of Greece which is down for few years.
  3. The government also has a tough task to take measures for the Refugee crisis with most of the population from war torn countries moving towards Europe.
Jul, 24, 2015

[cd explains] Greece-waale Bailout Le Jayenge

A Bollywood take on the crisis!

Here is the ultimate block buster in Economics. Isme action hain, drama hain, austerity hain, reforms hain, growth hain, depression hain, there are scams galore and bro-mance to boot! How could Bollywood not move in to create a movie?


 

Jul, 20, 2015

Germany rules out debt relief

  1. Germany made it clear that no part of Greek debt would be forgiven. However, Berlin was open for a flexible repayment plan.
  2. IMF had earlier criticized the Greek bailout proposals and urged the creditors to give some kind of upfront debt relief.
Jul, 18, 2015

German Bundestag passes the resolution to initiate talks with Greece

  1. A day after Greece agreed on the austerity measures, German Lawmakers agreed to initiate talks regarding the Euro 86 Billion bailout package.
  2. Germany is one of several EU countries whose Parliaments must sign off any debt deal for Greece.
  3. This German vote was only about resuming official talks — a final deal with Greece will also need the assembly’s approval.

     

     

Jul, 17, 2015

Europe set to restore funding to Greece

  1. Satisfied with the Greek Parliament’s approval to austerity measures, Europe is ready to provide the next bailout package.
  2. However, the Parliamentary approval resulted in a revolt in the ruling Syriza party which could lead to snap elections in the next few months.
Jul, 11, 2015

‘Grexit’ will be extremely costly, says IMF chief economist

  1. IMF ruled out further funding for Greece until old arrears are cleared.
  2. Greece defaulted on a loan repayment of €1.55 billion due to the IMF on June 30.

  3. According to the IMF economist, reforms were needed in tax administration, collective bargaining, the judicial system, pensions and reducing barriers to entry for professions, and these were not undertaken to a sufficient degree.
Jul, 11, 2015

Athens accepts harsh austerity measures

  1. Reforms like tax raises, pension reforms, economic liberalization were included in the package Greece sent to the Eurozone creditors for fund to avert bankruptcy.
  2. The reform package will amount to Euro 12billion over next two years.
Jul, 09, 2015

Thomas Piketty on European Crisis

Since his successful book, Capital in the Twenty-First Century, the Frenchman Thomas Piketty has been considered one of the most influential economists in the world.

Germany Has Never Repaid its Debts. It Has No Right to Lecture Greece.


 


So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?

Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece.

Jul, 07, 2015

[op-ed snap] Political implications of the Greek crisis


 

The Greeks have voted resoundingly against the economic policies that its creditors in the European Union want it to pursue.

But what next?

  1. Other weak European countries such as Spain could be tempted to follow the Greek strategy.
  2. The impact of a Spanish or Italian default will be far more severe because of the size of their outstanding public debt.

There is one principal economic lesson from the Greek crisis: a monetary union cannot work well unless there is a fiscal union as well.

The Grand European Project : Genesis

At the end of World War II, visionaries such as Jean Monnet convinced Adenauer of Germany and Robert Schuman of France—that deeper economic engagement between European countries would be the best way to prevent a repeat of the mistakes that led to so much bloodshed in Europe between 1914 and 1945.

Brief Timeline –

  1. 1951 – Setting up a common system for coal & steel
  2. 1957 – European Economic Community was set up
  3. 1992 – The Maastricht Treaty led to the creation of the European Union
  4. 1999 – Euro made its debut

A few Trivia questions –

  1. What is the difference between the European Union and Euro Zone?
  2. Latest country to join them respectively?

 

Jul, 07, 2015

Finance Minister resigns to smoothen talks with creditors

  1. After Greece’s astounding ‘No’ in referendum, FM resignation has removed a major obstacle to any deal to keep Athens in the euro zone.
  2. Greek PM said that Greece would bring a proposal for a cash-for-reforms deal to an emergency summit of euro zone leaders.
Jul, 03, 2015

[op-ed snap] Lessons from a Greek tragedy


 

The Greek episode has exposed fundamental assumptions about the role of the state and its capacity for reform to a searing examination.


 

Two key takeaways:

  1. The idea that nations in different stages of development could be yoked harmoniously under a common currency without sufficient fiscal oversight might never truly be a sustainable one.
  2. From a comparative Indian perspective, there are long term challenges looming for the NDA government too.

In this year’s budget, the government pushed back by a year, to 2017-18, a deadline for cutting the fiscal deficit to 3% of the gross domestic product. For now, the government has largely chosen to focus on disinvestment as a means of deficit reduction but ultimately it will need to tackle the revenue deficit and unfunded welfare subsidies.

Jul, 02, 2015

Greece to move ahead with referendum

  1. Greek PM has urged the people to vote ‘No’ in the referendum due on July 5.
  2. He says that a ‘No’ vote does not signify a rupture with Europe, but a return to the Europe of values.

  3. Crisis has also opened another rift in Europe with France in favor of an immediate agreement with Greece and Germany stern on its stand of no agreement before the referendum.
Jul, 01, 2015

Greece proposes a 3rd bailout!

 


 

  1. The Greek government has proposed a new Two-Year bailout programme, according to news breaking in Athens.
  2. This two-year programme would be supplied under the European Stability Mechanism (Europe’s bailout fund).
  3. And – crucially – would run alongside a debt restructuring.
  4. And it wouldn’t include the International Monetary Fund!
Jun, 30, 2015

Greece situation at a point of no return?

Jun, 30, 2015

[Discuss] How would you vote in the greek referendum?

 

 

Jun, 29, 2015

Greece to hold referendum on debt deal

 


The Greek Prime Minister has declared that the country will hold a referendum on July 5 on whether or not to accept the debt deal that has been proposed by its international creditors.


  1. Greece has refused to accept cuts to pension payments or public sector wages.
  2. The IMF is pushing for deeper spending cuts, not just more tax rises
  3. A key point of friction is a special benefit paid to some low-income pensioners, which creditors want scrapped.
  4. Creditors also want a wider VAT base; Greece says it will not allow extra VAT on medicines or electricity bills, and has also resisted calls for VAT hikes on hotels and restaurants.
  5. Athens wants a concrete commitment to debt relief, something its creditors are not offering

 

 

Jun, 24, 2015

[cd explains] How did Greece get in this mess?

 

Jun, 23, 2015

Greece Is in a Worse Spot Than America Was in 1933

  1. Using the second definition of depression, most economists refer to the Great Depression as the period between 1929 and 1941.
  2. Economic depression is highly subjective and includes the depth of contraction with the chronic nature of a given slowdown.
  3. What is certain is the plunge in output qualifies Athens to scream: “depression.”
Jun, 23, 2015

Greece yields, world hopes

Greece’s creditors suggested for the first time that a deal to avert bankruptcy is in sight after a proposal by Athens made significant concession on pension cuts. They will be coming to the table for discussions on tax cuts & EU + IMF might just unlock an aid.


But first things first, Greece makes up just 2% of the euro zone economy, so should you even care about what finally happens?

Yes.

Above and beyond the economics of the Greek crisis, however, what is clear is that the political implications of a default and possible euro exit would be huge and largely negative.

Jun, 22, 2015

If Greece melts down, who really cares?

  1. Athens is facing another deadline to repay its debts, putting Greece again in spotlight.
  2. Greek default does not imply Greek exit from the EU or euro.
  3. But the political implications would be huge and largely negative.

    Governments in the other countries on the receiving end of EU-mandated austerity having been closely following events there. Debt relief offered to Athens might inflame their own opponents of austerity. Should Greece exit the euro and perform relatively well, such pressures would increase!

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