We have a crisis in our hands

In some European countries, today we have reached a turning point. They have adopted very stringent measures to contain the coronavirus pandemic. 

The decisions have nothing to do with President Trump’s harsh words about us, words that were pronounced yesterday, when he was announcing the entry ban on European visitors. 

Today’s measures, adopted in France, Belgium, Denmark, Spain, Portugal and elsewhere, are just an indication of the level of risk we are confronted with. The pandemic is a major menace, that was the message coming from the different governments. It is huge because nobody knows the dimension it might get, nobody is in a position to guess a timeframe but everyone sees it will have a major impact on human lives, on public resources, on living standards, on lots of economic, financial and social aspects.

In view of that, the preventive measures can only be of an extraordinary nature. Some might seem disproportionate, but who knows what is reasonable or excessive, in a crisis of this dimension?

A challenging March

As we get into March, we can be sure we will have major challenges in front of us. The coronavirus will probably be the most critical. It has all the key ingredients to confuse many of us. People will keep pressing the panic button and the political leaders will be jumping in all directions, just to show to the citizens that they are moving as required. Then, there will be the economic impact. On the economic side, the crisis can be multifaceted. There will be less demand, the supply chains will be disrupted, and many enterprises will face serious cash problems. In addition, the stocks will not be able to recover the immense value that has been lost during the past week and probably the week ahead.

Obviously, the health systems will be under serious stress. They will become distorted as much of the resources will be focused on the Covid-19 pandemic.

Adding to the above, we will see an escalation of the conflict between Turkey and Syria, supported by Russia, a new migratory crisis and a Brexit on the rocks.

This is a time that calls for a new type of leadership.

On Greece´s next steps

We should congratulate Alexis Tsipras this evening. The Greek voters have shown they unmistakably support him and his approach to country´s debt issue.

Now Tsipras has to come up with a clear negotiating position. It has to be on the Euro group tables by tomorrow. There is urgency. And it is also very urgent to show that there is a way forward.

The proposal has to come from the Greek side. And be ready for a decision to be taken on Tuesday evening, when the Euro group leaders meet in Brussels.

These are indeed extraordinary times. They call for very clear commitments and well defined boundaries. Indecision and vagueness are key risks to avoid. As one has to avoid to be trapped by personal likes and dislikes. We might not like the other side, but we have to sit with him and talk in a very frank and constructive way. 

Greece: calling a spade a spade

Today´s prevailing position on Greece´s fate, in the European political and financial circles that have power, was rather clear: it´s time to call a spade a spade.

This basically means, as I see it, that those leading circles have come to the conclusion that the Greek situation has reached a decisive point. And the decision is to let Greece go its own way. It makes no sense to advocate for a solution that the other side does not accept.

I tend to agree. Default is painful but it is not the end of the road. Argentina and other countries have gone through that experience. Even California did. Default can actually be the beginning of a new cycle.

On the markets side, it looks as if the default possibility is now perceived as inevitable but with a manageable impact.

In the end, those who will be seriously affected are the poor people in the streets and villages of Greece. Unfortunately it´s always like that.

Greece´s way to hell

The end is close, preach those Christian fanatics that come to our doors, the Bible in their hands and the announcement of doom in their mouths. They are just in a mission to try to save us.

I thought of them today as I read the news about Greece. The end is close, the players seem to be saying. In this case, we know what they mean. But opposite of the preachers ‘approach, in the case of Greece many seem to be just waiting for it to happen. It is a bit as if different sides to this fate of gloom and doom would be relieved the day it happens.

The only problem is that once you reach the other side, hell can indeed be very bad. 

Greece: they will decide and we will talk with them afterwards

It is unwise for the EU leaders to freely comment on the forthcoming elections in Greece. It sounds like outright interference in the domestic electoral process. The Greeks will decide, based on their own internal power dynamics. Then, and only after that, the rest of the EU will see what comes next. There will for sure a need for negotiations. And everyone knows that only reasonable people with sensible negotiating standpoints can achieve results. Therefore, I believe that both sides, the Greeks and the external partners, will negotiate with a key concern in mind: these are no times to rock the boat. These are times of great global uncertainty and judicious people in Europe understand the current trends and circumstances. It would be a serious mistake for all of us if moderation was put aside. Leadership, today, at the beginning of this New Year, is about avoiding a race and an acceleration towards more confrontations. 

Greece at the margins of Europe

Greece is again in the news. But this time, it´s no longer a headline. It is still front page news, of course. But barely, at the bottom of the front page. However, for some papers, like Le Monde, is not even there, but lost in some less prominent corner of the newspaper.

Also, Greece is no longer very big news for the markets. Besides the Greek stock exchange and the Portuguese one as well, because Portugal´s bourse is very fragile and very sensitive to bad news coming from countries that could be considered comparable, all the other financial indexes have shown indifference to the developments in Athens

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Basically, the signs are very clear: the Greek politics are essentially a domestic matter. The voters will decide and will leave with the consequences of their decision. There is also the conviction that Syriza, the extreme left coalition, will not be able to put together enough votes to form a government. That might lead to a long period of impasse, with the country being administered by a caretaker government. Again, that seems to leave many in Europe indifferent.

Geopolitics and crisis management have placed Greece back at the periphery of Europe. This will bring some changes, for sure. 

End of summer vacations

End of August, end of summer holidays. This summer has been however a very busy one. And as we get into full gear in September, we will see an international scene pretty crowded by a number of key issues. The fragility of the politics has an obvious impact on the economy and the international business climate. But I have to say that surprisingly there is some kind of euphoria on the international financial front. A bit as if the politics and the financial matters were happening in two different worlds. And they are, in many ways. Russia and Ukraine, Syria, Iraq and ISIS, Libya and Egypt, the Ebola crisis, all that looks like crisis in distant planets. Big financial funds and the masters of global business transactions have been able somehow to isolate those crises and they believe the risk of contagion is today lower. But we forget that planets can also get into each other´s trajectory and crash. Prudence is then the right approach as we get into the new season.

The financial snake and the golden ghost

At present the international scene is very unstable. People with lots of money and greedy egos seem to be particularly confused about the prospects. They have the financial resources, plenty of financial muscle, they get into the markets, buy loads of shares, then get nervous, and move out as swiftly as they came in.

That shows the volatility of the overall geopolitical situation.

It also shows that financial decisions and the related markets are now fully connected all over the world. Early in the morning, well before the beginning of the business day in Europe, people in London, Paris, Frankfurt, and Luxembourg will get all the data from stock exchanges and analysts in Asia. That gives then the trend for the day.

And vice versa. Tomorrow morning, big guys in Hong Kong, Shanghai or Tokyo will start their early hours by looking at the information coming during night from the US. And that will influence their decision making.

It is often the snake eating its own tail. 

Portugal's Finance Minister has resigned

The Portuguese Finance Minister, Vítor Gaspar, resigned this afternoon. He had lost the public opinion battle long ago, as he was seen by the voters as the engine of the austerity programme Portugal has been implementing for two years. His name was, in the people’s minds, linked to taxes and economic recession. This was, of course, an unfair connection, as the economic situation of the country is much more complex than just the austerity measures he had to adopt. But politics are like that: you cannot find yourself without a popular power base.

For a long period, his power came from the confidence the Prime Minister had on his abilities to master the intricacies of the financial adjustment programme in addition to fact that Gaspar had a lot of support in Brussels, Berlin, Frankfurt and other EU capitals. But this was a time-bound power base, condemned to die. As the Prime Minister felt more and more isolated, including within his own party, his support to the man everyone identifies with the austerity could only come to an end. It has now happened. And Gaspar, who is an outsider in terms of the national politics, could read the writing on the wall. 

When the image spirals out of control...

Two friends of mine are travelling to Greece tomorrow for a week away from our grey skies. They bought a package holiday, the well-known “all inclusive deal”. Yesterday, when collecting the vouchers, they realised that the 5-star hotel they had picked is closed for lack of guests, then the alternative option is also closed; only the third choice is indeed available. They then realised that Greece has somehow disappeared from the holiday map of Northern Europe. For now, at least, I should say, and particularly for the high end segment of the tourism market.

This is no good news for Greece.

The finance moralist is a failed politician

Jeroen Dijsselbloem might not know where Bangui is located. Most likely, he had also no idea up to recently where Nicosia is. But like the Séléka rebels in the Central African Republic, he managed today to create chaos and uncertainty. His interview with Reuters and the Financial Times shows that he has the same level of political tact and experience as the leaders of Séléka. And he managed to do what the CAR rebels are very good at: to divide what should be united. They split the country along ethnic lines, a tradition in that part of the world. Djisselbloem split Europe, separating the good people of the parsimonious North from the prodigal boys from the South. And undermining bank recovery in the lands of such bad boys.

Then, later in the day, maybe after a serious caning by Angela, the man said that his words about the Cyprus programme being a template for future financial crisis were not meant to mean what they indeed mean, as each country situation is a special case.

He is the one that could be considered a special case.

Maybe the UN – at a time when its presence in Bangui is being seriously challenged –should consider sending him as an envoy to CAR. The country is at least a safe place for the markets as there is no Reuters or Financial Times correspondent around. 

The Russians and Merkel

On Cyprus, again... The main concern of all parties – EU and Nicosia – seems to be about face saving. Any solution will now be massaged to look good for both parties. But there is still the Russian unknown. And Berlin gets mad every time the Kremlin is mentioned as a potential partner, as a possible contributor to the solution.

The saga needs to be followed with great attention. It is a turning point in European affairs. 

Time for serious repair work

The Cypriot Parliament has now voted against the foolish financial package that the EU leaders were trying to impose on them. Instead of a sleepless night the bosses of Europe should think about reaching out towards Russia and getting the Kremlin to cost-share the rescue of Cyprus’ banking system. This would be a strategic move. It would build a concrete bridge between the EU and Russia, at a time when many years of empty grand rhetoric have achieved nothing in terms of a real partnership between the two sides. It would also contribute to stabilize the markets which have been seriously affected by Brussels’ decision and will be further destabilized by tonight’s impasse, after the parliamentary vote.

All this requires vision, courage and humility. These are exactly the commodities that have become rare in the EU corridors of power.