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You are reading the old Leavonomics blog, which ran from October 2008 to March 2012.  I have moved to wordpress for the new blog, which will be up and running later in August 2014.  You can access it here

Partial Greek default... to allow another loan.

In the largest partial debt default in history, 85% of private investors have agreed to take steep losses on their holdings of Greek debt. They will lose more than 70% of their investment. They accepted - in the end - that this was a better deal than allowing Greece to go bankrupt, in which case they would have lost everything. This agreement with private investors is an essential part of Greece's second "bailout". It paves the way for the EU and the IMF to sign off on a €130billion loan - called a "rescue package". Greece, which was facing bankruptcy within two weeks, can breathe again - and so can its creditors.

However, even after the latest loan, the country will still be left with debts of €250billion. The economy is in its fifth year of recession - never, in recent times, has an economy of a Western country shrunk so fast - 16% in just four years. The earliest any overly optimistic economist is predicting growth is 2014.

As expected, the markets reacted positively to the default news. The markets for want of a better term tend to "forgive" quickly. We have already seen this with other structured defaults in Russia, Brazil, Iceland etc. Why? Because all the markets care about is the future - not the past. Basically, a default means you are then a better bet than you were, to be able to pay in the future, the face value of any newly issued Govt bonds plus any interest payments - end result: they will allow you to play. It makes you wonder about our Government telling us all how hell would break loose in the markets if we burned Anglo Irish bondholders.

At the end of the day, this latest episode is yet another in a series of events designed to protect the Euro - at all costs, as well as saving the international banks from a total Greek default. The Greek problem is far from over yet...

Icelanders can't afford Big Macs anymore

McDonald's is to close its business in Iceland because the country's financial crisis has made it too expensive to operate its franchise. The fast food giant said its three outlets in the country would shut - and that it had no plans to return.

Besides the economy, McDonald's blamed the "unique operational complexity" of doing business in an isolated nation with a population of just 300,000. Iceland's first McDonald's restaurant opened in 1993. The franchises are run by a firm called Lyst, with owner Jon Gardar Ogmundsson saying the decision was "not taken lightly". He said that the restaurants imported the goods from Germany, but that costs had almost doubled, with the falling krona making imports prohibitively expensive.

Mr Ogmundsson said the restaurants had "never been this busy before... but at the same time profits have never been lower". "It just makes no sense. For a kilo of onion, imported from Germany, I'm paying the equivalent of a bottle of good whisky," he added. He now plans to run the restaurants under another name so that he is able to buy cheaper Icelandic products.

Iceland's banks collapsed at the height of the global credit crisis - wrecking the country's economy and forcing it to rely on an $10bn (£6.1bn) international aid package.

David McWilliams discusses the pullout here.

Recession ending for some

Brazil has come out of recession after its economy grew in the April-to-June quarter. The largest economy in Latin America expanded by 1.9% in the second quarter from the previous three months.

Data also showed Sweden emerged from recession on Friday, a sign that economies are starting to recover from the global economic downturn. Other countries that have come out recession include the eurozone's largest economies, Germany and France. Japan, the world's second-largest economy, also grew by 0.6% in the second quarter, less than the 0.9% growth the government initially estimated.

Stupid bankers!

Q: What's the question most bankers are asking these days?
A: "Do you want fries with that?"

Q: What's the difference between a bank manager and a pigeon?
A: A pigeon can still put a deposit on a Ferrari.

Q: How do you get a banker out of a tree?
A: Cut the rope.

Q: What’s the definition of optimism?
A: A banker who irons five shirts on a Sunday evening.

A banker said he was going to concentrate on the big issues from now on. He sold me one in the street yesterday.

Q: What is the difference between a banker and a large pizza?
A; The pizza can still feed a family of four.

Q: What's the difference between a banker and a couch?
A: The couch can support a family of four.

Q: What do you call a banker without a girlfriend?
A: Homeless

An Bord Snip Nua report is out

As a result of Ireland's financial crisis there were calls before Christmas for the formation of a new body to identify areas for cut-backs in public expenditure. A group of experts was called together at the behest of the Minister for Finance Brian Lenihan. The group's formal title is "Special Group on Public Service Numbers and Expenditure Programmes". It is a four person group, headed by University College Dublin economist Colm McCarthy (pictured above). Colloquially, it is referred to as "An Bord Snip Nua".

Today, the Department of Finance published An Bord Snip Nua's recommendations for around €5.3bn worth of public spending cuts. The 80-page report includes hundreds of proposals, including the abolition of the Department of Community, Rural and Gaeltacht Affairs.

It recommends a reduction of up to 5% in social-welfare rates, an increase in the retirement age, a reduction in the number of Irish embassies and increases in hospital charges. Other proposals include a cut of 500 in Defence Forces personnel, an amalgamation of small primary schools, means tests for home-care packages and reduced spending on road maintenance. An Bord Snip is also recommending the abolition of Sports Campus Ireland and the Irish Film Board, a 33% reduction in the number of VECs and the discontinuation of the rural transport scheme.

Euro cities cheaper to live in

A new survey released today has shown that Dublin has dropped out of the top 20 most expensive cities in the world, due to lower rents and the euro's fall against the US dollar. The cost of living survey for 2009, carried out by consultants Mercer, puts Dublin as the 25th most expensive of the 143 cities covered. This compares with 16th last year. Tokyo has knocked Moscow off the top spot.

In Mercer’s survey, New York is used as the base city for the index and scores 100 points, all cities are compared against New York and currency movements are measured against the US dollar.

Standing room only?

Ryanair Holdings may offer free flights to passengers willing to stand up during flights of less than 90 minutes, Sky News reported, citing chief executive Michael O'Leary.

Ryanair is asking Boeing about converting planes or delivering a new fleet with a section of “vertical seating”' that would allow passengers to stand or to sit on bar stools similar to those in trains' dining cars, Sky reported Mr O'Leary as saying in an interview.