As eurozone talks stall, fears of a Greek exit

As eurozone talks stall, fears of a Greek exit

Feb. 17: Friday offers one more chance to reach a deal. Plus, B.C. holds onto a surplus, and the Japanese hold onto their flip phones


Ah, Greece. The excitement never ends.

If yesterday was a high-stakes day for Greece and the eurozone economy, it certainly wasn’t the first—and it won’t be the last. After talks over the next step for Greece’s bailout broke down acrimoniously, eurozone finance ministers said they would revisit the negotiations on Friday, but only if Greece agrees to eurozone conditions. So far, Alexis Tsipras and his finance minister, Yanis Varoufakis, are sticking to their election plans not to accept an extension of the current bailout and its austerity requirements. So far this morning, European markets are down and the euro is feeling shaky, after yesterday began with tentative optimism that a deal would be reached.

At home, markets are back open today, and oil is trading above $53 this morning. A CP Rail strike is also over, after lasting less than two days before an agreement to go to binding arbitration, with the threat of a back-to-work bill looming. Today, B.C.’s budget will be announced, and StatsCan will release December numbers on international transactions in securities, which cover flows of equity, debt, and money-market instruments in and out of Canada. The Bank of Japan will also begin a two-day meeting, and the eurozone finance ministers continue for a second day of meetings. This morning, inflation numbers showed the U.K. is facing record low inflation, after prices rose only 0.3 per cent in January. Today is also the last day before China shuts down for almost a week for New Year’s celebrations.

What happens if Greece and the eurozone don’t reach a deal? Without some kind of arrangement, Greece will run out of cash by the end of the month, according to reports earlier this month from BloombergBecause the country is facing enormous bills in the coming months—here’s a chart—the country would rapidly default and then, presumably, leave the eurozone and return to the drachma. Common predictions include a massive outflux of money from the country, a huge spike in inflation, and (more) social unrest, but there’s no firm agreement on what will actually happen. Because no country has ever left the eurozone, it’s unclear what, exactly, the impact would be on the rest of the union; while Germany has maintained the eurozone would be fine, many others say it would be an absolute disaster. The threat of contagion is just one of the many, many concerns. Markets have been rising and falling on every twist and turn in the negotiations (and, before that, on every new twist in the Greek elections), and other countries, including Spain, are themselves shouldering high debt burdens and seeing rising support for anti-austerity parties. Meanwhile, the eurozone is trying to pull itself out of slow growth and deflation with a quantitative easing program, which requires an essential dose of confidence to loosen lending.

B.C. to table a surplus budget. The province’s finance minister, Mike de Jong, says the province will have an even larger surplus than expected this year, beyond the $444 million already predicted. He also said there will be surpluses for the next three years. De Jong says this would make the province the only one to table a surplus this year, attributing the boost to a temporary income tax hike on higher earners. Alberta may not be feeling neighbourly cheer at the news: Late last year, the province still predicted a surplus, but, last month, Jim Prentice said the province is facing a $500-million deficit due to falling oil prices. Saskatchewan, the other province that was recently holding onto a surplus, also recently announced it was likely facing a deficit. 

How reliable is the Labour Force Survey? The debate over how the end of the mandatory long-form census has affected the Labour Force Survey continues. Yesterday,  Maclean’s Kevin Milligan highlighted the survey’s methodological reliance on the long-form census, and asks if, and how, the survey is bettered by not using the volunteer National Household Survey, which has had very mixed response rates. It’s a debate that has been raging between the head of Statistics Canada and critics, including the Globe’s Barrie McKenna, who called the survey “dangerously unreliable and increasingly volatile.” In response, chief statistician Wayne R. Smith said the survey is “is every bit as robust today as it has ever been.” Given that the Labour Force Survey is one of the most crucial pieces of economic data we have on how the economy is performing—and, last year, proved to be a much weaker year for jobs than expected—it’s a technical, but important, debate on what we actually know about Canada’s economy.

Flip phones are still cool in Japan. Maybe Anastasia Steele knows something we don’t? The female character in Fifty Shades of Grey was much-mocked this weekend for her reliance on an old-timey flip phone (with Buzzfeed referring to it as a ” ’90s detail”, despite the fact that I personally was using one in 2012), but perhaps she just knew “dumb phones” were still big in Japan. A recent market-research survey showed that flip-phone shipments were actually up by 5.7 per cent last year, as smartphone shipments declined by 5.3 per cent, the second year of a decline. In Japan, the classic flip phone never really went out of style, plus, they’ve always been cheaper (and good for calling people.) Nonetheless, smartphones are still more popular. Even as shipments decreased, there were still at least three times as many smartphone as flip-phone shipments in Japan last year (27.70 million phones). Here’s a handy graph.

Need to Know:
TSX: 15,264.81 (+36.29), Friday
Loonie: 80.25 (+0.19 cents), Friday
Oil (WTI): $53.08, Tuesday morning (6:30 a.m.)