10/1/2015: Where did Europe's EUR3 trillion worth of debt go?

You know the Krugmanite meme… Euro area is doing everything wrong by not running larger deficits. But here is an uncomfortable reality: since 2007, Euro area countries have managed to increase their debt in excess of 60% of GDP by a staggering EUR3 trillion.

So here's the crux of the problem: where did all this money go?

We know in terms of geographic distribution:

EUR1.6 trillion of this debt increase went to the 'peripheral' countries, and EUR39.2 billion went to the Easter European members of the Euro area. EUR517 billion went to the 'core' economies. And a whooping EUR759.9 billion to France. Now, across the 'periphery' some 20-25% of the debt increase is attributable to the banks measures directly, but the rest is a mix of automatic stabilisers (e.g. increases in unemployment benefits due to higher unemployment) and old-fashioned Keynesian policies.

It might be that Euro area is not spending enough in the right areas of fiscal policy. But to make an argument that it is not spending enough across the board is bonkers. We have allocated some EUR3 trillion in borrowed spending and we will continue to run the debt up in 2015. And still there is no sign of growth on the horizon.

So, again, where is all this money going?

10/1/2015: Irish Retail Sales: November

Irish retail sales figures for November, published by the CSO earlier this week came in at the weaker end of the trend. Here is detailed analysis.

On seasonally-adjusted basis:

• Value of retail sales ex-motors fell 0.31% m/m in November having posted a 1.04% gain in October. 3mo MA through November was down 0.11% on 3mo MA through October, which itself was down 0.07% on 3mo MA through September.
• Volume of retail sales ex-motors was up 0.19% m/m in November, having posted a rise of 0.96% in October. 3mo MA through November was up 0.26% m/m  for the 3 months through November compared to 3mo MA through October, having previous posted identical increase in October, compared to 3mo MA through September.
• Meanwhile, Consumer Confidence was, for a change, more closely aligned with value of sales indicator. Consumer Confidence indicator was down0.23% m/m in November, having posted 0.68% decline in October.

Two charts to illustrate:

The first chart above plots longer-range series, showing two main insights:

1. Consumer confidence continues to vastly outpace actual retail sales performance in terms of both value and volume of sales, although we are starting to see de-acceleration in consumer confidence growth in terms of trend. Nonetheless, consumer confidence bottomed-out around July 2008. Actual retail sales did not bottom out until June 2012 (in Volume and Value of sales terms).
2. Since bottoming out, retail sales have been performing with virtually divergent dynamics. Trend in Volume of sales is relatively strong, upward. Meanwhile, trend in Value of sales is relatively flat, upward. In more recent months, this divergence is increasing once again.

The above is again confirmed in November data and in year-on-year comparatives too, as shown in the next chart.

Year on year (based on seasonally unadjusted data):

• Value of retail sales ex-motors rose 1.33% y/y in November having posted a 1.91% gain y/y in October. 3mo MA through November 2014 was up only 1.4% on 3mo MA through November 2013.
• Volume of retail sales ex-motors was up robust 3.92% y/y in November, having posted a rise of 4.40% in October. 3mo MA through November was up 3.7% y/y.

The above data clearly supports trends identified in previous months: Irish consumers are not striking, nor are they holding back consumption. Instead, they are willing to buy when they see value. Unfortunately for our retailers, that means more sales with lower profit margins. As the chart below shows, we now have 13 consecutive months of growth in volume of sales outstripping value of sales and out of the last 21 months, only one posted growth rate in value of sales in excess of volume of sales.

Using my Retail Sector Activity Index to plot underlying activity across the sector (note: the RSAI has much higher correlations with both indices of retail sales than consumer confidence), chart below shows that in 2014, growth rate in overall sector activity slowed down significantly compared to 2013.

The above, of course, is rather natural for the recovery that first produces a faster bounce up and then settles into more 'sustainable' over time rate of growth. The problem, however, is that current activity by value of retail sales is still 39.1% below the pre-crisis peak levels and for volume of sales it is 34% below peak. Even compared to the pre-crisis average (2005-2007), activity is down 11.2% in value terms and 3.2% lower in volume terms.

9/1/2015: Advisor-Driven Investment Management: Partial, Biased and Risky?

My post for Learn Signal blog on the issue of sell-side advice and inherent conflicts of interest and biases that are material to advice-driven investments: http://blog.learnsignal.com/?p=142

7/1/2015: China Threat: Europe's Exports Under Pressure

Recently, Irish Times run an article about threats and challenges to Irish economic model (whatever it might be - I have no idea), concluding that all is down to 'political leadership' (whatever that might be is also something I can't comprehend). But in reality, a key threat to Irish economy is the threat of changing nature of global production and demand patterns, related to

• Challenges from China and other emerging economies (which increasingly produce goods and services for global consumption that rival in quality European goods and services);
• Challenges from growing regionalisation of trade (with producers, including the MNCs, moving closer to the demand growth centres - which are nowhere near Europe); and
• Challenges from growing regionalisation of investment and capital flows, including financial and human capital (which puts pressure on our funding models for enterprise formation and growth).

There is little in the above that is subject to our policymakers' 'leadership' and much in the above that is subject to our internal market competitiveness.

But, setting aside the above considerations, what is the evidence of the growing threat from the emerging markets economies? Take a look at a recent paper by Benkovskis, Konstantins and Silgoner, Maria Antoinette and Steiner, Katharina and Wörz, Julia, titled "Crowding-Out or Co-Existence? The Competitive Position of EU Members and China in Global Merchandise Trade" (ECB Working Paper No. 1617: http://ssrn.com/abstract=2354238).

Keep in mind - this is ECB, so all conclusions might have been relatively placated or moderated to suit the prevalent narrative that things are going fine for Europe.

In their paper, the authors "analyse export competition between individual EU Member States and China in third-country goods markets."

Top of the line finding is that "competitive pressure from China is strongest for small and peripheral EU members, especially for the Southern periphery, Ireland and Central, Eastern and South-eastern European EU members. While we find no hard evidence for "cut-throat" competition between China and EU countries, we see an increasing tendency of smaller EU exporters leaving markets that are increasingly served by China." And another note of caution: data only goes to 2011, which means that whatever intensification in competition that might have happened in 2012-2014 - the years when European producers saw increased incentives to export due to sluggish growth in Europe, while Chinese exporters faced similar incentives to export due to decline in domestic returns on capital, and changing nature of domestic investment markets.

So some details.

Authors note that "the extent of existent competition between individual EU members and China (observed at the margin of the markets served by EU members) is fairly homogeneous across all EU countries." Figure 1 below (labeled Figure 7 in the paper) "shows that the fraction of trade links where both China and the given EU member are active in two consecutive periods amounts to roughly 62% in 2009, up from 49% in 2001. Thus, mutual competition increased for all EU members."

More per Chart above: "With an overlap of 65% and beyond in 2009, countries like Portugal, Sweden, Ireland, Denmark and the Czech Republic face the strongest existent competitive pressure from China in terms of the fraction of markets where they are directly exposed to China. The group of large exporters shows an overlap of existent markets between 60% and 64%, while many small Eastern European countries and Greece only serve between 56% and 59% of their export markets jointly with China."

Out of all EU countries, therefore, Ireland is 4th most-exposed to competition from China. Good luck devising a 'policy leadership' for that.


What about the markets where China is not operating, yet? Authors have the following to say on this: "the fraction of “newly conquered markets”, i.e. newly established trade links by either an EU member or China where the other exporter did not already operate (figure 8 below), declined from 5.6% in 2001 to 2.4% by 2009 on average across all EU members. Thus, with heightened existent competition, the number of new market conquests where China was not active decreased in all countries over time. The decline was particularly pronounced for large exporter such as Italy, Spain, Germany and Finland. But a number of CESEE-10 countries likewise shows a relatively strong decline, such as Lithuania, Hungary, Poland and Slovakia."

Ireland faired a little better in terms of "new market entry" for China risks, but that is because we already face much more direct pressure from China's competition.


Next up, the potential for Chinese exporters crowding out Irish (and other European) exporters.

Per study: "the most interesting type of competitive pressure is depicted in figure 10. The four combinations which are summarized here all represent different forms of potential crowding-out of one exporter by its competitor. …As a first interesting observation, even taken together, these cases are less important than the creation of new competition. However, we observe an increasing trend over time. Furthermore, with 10% or more of all cases, in particular CESEE-10 countries and the small peripheral EU members are especially affected by this type of competition."

And, by the above chart, Ireland is under some serious pressure here too.

The authors disaggregate the bars in the above figure in order to "extract information on the crowding-out of EU countries by China."

"Figure 11 [below] shows the share of crowding-out cases in which an EU country exits a market which China has just entered or continues to operate. …[in] Germany [case] crowding-out is observed for only 4.8% of all trade links in 2009 [see chart above] and Germany crowds out China in half of these cases (Figure 11 below). In contrast, evidence for the CESEE-10 is mainly characterized by China crowding out the CESEE-10 countries (Figure 11), and, furthermore, the incidence of crowding-out increased markedly over time (Figure 10 above). The same holds true for the EU’s small peripheral countries Ireland, Portugal and Greece. In all three countries, 90% of all crowding-out cases refer to their exit from a market where China enters or is active (Figure 11 below). Compared with 2001, crowding-out by China has generally gained importance over crowding-out of China, particularly for the core EU members."

Again, Ireland is under huge pressure here from China.

Overall, the paper conclusions are uncomfortable.

"In general, we find that export growth is mainly driven by the intensification of existing trade relationships rather than by the formation of new trade links (extensive margin)." Here's a problem: Irish policy has been about opening new markets (jumping head-to-head into competition with China and other exporters), instead of maximising presence in the already serviced markets (holding onto and expanding exports presence in already profitable markets). And that is despite the fact that "…the extensive margin turns out to be more important for the CESEE-10 than for the EU periphery, the core EU countries or even China."

"Small and peripheral countries are more exposed to competition from China than the large EU export nations." And Ireland is even more exposed here, since we rely almost exclusively on exports as the driver for growth.

"…the crowding-out potential is considerably higher for the CESEE-10 and the small peripheral EU countries than for larger EU members…" As commented earlier, this is about the need to pursue more intensification of our exports, rather than constantly attempting to chase 'new markets' as the core exports growth strategy.


Finally, for illustration purposes, chart below maps the composition of European exports by category of goods.

7/1/2015: Another One for European Century

A chart via @Schuldensuehner this one pointing at another myth of the European Century blowing up: the myth of Euro becoming the global reserve currency.

That's right, Official Reserves held by the Central Banks in euros are down 8.1% in Q3 2014.

This, as Bloomberg notes, is a much faster rate of decline in reserves than during 2010-2011 crisis. "In the third quarter of 2011, the common currency slid 7.7 percent, while its reserves fell 2.8 percent. A deeper plunge of 9.4 percent in the euro in the second quarter of 2010 only prompted a 1.3 percent loss in holdings, the IMF data showed."

Remember, this was supposed to be a European Century (http://www.dw.de/barroso-europe-is-a-success-of-globalization/a-2414542 and http://arc.eppgroup.eu/Activities/docs/berlin_declaration/en.pdf).

6/1/2015: BRIC PMIs: Weaker Outrun in December

Markit released PMIs for all BRIC countries for both Services and Manufacturing covering December 2014. Here are the main results.

Starting with manufacturing:

• Brazil Manufacturing PMI posted its first 50+ reading after 3 months of consecutive sub-50 readings. December PMI came in at 50.2, which is basically signalling no statistically significant growth. On a quarterly basis, Q4 2014 average came in at 49.3 - a contraction, against 49.3 (yep, same) for Q3 2014 and 50.1 (almost no growth) in Q4 2013.
• Russian Manufacturing PMI for December came at disappointing 48.9, marking the first month of sub-50 readings since June 2014. Q4 2014 average is at 50.3 (basically near-zero growth) against Q3 2014 reading of 50.4 (very weak growth) and Q4 2013 reading of 50.0 (stagnation).
• China Manufacturing PMI came in at 49.6, the first monthly contraction that follows six consecutive months of at or above 50 readings. Q4 2014 average was 50.0 - meaning Chinese manufacturing posted flat growth across the quarter. Q3 2014 average was 50.7, same as Q4 2013. Overall, there are some very serious weaknesses in Chinese manufacturing sectors.
•  India Manufacturing PMI jumped from 53.3 in November to 54.5 in December, signalling acceleration in activity in the sector. Q4 2014 average is at 53.1 - up on 52.0 average for Q3 2014 and on 50.5 average for Q4 2013.

Now, Services:

• Brazil's Services PMI was even worse, set at 49.1 in December (a shallow contraction), continuing with sub-50 readings for the third month in a row. Q4 2014 average is at 48.6 (outright contraction), against Q3 2014 average of 50.5 (weak expansion) and 52.1 (stronger expansion) in Q4 2013.
• Russian Services PMI stood at 45.8 - sharp contraction - in December 2014, marking third consecutive month of sub-50 readings. The index averaged less than impressive 45.9 in Q4 2014, showing severe strains from collapse in domestic services, such as financial services. The index averaged 50.1 in Q3 2014 and 53.0 in Q4 2013.
• China Services PMI surprised to the upside, posting 53.4 reading in December, up on 53.0 in November. Q4 2014 average is at 53.1 - faster growth signal compared to Q3 2014 reading of 52.7 and Q4 2013 reading of 52.0.
• India Services PMI, lastly, posted a slight de-acceleration in growth, slipping from 52.6 in November to 51.1 in December. Q4 2014 reading is now at 51.2, which marks a slowdown in growth from 52.2 index reading in Q3 2014 and47.0 reading in Q4 2013.

And a table and a chart summarising changes in both sets of PMIs

Note the increase in weaker growth signals in December data compared to previous month, driven by poorer PMIs in Manufacturing and by unchanged performance outlook in Services. Also note, per chart above, Russia not only acts as a main downward driver for the BRIC overall PMI-related performance, but it shows strong decoupling in the direction of trend from January-March 2014 on, with the divergence now accelerating over the last three months.

6/1/2015: The Darker Side of Sell-Side Research?

My blog post for @LearnSignal blog on the topic of conflict of interest problem with sell-side markets research: http://blog.learnsignal.com/?p=138.

6/1/2015: Irish PMIs December 2014: Strong End to 2014 Activity

Markit-Investec Irish PMIs releases were finalised today with Services data made public few minutes ago. Here is my quick analysis:

• December 2014 Manufacturing PMI reading stood at 56.9, signaling a strong expansion. The index was at a 4-months high. 3mo average (Q4 average) stood at 56.7, which represents a rise on Q3 2014 average of 56.1. Q4 2014 marked the highest quarter in terms of Manufacturing PMI average. The series are now 4.5 points ahead of post-crisis average.
• December 2014 Services PMI reading stood at 62.6, which, as Markit commentary says is a tie with June 2014 reading for the highest mark since February 2007. It is worth noting that September 2014 reading of 62.5 was, of course, statistically indistinguishable from December and June readings. 3mo average through December (Q4 average) is at 61.9, which is only marginally below Q3 and Q2 averages of 62.1. Relative to longer-period average, December reading is 7.1 points ahead of post-crisis average for the series.

Chart to illustrate:

Predictably, given the levels of both indices, there is some moderation in the growth rate of the index (second derivative, effectively):

Which is not a discouraging sign, as historically, the indices do signal strong growth in both sectors:

And as the chart above shows, uplift in Manufacturing is very strong, relative to historical trends. All good signals so far, but do stay tuned for some longer-range analysis later.

Note: as usual, I do not cover composition of the indices, as Investec refuses to supply actual data on indices components.  Should you want to consult their sell-side analysis, feel free to do so at http://www.markiteconomics.com/Public/Page.mvc/PressReleases

6/1/2015: Glance Back: Grey and Black Swans of 2014

Portuguese blog by Jorge Nascimento Rodrigues quoting my comments on the topic of black swan and grey swan events of 2014: http://janelanaweb.com/novidades/2014-em-revista-cisnes-negros-cinzentos-6-surpresas/

My comment in English in full:

Black swan events are defined not only by their unpredictability ex ante the shock and the magnitude of the shock-related losses, but also by the fact that the rationale for their occurrence becomes fully explainable ex ante the event. In this sense, looking back at 2014, one can only imperfectly interpret key events as either black or grey swans.

One of the major black swan events of 2014 was the flaring up of a major geopolitical crisis involving Russia and the West. This pre-conditions for the emergence of this crisis were present throughout the late 2000s - early 2010s, but its rapid escalation from to the state of a proxy war fought by the two players over the Ukraine was not something we could have foreseen at the end of 2013.

On economic front, the decoupling of the US economy from global economic outlook and acceleration in the US growth was accurately reflected in a number of major forecasts published in the second half of 2013. As was the associated continued downtrend in growth in the euro area. But the simultaneous crisis across the major emerging economies, including Brazil and South Africa, as well as the onset of the outright recession in Russia and the Russian Ruble crisis of Q4 2014 were black swan events.

A good example of the grey swan event - an event with some predictability ex ante, but with unpredictable timing, was a massive decline in global oil prices. The decline was forecastable in 2013, given the rate of growth in potential supply from the non-OPEC countries, primarily Canada and the US. The rates of new wells drilling and the levels of average output and output dynamics from the existent wells should have told us well in advance that the decline in oil prices was coming. Ditto for the signals coming from the natural gas price divergence in North America against Europe and Asia Pacific. But the exact timing of this decline in oil prices was not easily predictable. In the end, the drop in oil prices in 2014 was driven by a combination of two forces. The supply dynamics - largely predictable, and the contraction in demand driven by the black swan shock to global (and in particular emerging markets) growth.

Two major themes that dominated the financial markets in 2014 - continued decline in sovereign debt yields and simultaneous divergence in prices between the US and European equity markets - was hardly a black swan, given the differences in monetary policies between ECB and the Fed. Nonetheless, to some extent both themes were shaped also by the global growth divergence, and as such, both constitute a sort of a grey swan event.

Last, but not least, the flaring up of the euro area peripheral crisis, starting with Q4 2014 political risk flaring up in Greece, was neither a black swan nor a grey swan, and instead constitutes an empirical regularity of long term instability in the euro area periphery. This instability (both political and economic) is driven by the legacy of the debt crisis and the fallout from the policies used to address it. Nothing, absolutely nothing, has been resolved within the euro area when it comes to addressing debt overhangs present in a number of economies. Nothing has been done to address the endemic lack of structural growth drivers in the majority of the peripheral economies. If anything, the structural growth crisis contagion has now firmly spread to the core economies, such as France and Finland, and is impacting even Germany. Despite lots of sabre-rattling, the ECB remains in a passive policy mode, with the central bank balancesheet stubbornly stuck in the post-crisis lows and liquidity fully captured within a fragmented banking sector.

5/1/2015: 2015 Outlook: Ireland

My overview of 2014 and outlook for 2015 for the Irish economy, via @sheehymanning : http://issuu.com/manning-financial.ie/docs/mf_christmas_newsletter_web

5/1/2015: The Value of Better Teachers

Hanushek, Eric A. and Piopiunik, Marc and Wiederhold, Simon, paper, "The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance" (December 2014, NBER Working Paper No. w20727: http://ssrn.com/abstract=2535179) looks at the differences in teacher quality and the impact of these differences on students' outcomes.

Per authors, "difference in teacher quality are commonly cited as a key determinant of the huge international student performance gaps." The authors "use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees." The study also controls for parental inputs and other factors.

"Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills."

First table below shows basic estimation results highlighting the positive effects of teachers skills (in maths and reading) and parental skills on outcomes (in mathematics and zero effect in reading).

Second table above shows sample statistics. An interesting comparative in terms of Irish teachers' skills being very much average and ranked below average in the group of countries.

Third table below shows more advanced econometric controls for estimation, showing qualitatively similar results as above

And finally, chart below showing Ireland's relative position, compared to other countries in terms of the relationship between teacher skills and students' outcomes:

The above clearly shows below average link between teacher skills and student outcomes for Ireland (which are sub-standard relative to the average) in maths and slightly above average link between teacher skills and student outcomes in literacy (which are above average in terms of outcomes, but near average in terms of the teachers' skills effects).

The key, from my point of view, is that the paper shows a clear link between measurable metrics of teacher quality and measurable outcomes for students, while controlling for a number of other factors. This supports my view that pay-for-performance can and should be used to incentivise, support and promote better teachers, and that such system of compensation can be of benefit to our students.

Our education system pursuit of homogeneity and collective bargaining-set pay scales is outdated, outmoded and inefficient from social and economic point of view. Our teachers and students deserve better. Reforming education system should not be about reducing average wages and earnings, but realigning rewards with effort and outcomes.

5/1/2015: IMF on Debt Relief for Greece: Repeating the Repeats

Much of talk nowadays from the European leaders on Greek debt situation and the link to political crisis in the country. Some conversations are about lack of potential contagion from Grexit, other conversations are about the right of the Greeks to decide on their next Government, whilst all conversations contain references to the new Government having to abide by the previous commitments. Which is fine. Except, what about the European partners commitments? Specifically one commitment - relating to further debt relief for the country?

Here is 2013 IMF assessment of the Greek situation (emphasis in italics is mine):

"47. The program continues to satisfy the substantive criteria for exceptional access but with little to no margin. Delays in the implementation of structural reforms raise concerns about the capacity of the authorities to implement the program in a difficult political environment. …The continued commitment of euro area member states to support Greece, including by providing additional official financing to fill future financing gaps and through further debt relief as necessary, is an essential part of meeting the criteria."

And then:

"48. …The program is fully financed through July 2014, but a projected financing gap will open up in August 2014. Thus, under staff’s current projections, additional financing will need to be identified by the time of the fifth review, to keep the program fully financed on a 12-month forward basis. The Eurogroup has initiated discussions on how to eliminate the projected financing gaps. In this regard, the Eurogroup’s commitment in February and November 2012 to provide adequate support to Greece during the life of the program and beyond, provided that Greece fully complies with the program, is particularly important."

For some more on debt relief:

"55. As noted in the third review staff report, debt sustainability concerns continue to remain a risk. …The commitment of Greece’s European partners to provide debt relief as needed to keep debt on the programmed path remains, therefore, a critical part of the program. But the programmed path entails still very high debt well into the next decade, leaving Greece accident prone for an extended period. Should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, European partners should consider providing relief that would entail a faster reduction in debt than currently programmed."

And

"56. …The program remains subject to numerous risks, mainly from the worsening of the macro outlook combined with a further deterioration in banking sector assets (feeding back to the real economy), difficulties with the implementation of ambitious fiscal policy and administrative changes, and—above all—failure once again to ensure a reinvigoration of structural reforms in the face of strong resistance from vested interests. Absent a critical mass of structural reforms that would transform the investment climate, the growth outlook—and, therefore, crucially the assumptions regarding financing needs for the rest of the program period and the debt path—would not materialize. Externally, closing financing gaps and delivering on the commitment to reduce debt will be a test of European support."

And in Box 4, Criterion 2:
" …In light of the commitments from euro area member states to provide additional debt relief as necessary, the baseline debt trajectory is sustainable in the medium-term but subject to significant risks."

Link to the above: http://www.imf.org/external/pubs/ft/scr/2013/cr13241.pdf


But there are more statements from the IMF on the issue of debt relief for Greece.

Take for example Transcript of a Press Briefing by William Murray, Deputy Spokesman, International Monetary Fund, from September 11, 2014 (http://www.imf.org/external/np/tr/2014/tr091114.htm):

"QUESTIONER: You told us many times from this podium that the issue of the Greek debt will be discussed at the sixth review. As I understand this, it's going to begin at the end of the month. The Euro Group said on Monday that the debate will begin after the sixth review. What we want to hear is that are the discussions about the financing of the Greek program and about the debt, still proceeding on an orderly way as you told us before many times? And what is your plan or your strategy for the Greek debt? Is there an option of those talks between you and the Europeans? Are the Europeans onboard to discuss this big problem for Greece?

MR. MURRAY: ...I do want to remind you and others what we have said all along. There is an agreed framework in place for ensuring debt sustainability with Greece's European partners agreeing to provide any additional debt relief as needed to help bring Greece's debt down to 124 percent of GDP by 2020. And to substantially below 110 percent of GDP by 2022 as long as Greece continues to deliver on its program commitments."

Now, IMF estimates debt/GDP ratio for Greece to be at 170% of GDP. Which means that over the next 5 years, the programme will have to deliver debt.GDP ratio reduction of a massive 50 percentage points. How on earth can this be achieved without debt relief is anyone's guess.

And more: Interview by Greece’s newspaper Ethnos with IMF Mission Chief for Greece, Poul Thomsen, published in Ethnos, June 15, 2014 (http://www.imf.org/external/np/vc/2014/061514.htm):

"QUESTION: You talk constantly about the commitment of Europeans regarding the financing needs of Greece and Greek debt relief. If Europeans do not show the determination needed or the courage to take bold decisions, like last time, what is the IMF planning to do?

ANSWER: We are confident that the European partners will deliver on their commitments. Do you believe that Greece's debt is now sustainable or do you believe that the situation needs new and drastic interventions? Are European commitments to contribute to debt relief enough for the IMF? What could the potential tools for debt relief be? The agreed framework is credible, provided that Greece and its European partners deliver on their promises. For Greece, this means continuing to advance reforms and achieving and maintaining a fiscal primary surplus of 4.5 percent of GDP. For the European partners, this means providing additional debt relief, if required, to keep debt on the programmed path. Thus, if adhered to, the framework will make the debt sustainable."

So 4.5% primary surplus over 5 years - even if achieved, will deliver somewhere in the neighbourhood of 1/2 of the required debt adjustment. The rest, presumably, will have to be achieved via economic growth, which will have to be running, on average, at 4% per annum to provide for the adjustment planned. And, thus, do tell me if the above any realistic, let alone probabilistically plausible.

In its 5th (most recent) assessment of the Greek situation, IMF reiterated (paragraph 49) that "The continued commitment of euro area member states to support Greece, including by providing additional official financing to fill future financing and through further debt relief as necessary, is an essential part of meeting the criteria" for debt sustainability. (see http://www.imf.org/external/pubs/ft/scr/2014/cr14151.pdf)

And it also carries Greek authorities expectation of the European funders agreement to further debt relief: "The program is fully financed through the next twelve months. Firm commitments are also in place thereafter from our euro area partners to provide adequate support during the program period and beyond, provided that we comply fully with the requirements and objectives of the program. In this regard, we remain on track to receive the first phase of conditional debt relief from our European partners, as described in the Eurogroup statements of November 27 and December 13, 2012." (page 71)

The same was stated in May 2014 Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding from the Greek authorities (see: http://www.imf.org/external/np/loi/2014/grc/051414.pdf). On foot of the IMF press conference statement on same (see: http://www.imf.org/external/np/tr/2014/tr050814.htm).

And so on, to no end and… no closure from the European partners…