Greece
It really seems that every time there appears to be some progress made in Greece, it's followed hours later by a major hurdle. This weekend the major hurdle has been street demonstrations in Athens, and a serious internal political backlash from the agreements that were made last week with the Troika and private Greek bond holders.
It's still a very delicate situation and a messy Greek debt default cannot be ruled out. I've written lots of commentary on Greece but suffice to say, this week and next - in fact leading up to mid-March - when its debt payments are officially due, will be a critical period in Greece's history. Watch the short-term debt markets in Europe over the coming days. They'll tell the real story.
Oz interest rates
The ANZ and Westpac have now raised rates independent of the Reserve Bank. There are two issues at play here.
First, do their actions reduce the validity of monetary policy? If so, there needs to be a swift response from the government. Second, should we really be surprised? The banks claim most of their pricing decisions come from offshore markets, and those costs have risen. Some price pressure comes from the Reserve Bank, so, when it chose not to drop rates, the banks had to ease the pressure on THEIR margins, by lifting their rates. At the end of the day though they're privately run businesses and can do whatever the hell they want.
We're getting into dangerous territory when we ask the banks to have a little bit of a social conscience. It's simply not in their nature (and don't for a second believe any of their marketing on that front). If we truely believe the banks need to be rained in a bit, we should call on the government to create the necessary legislation. The banks will never do it on their own, unless of course it's in their interests.
I don't think from an economic stance we progressed this week, either from a domestic or international point of view.
David Taylor
