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Tuesday, April 15, 2014

Mohamed A. El-Erian at Bloomberg View : "What Greece Could Tell Us About Ukraine"

As tensions escalate in the eastern part of Ukraine, the country's officials are in Washington looking to put the finishing touches on an agreement with the International Monetary Fund that provides immediate financial relief and opens the doors to help from others. Given the situation on the ground, these already-complex negotiations must find a way to balance economic, political, security and social considerations. Also, the parties need to come up with a lot of money to cover the country’s financing requirements. In thinking about these tough challenges, I found myself wondering whether they could have any connection to last week’s successful bond issuance by Greece. If not yet, they possibly will down the road.

Greece’s quick return to international capital markets stands in sharp contrast to the experience of Latin American countries in the 1980s, Russia after its 1998 debt restructuring, and Argentina after its 2001 default. It reflects a change in investors’ willingness to forgive and forget in today’s more globalized financial markets, especially when the offending sovereign has strong backing from the official sector.


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