Declares that Nassau OTB, a ny times benefit corporation, Cannot close on roman catholic Easter sunday in preference togreek orthodoxeaster sunday
The ny times, the official newspaper for homosexual marriage
At long last, European creditor nations and Greece have reached an agreement on a third bailout in five years.
The bailout, which was approved by Greece’s Parliament on Friday, included familiar details: In return for an infusion of 86 billion euros, or $95 billion, Greece has promised to increase taxes, cut spending and enact measures to make its economy function more efficiently.
But there was one glaring omission. As it stands, none of that new money flowing into Greece will come from the agency that has, until now, played a crucial role in virtually every bailout, in Greece and elsewhere around the world: theInternational Monetary Fund.
That is because the I.M.F. says that Greece was simply incapable of repaying its staggering debt. Yet the accord reached last week makes no effort to reduce that burden. If you agree with the I.M.F.’s reasoning, you might have to conclude that despite all of the seemingly ironclad provisions of the agreement imposed by eurozone creditors, Greece will be no more able to honor the deal or to repay its new loans than it has been in other bailouts.
MULTIMEDIA FEATURE
Greece’s Debt Crisis Explained
Behind the efforts to resolve the country’s debt problems and keep it in the eurozone.
“I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own,” the I.M.F.’s chief, Christine Lagarde, said on Friday, following the accord’s approval this week.
The Greek debt drama has had its share of twists and turns. Alliances have shifted, rivalries have deepened, and the back-room maneuverings have been appropriately Byzantine.
But the I.M.F. shift from being Greece’s most persistent scold to its main advocate for a break on its debt has been among the most intriguing developments so far.
Clashing Assessments
In late June, representatives of European countries and the I.M.F. gathered at a private meeting at the European Union’s headquarters in Brussels. The officials were racing against time to devise a plan to keep the country in the eurozone. But the dispute between Greece’s two largest lenders was about to boil over.
Poul M. Thomsen, the Danish fund official who served as the I.M.F. point person in the Greek talks, had been negotiating around the clock, and his voice was hoarse. Since early in the spring, he had been arguing that while Greece needed to follow through on tough economic measures, its debt was out of control. Europe, however, insisted that the Greek government had only to enact tough austerity measures to set itself on a prudent financial path.
Now the Europeans wanted to highlight their own, more sanguine view of Greece’s debt prospects at a crucial meeting of the creditor countries’ finance ministers the next day. And in doing so they took the I.M.F.’s conclusion — that Greece could no longer repay its debt and that Europe might have to face losses on its exposure there — and presented it, in one throwaway sentence, as a long-shot scenario.
For the I.M.F. it was a breaking point. Not only were officials frustrated that Europe was not accurately reflecting their view, but they also wanted to make sure that their non-European shareholders, many of whom had become very critical of the fund’s aggressive lending in Greece, got the full picture of how their analysis had changed. So, in a highly unorthodox move, they decided to make their disagreement public. They released their full analysis — a 23-page document — a week later.
Since then the fund has been adamant: Europe must provide significant debt relief in order for the I.M.F. to provide cash toward the next Greek bailout.
A growing number of economists agree that Greece needs more than another dose of austerity policies to recover. But they are also asking why it took so long for the fund to reach that conclusion.
“I applaud the fund for releasing the report, but at the same time it was too late,” said Gabriel Sterne, an economist at Oxford Economics in London who has closely studied the I.M.F.’s role in Greece. “For right or for wrong, they are the only honest broker here so they really should have gotten this out sooner.”
No More Argentinas
Founded in 1944 as part of a broad mandate to ensure global financial stability after the end of World War II, the I.M.F. for many years primarily lent money to developing economies — largely in Latin America and Asia — that experienced a financial crisis.
But after the 2008 financial crisis, the I.M.F. turned its attention to Europe. An astonishing 61 percent of the I.M.F.’s loan book is now tied up in Ireland, Portugal and, of course, Greece.
The standard prescription in a crisis is a dollop of loans in return for belt-tightening measures.
When this analysis is done correctly, the endings tend to be happy. The economy recovers, and the country goes back to the usual method of meeting its financing needs by borrowing on global bond markets, as has happened with Ireland and Portugal.
When the analysis is not done correctly, the results can be disastrous. The country goes bust. The I.M.F. is not paid back. And most acutely, citizens end up suffering from the failed policies.
Arguably, then, the I.M.F.’s most critical task is figuring out whether or not a country can pay back its loans. That calculation will determine how much the fund pushes pure austerity policies or whether it will also impose losses on lenders to return the economy to health.
As an emergency creditor — the world’s subprime lender, if you will — the I.M.F. has some failures. Before Greece, the fund’s biggest debacle had been Argentina. The fund lent billions of dollars to the country just before it defaulted in 2001, leading to an economic tailspin. It took years for Argentina to come out of it.
To guard against falling into a similar money pit, the fund put in place a “no more Argentinas” rule, according to the author Paul Blustein in his definitive paper on the I.M.F.’s Greek drama.
The rule decreed that the fund would hand out money only if there was a “high probability” that the applicant could make good on the loan.
In May 2010, Greece would be the first test of this new rule.
From the outset, most of the fund’s senior staff concluded it was highly unlikely that Greece could pay the money back, given its voluminous debts and dysfunctional economy.
Several top officials went so far as to push for an immediate debt “haircut” — a permanent loss to the lenders — in secret meetings with their European counterparts, according to Mr. Blustein’s recounting of those events.
But the fund, then under the leadership of Dominique Strauss-Kahn, wanted to get back into the bailout game. Having hit a low of $9 billion in 2007, I.M.F. lending had been slowly ticking up through 2010. Mr. Strauss-Kahn, who was known to have his eye on the French presidency, was not going to miss an opportunity to play a central role in resolving the European debt crisis.
So the I.M.F. made a last-minute adjustment to its “no more Argentinas” decree. It would approve the loan request under a new “systemic exemption.” That is, the fund could justify the loan if it would prevent a broad financial panic.
Greece seemed to fit that exemption. The bailout request came less than two years after Lehman Brothers had failed. The global economy was still in a precarious state, and European debt markets had been rattled by Greece’s troubles. With the European Central Bank not yet ready to use its ability to print money to intervene, the fund decided to back Greece in spite of its disastrous finances.
It was a controversial decision. The bailout was a salvation for bond investors, namely large European banks, which owned the majority of Greek debt. But the Greek people would have to pay, as the country was required to institute severe budget cuts and tax increases to make the debt numbers add up. The immediate halt in government spending had a devastating effect in an economy dependent on state largess. Unemployment soared, suicide rates jumped, and pensioners took to begging on the streets.
The fund, nonetheless, produced optimistic reports about the outlook for Greece. (Since 2010, the fund’s growth estimates missed the mark by a cumulative 25 percent, a forecasting error of such a magnitude that the fund’s chief economist was forced to acknowledge in 2013 that the I.M.F. had underestimated the extent to which austerity policies could sink an economy.)
By 2012, Greece would need a second bailout, and this time fund officials were able to convince their European partners that bond investors must contribute to the rescue by accepting steep losses on their investments. In addition, they extracted a commitment from Europe that it would take steps to reduce Greece’s debt in the coming years.
With all the hoopla of the second bailout, this clause drew little notice, but for the I.M.F. it was a victory of sorts, as it gave voice to what officials had been saying internally: The time would come when Europe would have to take a hit on its Greek loans.
The Pressure Mounts
By mid-2014, Greece had made some progress. Excluding interest paid on its debt, its budget had reversed from a 10 percent deficit to a slight surplus.
The government was again able to tap global markets for cash, and Greek banks raised billions of dollars in New York and London.
That July, Rishi Goyal, a senior member of the I.M.F.’s Greek team based in Washington, hailed the achievement in a speech in Athens.
Privately, however, fund officials were voicing doubts to their European partners over whether Greek politicians, notorious for their free-spending ways, could maintain fiscal discipline.
Mr. Thomsen, the head of the I.M.F.’s European department, was among the most skeptical. A career technocrat from Denmark with a blunt manner, he had put together the original Greek program in 2010 and had become frustrated with Greece’s reluctance to follow through with reforms.
In particular, Mr. Thomsen was infuriated when the Greek prime minister at the time, Antonis Samaras, fired Harry Theoharis, a crusading young reformer in the Greek finance ministry.
Mr. Theoharis had the enthusiastic support of the I.M.F. to retool the country’s deplorable tax system. With the government backtracking on reforms, the country’s small surplus disappeared.
In January of this year, the anti-austerity party of Alexis Tsipras came to power. By April, negotiations over debt repayment had stalled, the government was hemorrhaging cash, and the economy was at a standstill.
On Easter Sunday, Yanis Varoufakis, who had become Greece’s finance minister, flew to Washington to meet with Mr. Thomsen and Christine Lagarde, who became the I.M.F.’s chief in 2011, and threatened to stop payment on more than a billion dollars in loans that were soon coming due.
Relations between fund officials and the Greeks had reached their nadir. Mr. Tsipras said that the fund had “criminal responsibility” for the crisis, and Mr. Varoufakis was telling people that Mr. Thomsen’s work in Greece would go down in history as the I.M.F.’s greatest failure.
Yet having run the numbers, the fund now accepted the central argument being made by Mr. Varoufakis: Greece was bankrupt and needed debt relief from Europe to survive.
The fund was also feeling the pressure from the non-European members of its board who questioned the huge commitment to Greece (currently about $15 billion) relative to the small size of its economy.
Ms. Lagarde and David Lipton, her top deputy, became more insistent, pressing European nations that economic reforms alone were not enough and that a debt restructuring would be needed as well.
In late April, Mr. Thomsen took up the issue once more at a critical meeting of European finance ministers in Riga, Latvia.
Two months later, Ms. Lagarde found herself at the Brussels meeting of European finance ministers, with the country’s future in the eurozone hanging in the balance.
The Europeans were pressuring Mr. Varoufakis to agree to an austerity-loaded debt deal that he was resisting.
I have a question for Christine, he said. Can the I.M.F. formally state in this meeting that this proposal we are being asked to sign will make the Greek debt sustainable?
She could not. And when Jeroen Dijsselbloem, the Dutch finance minister and lead negotiator for Europe, cut off all discussion of debt relief, the die was cast.
Back at I.M.F. headquarters in Washington, the decision was unanimous: It would go public with its assessment that Greece’s debt situation was hopeless.
‘Old Wine in a New Bottle’
The 19 countries of the euro area make up the I.M.F.’s largest shareholder base, but as the world’s financial watchdog, the fund also represents 169 other nations.
If the I.M.F. wants to be seen as an international, as opposed to a European, monetary fund, it must prove that it can speak with an independent voice. And if that means arguing that Europe, its senior partner in these talks, needs to take a loss on its loans — well, so be it.
Many have commended the fund for going public with its views. But the release of its debt reports has not yet had any practical effect.
The latest bailout is heavy on austerity measures like privatization of power companies and seaports, reduced pensions and tax increases in shipping and tourism, and says nothing about debt relief.
“This is old wine in a new bottle,” said Megan E. Greene, chief economist at Manulife in Boston. “I see very little chance that the bailout will succeed — it’s too much like the other ones.”
Would it have made a difference if the fund had officially broken with Europe in the spring, when it began to conclude that the Greek debt had become unmanageable?
Probably not, says Susan Schadler, a former I.M.F. economist and author of a widely read paper on the fund’s Greece saga.
But she argues that by not forcing creditors to take a loss back in 2010, the pain has been borne almost exclusively by the Greeks themselves, and not by bond investors.
“The fund should have pushed for a restructuring then,” she said. “That, after all, is its job — to assess the risks and say whether or not the debt is sustainable.”
Correction: August 16, 2015
An earlier version of this article misstated the year that Christine Lagarde became chief of the International Monetary Fund. It was in 2011, not late 2013. The article also misspelled the given name of the chief economist at Manulife. She is Megan E. Greene, not Meghan.
Sotheby’s and Christie’s are one of the business world’s oldest duopolies. Though always subtly different in corporate character, these auction houses have over the years been generally perceived to be evenly matched rivals.
In 2005, the Japanese company Maspro Denkoh found it so difficult to choose between them that it challenged Sotheby’s and Christie’s to a game of rock-paper-scissors for the privilege of selling its $20 million art collection (Christie’s won, thanks to expert advice from the children of an Impressionist and Modern specialist).
Since 2012, Christie’s has been filing consistently bigger sales totals. Such was the case on July 20, when Christie’s, which is registered in London, announced 2.9 billion pounds, or about $4.5 billion, of auction and private sales for the first half of 2015. Sotheby’s, based in New York, raised $3.5 billion over the same period, according to data provided by its press office.
Sotheby’s figures up to June 30, released this month, did not include its £130.4 million art-contemporary sale on July 1, but even allowing for the vagaries of summer auction scheduling, a billion dollars or so represents a significant gap in performance between the two companies.
Christie’s dominated the market-defining contemporary-art auctions in New York in May. Christie’s “Looking Forward to the Past” selection of 20th-century masterworks and its accompanying contemporary evening sale reaped $1.4 billion, dwarfing the $379.7 million that Sotheby’s took at its equivalent contemporary auction. Brett Gorvy, Christie’s international head of contemporary art, and Loic Gouzer, the specialist who curated the crossover $705.9 million “Looking Forward” sale, rule the Manhattan auction roost.
“We have been recruiting talent as well as exploring bolder ideas designed to substantially improve our performance in contemporary,” Tad Smith, Sotheby’s president and chief executive, said on Aug. 7 in the company’s second-quarter earnings conference call. On Aug. 5, Sotheby’s stock was valued at $41.95 per share. On Friday in New York, it was trading at about $38.
How has Christie’s managed to establish this edge over Sotheby’s?
Numerous commentators have noted that Christie’s is privately owned by the French billionaire art collector François Pinault, and as such it only reveals sales. Sellers of more than half the lots at its May evening auctions, including Picasso’s 1955 “Les Femmes d’Alger (Version “O”), which fetched $179.4 million, had been guaranteed minimum prices either by Christie’s, by third parties or by complex combinations between them. Christie’s isn’t required to reveal the profitability, or otherwise, of these arrangements.
Christie’s said in a statement that auction houses “may, from time to time, guarantee the price the work of art will realize at auction,” but it did not address the extent to which it uses guarantees itself. “Christie’s doesn’t discuss the profitability of individual sales, but at every level of the market it is a healthily profitable company,” the statement said.
Sotheby’s, by contrast, is a publicly listed company accountable to shareholders. On Aug. 7, it announced adjusted half-year net income of $80.5 million, compared with $84.9 million for the equivalent period a year earlier.
Despite being more circumspect about courting sellers with the certainty of minimum prices, Sotheby’s listed a first-half net loss of $8 million on its auction guarantees, excluding auction commission revenue. In May in New York, Roy Lichtenstein’s 1962 painting “The Ring (Engagement)” sold for $41.7 million. Guaranteed by Sotheby’s with its own money, the work had been estimated to sell for at least $50 million.
Longstanding complaints of poor returns on capital from activist shareholders such as Daniel S. Loeb, founder of the hedge fund Third Point, and Mick McGuire, founder of Marcato Capital Management, were met with a commitment from Sotheby’s to buy back $250 million of shares. On Thursday, the company announced that it would be repurchasing shares for an aggregate price of $125 million.
“This kind of oranges and lemons situation is incredibly rare,” said David A. Schick, managing director of Stifel Financial, a brokerage and investment banking firm in St. Louis. “I don’t know of another example. In most duopolies, the companies are big and they’re both public. It has probably created a lot of fuzzy, illogical comparisons.”
Mr. Smith, formerly president and chief executive of the Madison Square Garden Company, took over at Sotheby’s in March, succeeding William F. Ruprecht, the longtime chairman and chief executive, whose leadership had come under steady criticism from Mr. Loeb. Sotheby’s also named Domenico De Sole, former president and chief executive of the Gucci Group, as chairman.
“It’s going to take another six to 12 months to see the effect of any changes,” said Mr. Schick, whose analysts rate Sotheby’s stock as a “buy,” partly because of the expected increased capital returns resulting from the share buyback. “But Tad does bring a new and broader set of ideas to Sotheby’s that could close the gap between the brand and the business.”
There was a noticeable shift in tone at the Aug. 7 earnings call from the language of auction house to that of business school.
Mr. Smith, an adjunct professor of finance at the Stern School of Business at New York University, said in the call that Sotheby’s “will use its brand to enhance its growth profile in categories such as jewelry, automobiles, collectibles, financial services, wine, and, in subsequent years, potentially more lines of business.”
His emphasis on branding was a response to the way Christie’s had successfully diversified itself as “the art people,” creating cross-departmental auction formats, as well as its own online-only sales of luxury collectibles. The latter raised £9.9 million for Christie’s in the first half of 2015.
On June 1 in Hong Kong, the company sold a Hermès fuchsia crocodile Birkin handbag from 2014 for 1.7 million Hong Kong dollars, or about $220,000, the highest price ever paid for a handbag at auction, according to Christie’s.
Sotheby’s is catching up on the technology front. The company said on Thursday that its recent collaborations with eBay and invaluable.comhad led to a 35 percent increase in the value of successful online bids at its live auctions in the first half of 2015.
Sotheby’s has also been getting the better of Christie’s in some auction categories. In March, it re-entered the market for classic cars, one of the few luxuries Christie’s does not regularly sell, through a partnership with RM Auctions. On May 2, the partners sold a 1962 Ferrari 400 Superamerica SWB Cabriolet from the Paul and Chris Andrews Collection in Fort Worth for $7.6 million. Sotheby’s May sale of jewels in Genevaz raised $160.9 million, the highest-ever total for any jewelry auction, without adjusting for inflation.
But ultimately, it is the twice-yearly series of contemporary art auctions in New York that remain the measure by which the relative “strength” of Christie’s and Sotheby’s is perceived.
The problem for both houses is that overall growth in the auction market has stalled. This year’s first-half sales figures of $4.5 billion and $3.5 billion for Christie’s and Sotheby’s, respectively, are the same as they were a year earlier.
Financial turmoil in China, lower prices for commodities and a weak ruble have had an impact. The £95.7 million that Christie’s took at its June 30 contemporary sale in London was slightly lower than a year earlier.
“The June auctions showed that the bubble has deflated a bit since the highs of May,” said Mary Hoeveler, a New York art adviser, “but the overall growth of the art market will continue.”
The ultrarich, she said, want to buy trophies and are less interested in works by midcareer and emerging artists.
The November series of contemporary sales in New York could give a new-look Sotheby’s the opportunity to close the gap on Christie’s. But by then, will it have the financial firepower, and the influential personalities, to attract the Warhols, Rothkos and Basquiats that make or break an auction season? Or will we still be talking about oranges and lemons?
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