By Peter Ward July 17, 2015
Grexit Averted with Greece Bailout Deal
Portrait of Alexis Tsipras, leader of Syriza, on the cover of Greek magazine MONO. © Charis Tsevis
After teetering on the brink of a European Union exit, Greece agreed on Monday to a bailout deal with Europe’s financial powers in return for heavy concessions. The country looked increasingly likely to leave the euro zone last week when it defaulted on an International Monetary Fund loan.
The deal is contingent on Greece meeting some very specific and complex stipulations, such as passing policy changes to cut public pensions and increasing sales tax. The goal is to modernize the Greek economy, but citizens of Greece may balk at more austerity measures and cuts. The Greek Prime Minister Alexis Tsipras and his Syriza party were elected on a wave of anti-austerity promises.
In return for these concessions, Europe will lend Greece €10 billion in the coming days in order for the country to meet a €3.5 billion IMF payment on July 20. This will be followed by €77 billion over the next three years, providing the financial reforms are passed.
Greek banks, which were closed on June 28, could reopen next week, as the European Central Bank approved an extra €900 million ($989m) in emergency funding on Thursday.
Reaction to the deal has been varied. An opinion piece by Eric Beinhocker for Bloomberg described the deal as the definition of insanity–doing the same thing over and over and expecting a different result. Beinhocker argues that the economies of the countries making up the euro zone are not integrated enough. For instance, there are huge disparities in key indicators such as GDP per person. Others were even harsher, describing the agreement as a German coup. Jan Keulen, writing for Al Jazeera, even went as far as to call the deal an “act of terrorism.”
The Financial Times defended the deal, and in an opinion piece written by Lars Field, said those describing it as a humiliation for Greece and coup by Germany were blaming the fire brigade for putting out the fire.
Iran Deal Hits Oil Markets
Six of the world’s superpowers – the U.S., France, China, Britain, Russia and Germany – reached an agreement with Iran over the Middle Eastern country’s nuclear program this week. The deal stipulates that Iran suspend its efforts to build a nuclear bomb in exchange for an end to heavy U.N. sanctions on the resource-dependent nation, which have been in effect since July 2006.
Iran’s economy relies heavily on oil and gas exports, which were almost entirely halted by the sanctions. The country has also been unable to import the technology needed to maintain its oil and gas facilities, and was cut off from the banking system used to transfer money between world banks.
Tehran, Iran. ©Loizeau
On Wednesday oil prices fell around 3% on news of the deal. Before the sanctions were put in place, Iran was producing around 4 million barrels per day of oil, but analysts do not expect the country to supply that amount again in the near future. Goldman Sachs analysts believe Iran could supply an extra 200,000-400,000 barrels of oil per day in 2016, according to Reuters, adding to an already oversupplied global market.
Goldman Sachs Earnings Tank, Citigroup Earnings Soar
Earnings season brought contrasting fortunes to Wall Street giants Citigroup and Goldman Sachs this week. Goldman posted profits of $916 million, less than half of the $1.95 billion the bank earned in the same quarter last year. Citibank , by contrast, reported a dramatic increase in earnings, which totaled $4.85 billion for the quarter, up from $181 million 12 months ago, when the bank was given a $3.8 billion legal charge.
Goldman Sachs CEO Lloyd Blankfein. © Fortune Live Media
Goldman’s worse than expected performance was also related to legal issues, as the company took a $1.45 billion provision for mortgage-related litigation and regulatory matters in the second quarter of 2015. That decision reduced the bank’s earnings by $2.77 per share.
Goldman Sachs CEO Lloyd Blankfein seemed unperturbed by the drop in profits. “We are pleased with our performance for the quarter,” he said in a statement. “While uncertainty in the EU weighed on investors’ level of conviction, many of our businesses continued to benefit from generally improving economic conditions and healthy client activity.”
Citi produced its best quarterly earnings report in eight years, and even Citi Holdings, the division of the bank containing bad mortgages and toxic loans left over from the financial crisis, made a $157 million profit.
During early trading on Thursday, Goldman Sachs shares fell 1.2%, while Citi rose 2.8%.
Amazon.com CEO Jeff Bezos at Startup School. ©ptufts
Amazon Turns 20
Amazon.com, one of the world’s largest e-commerce companies, turned 20 this week. The company celebrated with a ‘Prime Day’, a one day sale exclusive to Amazon Prime members.
The company, long criticized for meager profits, attracted praise from Brad Stone of Bloomberg, who hailed the company’s web services offering and unconventional business approach, and noted the recent resurgence in the company’s stock price following a slump in October. Stone also compared former Microsoft CEO Steve Ballmer unfavorably to Amazon CEO Jeff Bezos.
Fortune took an interesting angle on the occasion, accumulating anecdotes from former employees on what it was like to work for Amazon when the company was first founded. Among the interesting facts was that Bezos almost named the company ‘Relentless’, salaries were low, and homeless people slept in the office doorway.
Amazon’s Prime Day event was roundly mocked on social media, with many people upset at the quality of items put on sale. Despite this, reports from ChannelAdvisor and CNN Money stated sales were up 80% in the U.S. and 40% in Europe. Amazon itself said that the sales figures for Prime Day surpassed those of last year’s Black Friday.
50 Cent Files for Bankruptcy Protection
50 Cent, Hultsfred, 2007. ©Susanne Davidson
Rapper 50 Cent, best known for his 2003 Get Rich or Die Tryin’ album, may have to try getting rich all over again, after filing for Chapter 11 bankruptcy protection. The Wall Street Journal reports the musician, businessman and actor, real name Curtis Jackson III, has assets and debts in the range of $10 million – $50 million.
Jackson made the filing after a court ordered him to pay $5 million in damages to a woman who sued him over a sex tape. The 40-year-old Grammy award winner was accused of adding a commentary to a sex tape the woman made with her boyfriend, which was then subsequently leaked online. Jackson’s lawyer has said the rapper’s other business interests will proceed as usual while the Chapter 11 case is considered.
Forbes valued Jackson’s net worth at $155 million in May. He will make his next movie appearance in the upcoming boxing movie Southpaw. His other business interests include clothing, mining, drinks and boxing.
