Greece's Euro Exit Seems Inevitable - page 3
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It is starting : this is a clear sign of what is going to happen with Greece
Greek Reform Deadline Weighs on Euro
Greece is expected to make a repayment to the IMF today but that is not enough to keep the euro afloat as EU officials have placed a 6 day deadline for an agreement on reforms. According to EU officials, Greece made an critical appeal for cash on Wednesday as liquidity becomes a real problem.
Sadly, those appeals were rebuffed, told there must be real progress before any further cash injections would be considered. Adding to the euro slide was poor German data as the single currency remains a sell on any rallies.
Greece is expected to pay a 450 million euro loan installment to the IMF later today as it scrapes together cash reserves from various state bodies and pensions. Separately, the European Central Bank is holding meetings today as it weighs its options on extending and increasing emergency cash assistance for Greek banks, which have all suffered massive deposit outflows over the first few months of 2015.
Rumors of a secret communication from the Finnish Finance Ministry have been making the rounds, as it proposes a “Grexit” situation should they fail to meet obligations under its 240 billion euro bailout program. Elsewhere, German industrial production data, weighed heavily by a January downward revision, missed badly and puts into question supposed economic “green shoots” seen over the last few weeks from mainland Europe.
Turning to the UK for a moment, the Bank of England held their latest policy meeting this Thursday. Not surprisingly, the BoE held rates and QE firm at 0.50% and 375 bio GBP, respectively.
The pound experienced a brief sell-off following the results but has since recovered to pre-BoE levels. Sterling continues to be caught between a rock and a hard place, as it makes ground on the euro but is holding up quite well against its North American cousin. Speaking of the dollar, the market continues to digest yesterday’s FOMC minutes from last month’s meeting. While policymakers still took a more cautious tone to rate hikes, and reinforced their delayed timetable for such action, the greenback continues to find a bid tone, as it remains a buy on dips.
It is jobless claims day for the US, and it was another strong result, as only 281k Americans filed new unemployment claims. This is slightly above last week’s result of 267k but as these numbers continue to come in below the 300k level, it remains a beacon of hope for the improving American economy. Canadian housing data was bang in line, as the Loonie trades slightly lower following yesterday afternoon’s FOMC minutes.
Oil has found a slight bid tone overnight, which is keeping the Canadian dollar from depreciating too much and as the USD/CAD remains closer to the $1.25 level for longer, investors may soon wonder how much further downside remains. Tomorrow is a big day for the Loonie as Canada releases its March jobs report.
Good luck trading today, there is sure to be a lot of headline risk as Greek news continues to dribble out. Stock performance may assume the driver’s seat for markets as earnings season begins in earnest next week.
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They should just exit
All this is becoming a stupid political game - nothing to do with real reasons why all is happening
Greece may have blown best hope of debt deal
Even if it survives the next three months teetering on the brink of bankruptcy, Greece may have blown its best chance of a long-term debt deal by alienating its euro zone partners when it most needed their support.
Prime Minister Alexis Tsipras' leftist-led government has so thoroughly shattered creditors' trust that solutions which might have been on offer a few weeks ago now seem out of reach.
With a public debt equivalent to 175 percent of economic output and an economy struggling to pull out of a six-year depression, Athens needs all the goodwill it can summon to ease the burden. It owes 80 percent of that debt to official lenders after private bondholders took a hefty writedown in 2012.
Since outright debt forgiveness is politically impossible, the next best solution would be for Greece to pay off its expensive IMF loans early, redeem bonds held by the European Central Bank and extend the maturity of loans from euro zone governments to secure lower interest rates for years to come.
"This step would save Greece's budget billions of euros, while reforming the Troika arrangement, eliminating the IMF's and the ECB's financial exposure to Greece," said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics, who advocates such an arrangement.
It would lower the effective interest rate on Greek debt to less than 2 percent, far less than Athens was paying before the euro zone debt crisis began in 2009, and radically reduce the principal amount to be repaid over the next decade, giving Greece fiscal breathing space to revive its economy.
And unlike ideas floated by Greek Finance Minister Yanis Varoufakis to swap euro zone loans for GDP-linked bonds and ECB holdings with perpetual bonds, paying out the IMF and the ECB early would be legal and supported by precedent.
But if the economics make sense for Greece, the politics no longer add up for its partners.
A euro zone official said there had been exploratory talks with the previous conservative-led Greek government about such a plan last year, before then Prime Minister Antonis Samaras chose to bring forward an election he lost rather than complete a bitterly unpopular bailout program.
"Now it's a political non-starter," said a euro zone official. "There's just no appetite in the euro zone for a grand bargain to take over Greece's debt to the IMF and the ECB."
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They will not exit
Then the rest of the countries similar to Greece would exit and that is not what the bosses of EU want
Tsipras considering going to the voters again
Increasing coverage of a story published earlier in Bild which reports that Greek PM Tsipras is considering calling for a new election, depending on the on-going debt negotiations
Looks like April 24 becoming the final deadline for the EU and Tsipras may be looking to strengthen his hand with Brussels by seeking larger support from the people for further action
Greece will declare default if IMF talks fail - FT
From the FT:
"Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government's thinking."
The default wouldn't technically take place until at least June 1. The report said they will default on $2.5 billion in IMF loans starting with payments due May 1; the IMF has a 30-day grace period.
The story says it could be a negotiating tactic buy Tsipras is walking a fine line.
IMF assumes that the fastest growing nation in the Eurozone in 2016 will be Greece.
The comedy continues
Germans downbeat on chances of Greek deal next week
Germany's finance minister said on Wednesday there was no prospect of the euro zone reaching a deal with Athens next week on economic reforms that would unlock bailout funds, potentially leaving Greece perilously short of money.
Both the Greek government and its creditors have said they need to reach at least an outline agreement at an April 24 meeting of euro zone finance ministers in Latvia's capital Riga.
But Athens, which has signaled it may not have enough cash to keep up payments to international creditors in May, has yet to produce a program of reforms that is deemed acceptable.
German Finance Minister Wolfgang Schaeuble told the Council on Foreign Relations in New York that no one expected a deal at the Riga meeting or in the coming weeks.
"No one has a clue how we can reach agreement on an ambitious program," he said, adding that Greece's new leftist-led government had "destroyed" all the economic improvements achieved by Athens since 2011.
The veteran conservative minister appeared to suggest that the euro zone could cope with a Greek default, saying markets had "priced in" all possible outcomes to Greece's debt woes and there was no contagion to other euro zone sovereign borrowers.
Standard & Poor's decision to downgrade Greece's credit rating to CCC+ with a negative outlook, citing the prolonged negotiations, suggested it sees default as increasingly likely.
In Brussels, European Commission President Jean-Claude Juncker, who has tried to mediate with Greek Prime Minister Alexis Tsipras, told a closed-door meeting of the EU executive that his patience with Athens was wearing very thin and there had been no progress in recent days, an EU official said.
But he said Juncker had insisted there should be no contingency planning for a possible Greek exit from the euro zone.
"A 'Grexit' is a taboo topic for Juncker," the official said.
In Berlin, a Finance Ministry spokeswoman said euro zone countries could not realistically pay out new aid to Greece this month because of the complex process required.
Slovak Finance Minister Peter Kazimir echoed Schaeuble's gloom about the chances of a breakthrough next week.
"Given that we have lost a lot of time, I am skeptical," Kazimir told reporters after a Slovak cabinet meeting.
Greek Prime Minister Alexis Tsipras, elected on a promise to end austerity, is balking at pension and labor market reforms to which his conservative predecessor had agreed.
EU sources say Brussels is pushing Athens towards more rapidly applicable measures to liberalize markets for products and services instead.
Athens is dangerously close to running out of cash, with its reserves expected to dip into negative territory after April 20, a source familiar with the matter has previously said.
The government could get by for another couple of weeks by using one-off measures or trying to raid the last remaining cash reserves at state entities -- a tactic it has been using in recent months.
But without a deal in Riga, Athens could be forced to choose between making 1.6 billion euros of wage and pension payments at the end of this month or about 1 billion euros of debt payments due in May, mostly to the IMF.
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Grexit Fears Sweep Through Markets
The EUR/USD came under renewed selling pressure in early European trade today as fears of Grexit swept through the market. The latest point of concern was a report in the Greek paper Ekathimerini saying that New Democracy believes that a Greek exit is possible. This comes on the back of the S&P downgrade yesterday and constant negative comments from German Finance Minister Schauble.
As we noted yesterday, many of the EZ policy makers appear to have given up on the prospect of Greece remaining in the union and while the financial risks of such a move have been curtailed, the political risks are unknown. If Greece were to leave the union it would set the precedent and open the way for anti-EU parties in Italy and France to assert their power.
In either case, the pair sold off to 1.0625 after spiking to 1.0750 in early Asian dealing, but has since recovered back towards the 1.0700 level as bargain hunters came in. The one factor that has kept the euro bid over the past few days has been the steadily disappointing drumbeat of US data. Yesterday’s woeful Industrial Production numbers only added to concerns that US economy is simply not strong enough to escape from zero bound just yet.
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