Access to international aid by Greece should be toughened proposed Germany, by setting up an escrow account outside its reach to guarantee payments of interest and debt to creditors. There have been thousands of contradictory statements repeatedly doing rounds in the Eurozone News. Headlines stating Bailout requests being made are followed by denials of requests being made & news of bailout demands being outright rejected seem to be followed by a softened stand to be changed the very next day if not by the hour again. Markets have been witness to these political gimmicks for quite a long time & nothing seems real for now until something materializes. I think nothing major or earth shattering can be expected to occur, be it positive or negative for the markets before the crucial US Presidential Elections, lest the same, Rocks the Boat…There may be a sudden plethora of happenings & activities after the first week of November. Till then markets can be expected to remain volatile, generally directionless with occasional spurts of movements & spikes generated through economic & political news. Markets may switch & sway in either directions every few days repeatedly.
Finance Minister Wolfgang Schaeuble, who suggested that Greece will get more aid even while struggling to meet the conditions, wants a lasting solution to the country’s debt crisis to restore confidence in financial markets, reported Bloomberg. European Union leaders could try to bridge their differences over plans for a banking union the 2 day summit which started today. No substantial decisions are expected, reviving concerns about complacency in tackling the debt crisis which exploded three years ago in Greece. A statement from the troika yesterday, said it had left Athens after “comprehensive and productive discussion” agreeing the broad outlines of the austerity measures Greece will be forced to impose in exchange for the latest payout. Greece and inspectors from the troika say they have agreed on most issues.Athens is expected to secure aid needed to avoid bankruptcy given EU determination to avoid fresh market turmoil threatening bigger economies.
Status on Greece till Yesterday:
After months of often heated and testy negotiations, Athens and its European Union and International Monetary Fund lenders appeared to be in the home stretch toward a comprehensive deal on spending cuts and reforms needed to avoid a Greek bankruptcy. Announcing the conclusion of their latest mission in Greece, the statement from the so-called troika of The European Commission, European Central Bank and the International Monetary Fund said remaining issues would be resolved by technical teams in the days ahead. “The authorities and staff teams agreed on most of the core measures needed to restore the momentum of reform and pave the way for the completion of the review,” the troika said. “Discussions on remaining issues will continue from respective headquarters and through technical representatives in the field with a view to reaching full staff level agreement over the coming days. “Furthermore, financing issues will be discussed between the official lenders and Greece.” “I’m confident we’re doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery,” Prime Minister Antonis Samaras said at a meeting of European center-right parties in Bucharest. A senior Greek government official earlier said the two sides had reached agreement on all issues except labor reforms. As per Germany’s proposal, that money, would now go to a special fund. A final deal will help unlock a 31 billion-euro ($40.6 billion) aid installment that the country needs to avoid a default. Greece remains on life support with the country mired in its fifth year of a recession that has shrunk the economy by almost 20%. The escrow account would be outside Greece’s control and force the country to cut spending or raise taxes to make ends meet.
Greece Erupts with Anti-Austerity Protesters Today:
Greece is due to run out of money next month & has little choice but to push through the austerity package being discussed with lenders. This is the third time since late September that tens of thousands of Greeks have taken to the streets holding banners and chanting slogans to show their anger at austerity policies imposed by EU and IMF lenders in exchange for aid. Greece must make at least 11.5 billion euros of cuts to satisfy the “Troika” of the European Commission, European Central Bank and IMF, and secure the next tranche. Greek police clashed with anti-austerity protesters hurling stones and petrol bombs on the day of a general strike that brought much of the near-bankrupt country to a standstill. In the second major walkout in three weeks on Thursday, almost 40,000 protesters marched in Athens in a bid to show EU leaders meeting in Brussels that new wage and pension cuts will only worsen their plight after five years of recession. Tensions mounted when a small group of protesters began throwing pieces of marble, bottles and petrol bombs at police barricading part of the square in front of parliament, prompting riot police to fire several rounds of teargas to disperse them, reported Reuters. Most business and public sector activity ground to a halt at the start of the 24-hour strike called by the country’s two biggest labor unions, ADEDY and GSEE. Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite, said Yannis Panagopoulos, head of the GSEE. “The new, painful package should not be passed,” the ADEDY public sector union said in a statement. “The new demands will only finish off what’s left of our labor, pension and social rights.” With time running out fast, people are taking matters into their own hands, said the main opposition Syriza party leader Alexis Tsipras who took part in the march. Read more on Forecast: Taxes will be ruthlessly imposed with a view to alleviate the social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate….
Social Democratic Party’s Peer Steinbrueck, who is Merkel’s main opposition’s lead candidate in elections due next fall, accused Merkel’s coalition of “mobbing” Greece over the summer months, when members of her CSU Bavarian coalition partner said that Greece should be “cut free” from the euro. Steinbrueck predicted that for all her current objections, Merkel will probably have to agree to a third Greek bailout, just as he said she overturned her prior opposition to the European Central Bank buying sovereign bonds, the permanent rescue fund and ECB President Mario Draghi’s bond-buying concept. Merkel “has become driven, someone who says no for so long until the pressure of reality threatens to blow the lid on pan, forcing you to say yes,” Steinbrueck said.
Markets Mood Turns Optimistic on Greece & Spain News:
Europe’s financial markets had rallied on Wednesday even before the upbeat signals from Greece, after Spain dodged a widely expected downgrade to junk status from ratings agency Moody’s. Spanish 10-year bond yields fell to a six-month low of 5.5% and the Ibex stock market in Madrid jumped by 1.4%, after Moody’s confounded investors’ expectations and left the country’s rating unchanged. Moody’s said its judgment was based on the expectation that Spain would seek help from the single currency’s bailout fund, the ESM- European Stability Mechanism. That in turn could trigger massive purchases of Spanish bonds under the ECB’s plan for “outright monetary transactions”, announced by its president, Mario Draghi, last month, helping to drive the country’s borrowing costs down further. But Spain’s Prime Minister, Mariano Rajoy, has so far resisted applying for help from the Eurozone, fearing that it will mean surrendering political sovereignty. Despite Wednesday’s more optimistic mood, some analysts cautioned that even if a Spanish bailout does trigger the OMT, it will not bring the long-running crisis to a close.
The OMT is a liquidity measure, it does not address solvency. As such, it can only buy time; it cannot solve the structural flaws behind the European debt crisis. A more comprehensive resolution must involve some debt restructuring, both public and private, in peripheral economies to restore sustainability and lay the foundation for growth. Even the stronger economies at the Eurozone’s core have seen growth hit hard by the crisis and the German government was forced to concede on Wednesday that it now expects to eke out GDP growth of only 1% in 2013, not the 1.6% it had forecast.