Investors Won't Like The News Out Of Greece And France [View article]
The European newspapers tend to believe Merkel and Hollande will strike some type of an accord by softening certain terms of the recent fiscal compact and by adopting dubious growth measures. I say dubious as I doubt the growth spending we sill see would qualify as investment in any sense of the word.
Greece, on the other hand, is an absolute mess with widespread dissent, discord and dissatisfaction. After the New Democratic party, after finishing first, was unable to form a government the extreme left Syriza party was given a chance to form a government but most believe it will fail. Its leader, Alexis Tsipras, has said banks should be nationalized, debt servicing curtailed and the second bailout repealed.
There will likely be a second election but the fact remains 70% of the people voted for parties eschewing austerity and terms of the second bailout. Whatever government is formed is unlikely to implement the additional spending cuts and structural reforms agreed to during bailout negotiations, setting the stage for a confrontation with the ECB, EU and IMF.
From the FT:
As long as the political stalemate lasts, it puts in doubt Greece’s next loan tranche from the EU and the International Monetary Fund, which needs to see parliamentary approval for deep cuts in healthcare spending and public sector employment, as part of the country’s second €174bn bailout.
Without the EU and IMF money, Greece will be unable to meet pension, salary and debt commitments next month and, in such a scenario, strategists say a euro exit could be triggered.
“If the Greeks cannot pay pensions and wages, then that could speed up an exit,” says Mr Sian.
He fears the first forcible exit of a country from the currency bloc would create profound uncertainty and difficulties for the entire eurozone. It could pressure other peripheral government bond markets and even lead to other countries leaving the single currency.
(CI here) Even a member of the ECB today acknowledged the possibility of Greek withdrawal from the EMU, a position never taken publicly heretofore.
Wall Street Breakfast: Must-Know News [View article]
With a deteriorating US economy and the mosaic of snippets from above, including fading recoveries in Japan and the eurozone, it's easy to agree with Roubini's sober, if not somber, assessment of the global economy. Consistent with this, the Fed is likely to join Japan in further quantitative easing which is likely to depreciate the value fiat currencies prompting European central banks to suspend gold for bond swaps. This appears to the mean view to which all other views revert.
Investors Won't Like The News Out Of Greece And France [View article]
Greece, on the other hand, is an absolute mess with widespread dissent, discord and dissatisfaction. After the New Democratic party, after finishing first, was unable to form a government the extreme left Syriza party was given a chance to form a government but most believe it will fail. Its leader, Alexis Tsipras, has said banks should be nationalized, debt servicing curtailed and the second bailout repealed.
There will likely be a second election but the fact remains 70% of the people voted for parties eschewing austerity and terms of the second bailout. Whatever government is formed is unlikely to implement the additional spending cuts and structural reforms agreed to during bailout negotiations, setting the stage for a confrontation with the ECB, EU and IMF.
From the FT:
As long as the political stalemate lasts, it puts in doubt Greece’s next loan tranche from the EU and the International Monetary Fund, which needs to see parliamentary approval for deep cuts in healthcare spending and public sector employment, as part of the country’s second €174bn bailout.
Without the EU and IMF money, Greece will be unable to meet pension, salary and debt commitments next month and, in such a scenario, strategists say a euro exit could be triggered.
“If the Greeks cannot pay pensions and wages, then that could speed up an exit,” says Mr Sian.
He fears the first forcible exit of a country from the currency bloc would create profound uncertainty and difficulties for the entire eurozone. It could pressure other peripheral government bond markets and even lead to other countries leaving the single currency.
(CI here) Even a member of the ECB today acknowledged the possibility of Greek withdrawal from the EMU, a position never taken publicly heretofore.
Wall Street Breakfast: Must-Know News [View article]