Spreadex Market Update
Drastic Greek proposal appears to edge Eurozone closer to a deal, markets surge
In a strange turn of events considering the resounding ‘no’ cried out by the Greek people to austerity, Tsipras submitted a proposal to creditors on Thursday that contains around €13 billion in cuts and tax rises, €4 billion more than the plan the public rejected. The concessions this reflects, especially on primary budget surpluses, VAT and pensions (i.e. all the ‘red lines’), and the swelling chances of a deal actually being made, is in no doubt the reason behind the robust early gains of the DAX and CAC. However there is still more work for Tsipras to do, and in many ways the most difficult task lies ahead; the Greek PM now has to try and convince his government this Friday to back the €13 billion plan, one that seemingly flies in the face of the anti-austerity rhetoric that has been Syriza’s bread and butter since before the party was elected.
If the plan is approved, and many believe it will be, it will be interesting to see how Greece’s creditors react at this weekend’s Eurogroup meeting and EU summit. The proposal is a fairly spectacular climb down from Tsipras, especially after the result of the referendum, and one that lends credence to the idea that the Greek PM didn’t think he would be in power to make these decisions following the vote. The ball has been firmly shifted into the court of the creditors, and they now have to prove they are willing to back the kind of Eurozone certain factions (Germany, as ever) have been clamouring for.
Of course the FTSE got to bask in the Eurozone glow, jumping above its Monday open to recover nearly all of the week’s losses. Another calm morning from the commodities sector should see the UK index maintain these gains; the bigger question will be if any course-altering kinks arise on the road to a potentially successful Eurozone weekend.
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