Spreadex Market Update
Pigs seen flying as Eurozone reaches unanimous agreement on Greek deal
To say it’s been an intense weekend is an understatement. The last 2 days have seen a variety of ideas floated, the toughest to swallow being the Germanic suggestion that Greece undergoes a ‘temporary exit’ (Grexish? Greak?) from the Eurozone. However, with hours and hours of discussion, and the idea of a ‘temporary exit’ slowly disappearing, 2 red lines appeared to remain: 1) the involvement of the IMF (something Greece was against) and 2) the transference of €50 billion in high-value Greek assets to be privatised by an external fund (a demand largely coming from German mouths).
Yet just as the markets opened Twitter was abuzz with news of a deal, with multiple leaders suggested an agreement has been reached. Big Daddy Donald Tusk confirmed these reports with a tweet stating that a ‘unanimously reached agreement’ has been made, one that leads to an ‘ESM programme’ with ‘serious reforms and financial support’. Things aren’t completely signed, sealed and delivered just yet, with approval by European parliaments (no easy feat, especially in Greece and Germany) and a discussions over a finance bridge for July and August still to come.
However the main question will be how much Germany has been forced to climb-down from its more excessive, and harsher, demands? The transference of the €50 billion of assets to an outside fund for privatisation was confirmed by Dijsselbloem, a definite victory for Germany, whilst other figures remain unclear with ‘firm negotiations’ soon to begin on the content of the third bailout.
Understandably since it’s what they have been waiting for, the Eurozone indices shot up as those tweets began to flutter into existence, with the DAX already seeing 3 digit gains. Of course the FTSE borrowed a bit of that Eurozone shine after the bell, with the UK index climbing by around 50 points as Monday’s trading began. What will now be interesting is how long it will take the FTSE to refocus on its own issues, after months of moving on the back of developments on the continent.
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