Spreadex Market Update
Greek vote and finance bridge funding joined by stark IMF warning
That all-important Greek vote, the first step (or thousandth, depending when you start counting) on the road to unlocking a third bailout. If the deal is voted through it will set up a flurry of similar votes at the end of the week, with the bid daddy being the one in the Bundestag. However, not to get too ahead of ourselves, Alexis Tsipras still faces a tough task this Wednesday and will have to try and quell a nascent rebellion in his own party, one that could undo the ‘progress’ made at the weekend.
Then there is the issue of a short-term finance bridge, something that caused ructions at the ECOFIN meeting yesterday as non-Eurozone members, including Britain’s George Osborne, balked at the idea of using the EFSM as the funding source. Yet Greece has an impending ECB repayment next Monday, meaning the region’s finance officials have very little time to sort out where the money is actually going to come from. Yet this could all be moot if the IMF’s latest report, which Eurozone officials supposedly received before the deal was agreed at the weekend, is accurate. The Washington-based institution painted a pretty dire picture of Greece’s current situation, recommending a 30-year grace period for the country as a 200% debt to GDP ratio in the next 2 years looms. It suggests that for all the parliamentary votes and short-term fund finding, any deal without debt relief is a deal that isn’t worth making, for either side of the Greek divide.
The return of a bearish tone following Monday’s brief optimism has left the DAX and CAC looking limp, with the FTSE similarly flat. This could change, however, with a morning of strong jobs data, something that could well be on the cards. Analysts are expecting UK wage growth to hit a 5-year high of 3.3% alongside the maintenance of a 7-year low in the unemployment rate; these figures could be the tonic the UK index needs to escape the curmudgeonly tone of the Eurozone.
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