Spreadex Market Update
ECB increases Greek ELA, Draghi claims debt relief is ‘necessary’
The Italian firmly dismissing the idea that the central bank had let down the Greek people by stating that the ECB now stands as the country’s largest depositor, and had resisted completely turning ELA off completely as many parties in the region wanted. In terms of ELA for Greece, the ECB president announced the central bank was raising the cap by €900 million; not enough to see capital controls lifted, but still an important step in keeping the banks alive.
Draghi also noted how debt relief was ‘necessary’ but was unsure how it would work under the region’s legal framework. The growing calls for debt relief, or at least a more engaged discourse about debt sustainability, are notable not only due to the repercussions a bailout that doesn’t contain at least some debt relief measures could have (as the IMF highlighted). No, they are notable due to the fact that despite the issue’s staunchest opponent, i.e. German sourpuss Wolfgang Schauble, begrudgingly agreeing, alongside the majority of key figures in not only in the Eurozone but the EU as a whole, that it needs to happen, nobody appears willing to take the steps to implement the clearly needed measures due to the issue’s political toxicity. It is perhaps the crowning example of the battle between the divergent political and economic realities at the heart of this saga.
In amidst all this the Eurogroup also announced it was to start negotiations surrounding a 3 year ESM bailout, but with the caveat that Greece must adopt new set of measure by 22nd July; interestingly there was no mention of the urgently needed finance bridge, even if Draghi himself seemed confident it would appear soon. The continued air of (fragile) optimism allowed the DAX to maintain its 3 digit gains with the CAC also putting in a decent shift as Thursday continued.
Slight better-than-expected jobless claims figures were joined by a big miss for the Philly Fed manufacturing index and a slight gain for the NAHB housing market index failed to help those looking for extra-clarity on the rate hike debate, leaving both the Dow Jones and dollar fairly flat as Greece dominated the headlines.
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