Spreadex Market Update
Bundestag gives green flag to start bailout negotiations, whilst Greece gets €7.16bn bridging loan
Like in Greece (and France, Finland, Austria and Latvia), the Bundestag eventually passed the Greek deal, with 439 yes votes to 119 no’s, and 40 abstentions. Like Tsipras’s 38 Syriza dissenters, 50 of those who voted against the deal came from Merkel’s own CDU party (and its Bavarian sister the CSU). So, as expected the vote wasn’t too much to worry about, yet it still hints at the chance for political problems lurking at the peripheries for the German Chancellor.
Perhaps more pressingly, the European Commission confirmed this afternoon that Greece will receive (hopefully by Monday) a €7.16 billion, EFSM funded bridging loan to be pay out in two instalments. This will help Greece cover both the July 20th and August 20th ECB repayments, as well as the infamous €1.6 billion it owes the IMF in arrears. Importantly, and to the delight of George Osborne, ‘a mechanism has been designed so as to ensure that non-euro area member states do not carry any risk’, likely the only move the Eurogroup could pull to ensure Greece got the money it needs in time.
However, unfortunately for the Greek people (who often get neglected in the macro-discussions over the issues of Greek debt) contrary to earlier reports the banks will not reopen on Monday, despite the increased ELA, fresh bridging loan and green flag to start bailout negotiations. Following the afternoon’s developments the DAX and CAC appeared unimpressed. It seems investors are unwilling to take any risk into the weekend; understandable, really, considering how frantic the last few Eurozone weekends have been.
Over in the US it was a busy, and Fed-relevant, afternoon of data; as expected, if unimpressive, inflation growth was joined by a slip in preliminary UoM consumer confidence, something hinted at by Tuesday’s dismal retail sales figures. By and large, however, these were dollar boosting rather than Dow helping numbers, and the greenback saw some mild growth against the euro and the pound whilst the Dow Jones dipped into the red.
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