Greek Creditors Backing Away

Market Trends - 08/05/2015

The latest depressing rhetoric emerging from the Euro Area comes on the heels of a major deadline for Greek creditors to compromise on another tranche of bailout aid. With the disbursement of the EUR 7 billion, Greece is unlikely to last the month in another blow to the nation’s efforts to rebuild the economy and return to growth. Disagreements between creditors is a main source of tension at the moment considering the disputes over terms of the bailout and conditions Greece must satisfy in order to unlock the funds. Although reforms have been enacted, some meet the threshold for releasing funds while others still fall short of expectations. Unfortunately for the IMF and other creditors, should the groups decide to not assist Greece further, both can expect to take sharp haircuts on currently outstanding obligations. There have been no out of the box proposals to really shakeup the situation, adding to Greece’s frustrations with creditors.


Greece optimism was cut short yesterday with more incendiary comments from firebrand German Finance Minister Wolfgang Schaeuble after warning “don’t expect spectacular Eurogroup results.” Although Greece retorted via mouthpiece Varoufakis that a Greek exit is “not an issue” it is clearly evident that certain members are prepared to let the nation fail after squeezing the last Euro cent out of the nation. Even though talks are noted to have taken an unexpected positive turn after Varoufakis was forced by his own party to step down as the lead negotiator with the Troika, the constructive nature of the dialogue seems unlikely to persuade German partners that the Government is true in its intentions to reform the broken economy. Although correct in the assertion that chasing good money after bad in relation to the previous Greek bailouts is bad policy, it nevertheless ensures that creditors are not made whole, denting the outlook for the Euro Area. The Euro has increasingly reflected this stark possibility as the neighboring UK benefits from the Euro Area uncertainty.

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