Political risks have clearly risen in several Euro-zone countries, materially raising the odds that in at least one country, the risks materialize. Bond markets should become more susceptible to such risks in the near future, warranting cautiousness towards the bonds of the weaker Euro-zone countries over the summer.
That the inflation rate in Greece fell below zero in March for the first time in 45 years gets quite a lot of media attention. The deflation ghost is out of the bottle again – is it really? Or has it …
Greece is starting to see some light at the end of the tunnel, even though the country still has a long way to go. Economic confidence has seen a sharp rebound in the past few months, and is now at its highest level since the country received its first bailout in early 2010. Even the outlook for Greece is thus not all gloomy.
In this week’s edition of G10 weekly we elaborate on the Greek deal struck this week and the gloomy Swedish macro backdrop, with our bearish view having been strenghtened by the fresh release of the NIER survey. We also look at possible effects of early LTRO repayments and how this could affect market pricing.
Despite remaining uncertainties, it looks likely that Greece will receive its money. Equally likely, going forward Euro-zone countries will have to take further losses on their exposure to Greece, while the outlook for the country remains clouded to say the least. The cost of the numerous meetings on Greece has been a further erosion of credibility.
The Eurogroup has failed to agree how to close the financing gap in the Greek bailout program! The Eurogroup will reconvene on Monday. The bottom line is that Greece will still get its money in due time. However, the Euro-area leaders have lost credibility by failing to reach a deal!
Even though different countries have made a varying amount of progress, while the many times rather ambitious targets have often been missed, it would be a misconception that no positive development would have taken place. Especially if one looks at the development of the current account, most countries are not that far away from balance any more.
Spanish bank deposits rose for the first time in six months in September, while foreign investors have reportedly been more active in Spanish bond auctions lately. Overall then, market pressure is not a particularly strong argument calling for a quick aid request by the Spanish government – political considerations currently play a bigger role.
Not too long ago, I had high expectations for this week’s EU Summit
There are several options to give Greece more time to reform its economy but trickier still is convincing the IMF the debt remains sustainable. In any case, it looks all but certain that Greek debt will need to be restructured again - sooner or later - meaning losses for the public-sector creditors.
There wasn't much good in today’s confidence numbers, strengthening the message that the Euro-zone situation may get worse before it improves. Still, we would not disregard the message given e.g. by the manufacturing PMI.
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
Now the tough part begins: re-negotiating the terms of the Greek stability programme. The two sides are likely to be miles apart in their demands to begin with.
One should not expect any major risk rallies or bond sell-offs on the back of the Greek elections, we already saw notable corrections in markets ahead of the elections.
The pro-bailout parties secured enough seats to form a government at Sunday’s election. That is a relief to the markets, but does not solve the debt crisis.
Most of next week will most likely be spent digesting the Greek elections results and (the chance of) possible stimulus measures, and few interesting entries in the calendar.
Our baseline scenario is that Greece will remain in the Euro area, BUT that requires forming a government as a first step.
Greek elections and contagion risks still the major story. We are keeping our forecasts basically unchanged.
The Spanish bailout will probably give some relief to the markets in the near term, but it is likely to be limited because it will not end the debt crisis, the Greek elections are still looming, and Spain may need more help eventually and risks downgrades following the bailout.
Apart from the continued talks around when Spain will make the official request for aid to its banks, the Greek elections are definitely the main thing to follow.
Contrary to our expectations, the ECB kept interest unchanged at today’s meeting. We expect a rate cut in July.
Can the Euro area survive a Greek exit? Will Spain ask for an EU/IMF bailout? What actions will be taken at the 28-29 June EU summit and will it be enough to secure the survival of the common currency in the longer term?
We still find it most likely that Greece will remain in the Euro area, at least in the near term, but have to ask what happens if they do not?
Politicians have started to show a sense of urgency, but decisive measures will take years to implement. Still the EU summit on 28-29 June might give some rough sketch of a road map for further integration.
Today’s disappointing numbers point to a significant contraction in the Euro area in Q2 and shows that the Greek crisis is spreading to the German and French economies. Risk of rate cuts from the ECB during summer.
All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.
New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece's problems is not found.
Everybody thinks it is almost certain Greece will leave the Euro-zone. And while it might happen, is it really that certain?
Today's key figure relases showed a somewhat better growth performance for the Euro area as a whole than expected.
News that the Democratic Left have tentatively agreed to participate in a grand coalition offers hope of a new Greek government being announced this weekend.
With 99% of the votes from Sunday’s general elections counted, the two “big” parties – the conservative New Democracy and the socialist PASOK – won 149 seats in the 300-seat parliament and hence lack two seats to form a majority coalition.
Markets are expected to set out with a negative tone towards risk today after the uncertain Greek election outcome and the very soft US employment report Friday. Hollande won in France, as expected.
Greece sold EUR 1.3n of 13-week T-bills at a yield of 4.25% today, down from 4.61% in February and the lowest since last May. However, confidence in the country is not about to return.
De som trodde vi nå var ferdig med Hellas for en stund tar dessverre feil. Fredag denne uken vet vi om en tilstrekkelig andel av private investorer slutter seg til avtalen om frivillig nedskrivning av deres beholdning av greske statsobligasjoner.