Greece in turmoil
Greece is in turmoil today, and likely headed toward another election, as uncertainty weighs on Athens and the markets, punctuated by a warning from an official of the European Central Bank.
After Sunday's elections left the country with no clear outcome, the head of the party that wants to undo the terms of the bailout is now trying to form a coalition government. But it's not clear that will work, which could mean a second vote. And time is not on its side.
"The time line going forward requires Greece to pass a budget including measures agreed to in its last bailout as a pre-condition for the first review that is supposed to occur by the end of this month," noted Derek Holt and Dov Zigler of Scotia Capital.
"A medium-term fiscal plan is also supposed to be ready by the end of May. All of this is necessary in order to prove that financing is in place for the next year. At present, these time lines are unlikely to be met and especially so if another election is called on a coalition stalemate."
The voters have clearly spoken in Greece, and that's the direction politicians have to take.
But it's not clear a coalition can even be formed at this point - the first-place New Democracy party failed to put one together - and the situation now threatens the international rescue of the country.
And should Alexis Tsipras and his Syriza party, which took second place in the elections, form a coalition government, then all bets are off.
I'm not saying he'd be wrong to attempt to rewrite the harsh terms of the bailout agreement - indeed, something has to give amid Greece's crippling unemployment - only that it would plunge Greece back into fiscal turmoil.
As he put it today on state television, Sunday's vote was one against "a barbaric bailout."
“There will be no €11-billion of additional austerity measures, 150,000 jobs will not be cut," he said.
But that's if he can form a coalition.
"Given he is unwilling to talk to ND (New Democracy party), the Communist Party has said it won’t talk to anyone and Golden Dawn (the extreme right) is not a candidate coalition partner, the numbers don’t add up," said senior currency strategist Elsa Lignos of RBC in London.
"So it seems Greece will have to go back to elections (June 17 is the touted date)," Ms. Lignos said, noting the country's looming obligations aside from the bond swap deal, known as the private sector involvement or PSI, arranged earlier.
"Greece’s €436-million redemption on May 15 is starting to attract attention – it is an international bond which was not part of the PSI," she said.
"There is a 30-day grace period so Greece could effectively hard default just days ahead of a new election. That would open the way for litigation but the real story should still be what fresh elections mean for chances of a [euro] exit."
Jörg Asmussen, a member of the executive board of the ECB, one of the parties involved in the Greek bailout, warned Greece's squabbling politicians today there's no going back.
"Greece needs to be aware that there are no alternatives to the agreed bailout program, if it wants to stay in the euro zone," he told the German newspaper Handelsblatt.
Asad Khan
Financial Analyst (CFB)
(043841906)
asad@cfb.ae
Greece is in turmoil today, and likely headed toward another election, as uncertainty weighs on Athens and the markets, punctuated by a warning from an official of the European Central Bank.
After Sunday's elections left the country with no clear outcome, the head of the party that wants to undo the terms of the bailout is now trying to form a coalition government. But it's not clear that will work, which could mean a second vote. And time is not on its side.
"The time line going forward requires Greece to pass a budget including measures agreed to in its last bailout as a pre-condition for the first review that is supposed to occur by the end of this month," noted Derek Holt and Dov Zigler of Scotia Capital.
"A medium-term fiscal plan is also supposed to be ready by the end of May. All of this is necessary in order to prove that financing is in place for the next year. At present, these time lines are unlikely to be met and especially so if another election is called on a coalition stalemate."
The voters have clearly spoken in Greece, and that's the direction politicians have to take.
But it's not clear a coalition can even be formed at this point - the first-place New Democracy party failed to put one together - and the situation now threatens the international rescue of the country.
And should Alexis Tsipras and his Syriza party, which took second place in the elections, form a coalition government, then all bets are off.
I'm not saying he'd be wrong to attempt to rewrite the harsh terms of the bailout agreement - indeed, something has to give amid Greece's crippling unemployment - only that it would plunge Greece back into fiscal turmoil.
As he put it today on state television, Sunday's vote was one against "a barbaric bailout."
“There will be no €11-billion of additional austerity measures, 150,000 jobs will not be cut," he said.
But that's if he can form a coalition.
"Given he is unwilling to talk to ND (New Democracy party), the Communist Party has said it won’t talk to anyone and Golden Dawn (the extreme right) is not a candidate coalition partner, the numbers don’t add up," said senior currency strategist Elsa Lignos of RBC in London.
"So it seems Greece will have to go back to elections (June 17 is the touted date)," Ms. Lignos said, noting the country's looming obligations aside from the bond swap deal, known as the private sector involvement or PSI, arranged earlier.
"Greece’s €436-million redemption on May 15 is starting to attract attention – it is an international bond which was not part of the PSI," she said.
"There is a 30-day grace period so Greece could effectively hard default just days ahead of a new election. That would open the way for litigation but the real story should still be what fresh elections mean for chances of a [euro] exit."
Jörg Asmussen, a member of the executive board of the ECB, one of the parties involved in the Greek bailout, warned Greece's squabbling politicians today there's no going back.
"Greece needs to be aware that there are no alternatives to the agreed bailout program, if it wants to stay in the euro zone," he told the German newspaper Handelsblatt.
Asad Khan
Financial Analyst (CFB)
(043841906)
asad@cfb.ae
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