After a Greek spokesman said Wednesday that Greece was already drafting a deal with its creditors, markets bounced upward. But senior European figures quickly poured cold water over the suggestion. According to Reuters, German finance minister Wolfgang Schaeuble said he didn't see much progress and was surprised by the upbeat tone coming from Athens. He also made a sideswipe at his Greek opposite number, Yanis Varoufakis. Schaeuble told German media that it was possible for him to work with the new Greek government because he had been able to work with East German communist party ministers before the reunification of Germany — not a very flattering comparison for Athens. Eurogroup chief Jeroen Dijsselbloem followed the German finance minister, adding that the Greek government had "to really put in more effort to make this the final stretch." The European Central Bank's latest financial stability review also gave Greece a kicking Thursday morning: Sovereign risks emanating from Greece, in particular, have increased sharply owing to heightened political uncertainty over the past six months, while the banking sector in Greece has witnessed substantial deposit outflows, a loss of access to the wholesale funding market and deteriorating asset quality. Financial market reactions to the developments in Greece have been muted to date, but in the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro area sovereigns could materialise In short, a lack of agreement will make Greek debt look increasingly risky — given the risk of defaults. Greek sources have been increasingly optimistic over the past couple of weeks. On May 18, Varoufakis said a deal was about a week away — a timeline that has since come and gone — with no deal in sight. But every note of optimism has been knocked back by negotiators on the other side of the table. Greece is running out of cash, and it has to make a further major debt repayment to the IMF on June 5. Greece owes €1.5 billion ($1.6 billion, £1.1 billion) to the IMF through June 19, part of a cumulative debt of €2.5 billion so far. It's extremely unlikely that payment will be made without a deal and the bailout money that comes with it. Here's what Bank of America analysts said in a note Wednesday: The timeline just seems too tight. Our view remains anti-Grexit, but given the liquidity situation and bulge of debt payments in the first half of June (Table 2) each day that passes raises the risk of a Cyprus-style scenario: temporary capital controls that, however, finally focus the political minds and bring about a solution. Bank of America's table of the coming payments (right) shows just how much is coming June 5 and in the next few weeks afterward — twice as much money is due to the International Monetary Fund (IMF) alone than Greece paid in May. It looks as if the sticking points in the deal are still what they were two months ago — though there has been progress on privatisation and fiscal austerity (the Greek government seems to have compromised on the former, and the country's creditors now seem to be content with lower budget surpluses for Athens). The major issues left unsolved are labour market and pensions issues. The IMF and the more hawkish Europeans want significant reforms on both fronts, but that would almost certainly mean the new government rolling over on promises in made during an election just a few months ago. Look out for any news on those policy areas specifically — and treat any more comments from Greek representatives suggesting the deal is done with a healthy pinch of salt.Join the conversation about this story » NOW WATCH: Here's how Floyd Mayweather spends his millions
 |
| READ THE ORIGINAL POST AT feedproxy.google.com |
