Posted by Nelayan Forex On 7/10/2015 02:05:00 AM 1 comments
GERMANY conceded on Thursday that Greece would need some debt restructuring as part of any new loan programme to make its economy viable as the Greek cabinet raced to finalise reform proposals to avert an imminent economic meltdown.
The admission by German Finance Minister Wolfgang Schaeuble came hours before a midnight deadline for Athens to submit a reform plan meant to convince European partners to give it another loan to save it from a possible exit from the euro.
Greece has already had two bailouts worth 240 billion euros from the euro zone and the International Monetary Fund, but its economy has shrunk by a quarter, unemployment is more than 25 percent and one in two young people is out of work.
Schaeuble, who has made no secret of his scepticism about Greece's fitness to remain in the currency area, told a conference in Frankfurt: "Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that.
But he added: "There cannot be a haircut because it would infringe the system of the European Union."
He offered no solution to the conundrum, which implied that Greece's debt problem might not be soluble within the euro zone.
But he did say there was limited scope for "reprofiling" Greek debt by extending loan maturities, shaving interest rates and lengthening a moratorium on debt service payments.
European Council President Donald Tusk, who will chair an emergency euro zone summit on Sunday to decide Greece's fate, joined growing international calls for Athens to be granted some form of debt relief as part of any new loan deal if Prime Minister Alexis Tsipras finally delivers convincing reforms.
Tsipras chaired a marathon cabinet meeting to finalise a package of tax hikes and pension reforms to send to euro zone authorities in a race to secure agreement at the weekend on a third financial rescue.
The leader of his junior coalition partner, Defence Minister Panos Kammenos, told reporters the Greek proposal had been approved by the cabinet and would be submitted shortly.
Tusk said a realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors.
Failure to reach a deal on Sunday, including releasing some money to enable Athens to cover debt service over the next few weeks could lead to a collapse of Greek banks next week.
If there is no agreement, all 28 European Union leaders will discuss measures to limit the damage from a Greek collapse, including humanitarian aid, possible border controls and steps to mitigate the impact on neighbours, EU officials said.
Just how uncertain the coming days are was highlighted when European Central Bank President Mario Draghi voiced highly unusual doubts about the chances of rescuing Greece.
Italian daily Il Sole 24 Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as saying he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens' rescue.
Asked if a deal to save Greece could be wrapped up, Draghi said: "I don't know, this time it's really difficult."
The ECB is keeping shuttered Greek banks afloat with emergency liquidity capped until the weekend.
Even France, Greece's strongest supporter in the euro zone, acknowledged it was working on scenarios for a Greek exit from the currency area if weekend efforts to clinch a deal fail.
Under the agreed timetable, the leftist Greek government, which formally applied on Wednesday for a three-year loan from the European Stability Mechanism bailout fund, has until midnight to present convincing, detailed reform proposals.
FRANKFURT/ATHENS | BY JOHN O'DONNELL AND ANGELIKI KOUTANTOU
Business News | Thu Jul 9, 2015 6:36pm BST
*Results from July 05, with 100% of votes reported.
What could happen in a YES or NO vote scenario after the July 5th Referendum
THE SOVEREIGN DEBT CRISIS TIMELINE
Greece 10-year government bond yield - percent
GREEK GOVERNMENT DEBT AND DEFICIT
European Commission forecasts through 2016
GREEK GDP PER CAPITA
GDP at market prices per capita rebased to zero at end-2007
GREEK UNEMPLOYMENT RATE BY AGE
Unemployment rate - percent
Bank of Greece data to May 2015
SOURCES: GREECE MINISTRY OF INTERIOR, DATASTREAM
Posted by Nelayan Forex On 7/06/2015 03:22:00 AM 0 comments
Greeks voted overwhelmingly "No" on Sunday in a historic bailout referendum, partial results showed, defying warnings from across Europe that rejecting new austerity terms for fresh financial aid would set their country on a path out of the euro.
With nearly a fifth of the votes counted, official figures showed 60.4 percent of Greeks on course to reject a bailout offer from creditors that was the official issue of the ballot. The figures showed the Yes vote drew 40.1 percent. An official projection of the final result is expected at 1800 GMT (1900 BST).
Officials from the Greek government, which had argued that a 'No' vote would strengthen its hand to secure a better deal from international creditors after months of wrangling, immediately said they would try to restart talks with European partners.
"The negotiations which will start must be concluded very soon, even within 48 hours," government spokesman Gabriel Sakellaridis told Greek television." We will undertake every effort to seal it soon."
Euclid Tsakalotos, the government's chief negotiator said talks could restart as early as Sunday evening.
Many of Athens' partners have warned over the past week that a 'No' vote would mean cutting bridges with Europe and driving Greece's crippled financial system into outright bankruptcy, dramatically worsening the country's 5-year-long depression.
If confirmed, the result would also deliver a hammer blow to the European Union's grand single currency project. Intended to be permanent and unbreakable when it was created 15 years ago, the euro zone could now be on the point of losing its first member with the risk of further unravelling to come.
"I believe such a result can be used as a strong negotiating tool so that Europeans can understand that we are not a colony," said Nefeli Dimou, a 23-year-old student in Athens.
In Brussels, EU officials said there would be no comment until the final results are announced.
First indications were that any joint European political response may take a couple of days. German Chancellor Angela Merkel and French President Francois Hollande will meet in Paris on Monday afternoon. The European Commission, the EU executive, meets in Strasbourg on Tuesday and will report to the European Parliament on the situation.| BY KAROLINA TAGARIS AND LEFTERIS PAPADIMAS
Business News | Sun Jul 5, 2015 8:03pm BST
Posted by Nelayan Forex On 7/04/2015 06:41:00 AM 1 comments
Explainer: If Greece leaves the euro
Philip Stafford and Roger BlitzWhat happens once a country leaves the euro?
On financial markets a new currency first needs a new currency code that can be identified by computers for trading and payments. They are issued by the Swiss-based International Standards Organisation, a worldwide federation of national standards. It provides an alphabetic three-character code, with the first two letters representing the country and the third the name of the currency. In Greece’s case it could not go back to its old code for drachma, GRD, because there are still some outstanding payments to be made. It would require a new code, most likely GRN.
Is that really all it takes for markets?After that, the code must be entered into software and payments systems so the computers can recognise it for payments processing and trade confirmations and other critical but unseen functions. Market infrastructure providers say this can be done in one business day if needed.
In reality it requires far more. Switching over to a new currency is trickier when it comes to resolving long-dated forward financial contracts, such as swaps and options.
There is a host of legal questions that have to be resolved as payments are switched from one currency to another. Some trades may have to be modified or even rebooked. It is far from an impossible job, but as it involves legal changes, it is a slow and careful process.
Thankfully there is no wall of long-term Greek derivatives trades. The five-year saga has made investors wary and few have accepted Greek central bank-backed collateral for their trades, even if the European Central Bank has permitted it to be used as collateral in Eurosystem monetary policy operations. Some market participants have suggested it could be done in 30 business days but that might prove to be optimistic too.
What would the market expect the Greek government to do to support its new currency?
The Greek government would be likely to set a new Greek currency at half the value of the euro to gain some degree of competitiveness, and enforce that through a mixture of capital controls and currency intervention, and create liquidity through bond issuances.
But how to redenominate euro notes is the hard part. Greece would suffer from disruption to the banking system, bankruptcies, people trying to take their money out of the country illegally and uncertainty about commercial transactions.
It took the euro three years to get from launch date to notes issuance, and although it is unlikely that it would this long for Greece to set up a new currency the process could still take months.
What impact would Greek exit have immediately on the markets?
Market turmoil following an announcement of capital controls or an exit from the euro would not worry a forex settlement service such as CLS.
It is unlikely that there would be a lot of trading business at first though. It is an open question as to how much of the new currency people would have to trade.
Beyond that, Greece would also have to develop a system to settle payments in central bank money, but that could take several years.
Could be a good outcome for Greece?
“Introducing a new Greek currency is do-able over time,” says David Puth, CLS chief executive, “but it is not cost-free.”
“The introduction of a new currency is complex when done in a planned way. When done suddenly and under duress, the process will be disruptive with many unintended consequences that cannot all be anticipated.”
OK, so that’s the Greek side of the saga. What about the euro, is that unaffected?
Not exactly. That is because a Greek exit blows apart the principle sacrosanct to the EU — that eurozone membership is a club you can join but cannot leave. That affects investors, corporations and others with uneven exposure to a break-up of the eurozone.
Such as who?
Such as an Italian manufacturer, say, whose assets and revenues are in Italy but whose financing is done in euros.
So what could it do to protect itself?
James Wood-Collins, chief executive of Record Currency Management, which advises clients on hedging forex exposures, suggests establishing re-denomination swaps or legal tender contracts. They would put a price on the likelihood and impact of a country leaving the eurozone and re-establishing its domestic currency.
“Banks and other market participants have discussed such instruments in recent years, but a market has not yet been established,” he says. “The potential exit of Greece could provide the necessary catalyst for this development.”
(caption by MoneyWeek)