Partner Article

Another Greek deadline goes by although markets steady

Investors began the week anticipating a 10:00 am (GMT) deadline by which Greece had to agree
cross-party support for further painful austerity measures and reforms in return for additional
bailout funds from its tripartite creditors (EU, IMF and ECB). After 5 hours of talks on Sunday,
political leaders had apparently agreed on some of the basic points of the conditions of the bailout,
including spending cuts in 2012 worth 1.5% of GDP. They were however far from agreement on
wage cuts in the private sector and divergent on bank recapitalisation plans. The leaders of PASOK,
New Democracy and LAOS, were then given until the aforementioned deadline today to agree on
the remaining measures, to secure the €130 billion second bailout which is required before Athens
faces a €14.5 billion debt repayment in March. In keeping with the ongoing charade, we learnt
an hour before the deadline that Greece wasn’t working to any deadline today. The deadline is
now said to be before the next Eurozone finance ministers meeting which, typically, is yet to be
confirmed.

Later in the afternoon, Merkel and Sarkozy met in Paris and gave a stark warning to the Greek
politicians and made it clear that time was running out to accept the terms of the new bailout.
Market reaction was however muted, many suggesting that markets still believes a deal will
ultimately get done, and looking through the brinksmanship the country isn’t really any closer to a
default. Other explanations focus on the ECB’s Long-Term Refinancing Operation that has provided
vital liquidity to the European banking sector which is now better able to withstand a potential
disorderly Greek default.

The FSTE100 finished off 0.15%, losing just 8 points to 5892, in line with most other major indices.
Brent Crude was up 2% to $115 per barrel whilst spot Gold fell 1.2% to $1725.

This was posted in Bdaily's Members' News section by John Dance .