How many lines in the sand?

Another negotiation, another ‘deadline’ – Greece has been given three more days to vote through the ‘new’ austerity plans in the Greek parliament before new emergency liquidity occurs.

Source: Bloomberg


The new line in the sand

Greece has 72 hours to vote through new measures – So a new ‘ultimate, ultimatum, deadline of a timeline’. Only then can ‘new talks begin’ (so a new ‘ultimate, ultimatum, deadline of a timeline’ will be given).


The new line in the sand (Greece must legislate these measures by July 15) consists of:

  • Streamlining VAT and broadening the tax base to increase revenue
  • Upfront reform measures to pension schemes
  • Streamlining legal practices through Codes of Civil Procedure – these are cost reduction measures
  • Implementation of the provision of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union
  • Undertake ‘vigorous’ enterprise bargaining and labour market reforms
  • Strengthen the financial sector, including ‘decisive’ action on non-performing loans and ‘eliminating any possibility of political interference
  • Significantly ramp up a privatisations program with improved governance. Otherwise, Greece needs to hand over valuable Greek assets (approximately €50 billion), which will be transferred to an external and independent fund (the suggestion is the Institution for Growth in Luxembourg).


The conclusion from these measures is that ‘trust’ is a massive issue and Merkel herself used that word, saying:

“The situation is extremely difficult if you consider the economic situation in Greece and the worsening in the last few months, but what has been lost also in terms of trust and reliability.” – Angela Merkel

The only other interesting development from the weekend’s non-event deadline was the gap between euro nations and even leaders and their finance ministers.

The gap between Angela Merkel and Wolfgang Schӓuble is interesting. Merkel appears willing to play ball with Greece, while Schӓuble is basically implying he wants Greece out of the Eurozone. His proposal involves giving Greece five years ‘out of the zone’ and has been getting a lot of press. Realistically, if you’re out for a ‘period’, that period will be permanent.

IG’s Sunday market trading sees the European markets down approximately 2% - we are now into the seventh month of ‘negotiations’ and there really is no real end in sight.

China remains in a ‘stable’ situation. This week’s trade balance, retail sales, fixed asset investment, industrial production read and GDP print (the big one) should be determinates for direction. However, the new ‘stability’ measures are more likely to be the better guide.


Ahead of the Australian open

We are currently calling the ASX up 39 points to 5531. Greece is becoming a non-event for Asia and the fact the PBoC and central government have ‘regained’ control of the Chinese markets for now means value can be found.

Iron ore bounced back above US$50 a tonne and the US enters earning season in full tonight. Estimates are so low a toddler could jump over them.

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