Another Day, Another Deadline – Greece Set For 1 pm (GMT) Crucial Meeting
One deadline after another has come and gone over recent weeks. The leaders of the three parties in the coalition government of Prime Minister Lucas Papademos postponed on Tuesday what was billed as a crunch meeting because of “missing paperwork”.
Papademos, the technocrat shoe horned into a position of power last November in order to secure the new 130 billion euro rescue from the IMF and European Union, (which in turn is needed to secure debt payments moving forward), is desperately trying to persuade all the party leaders to accept the severe austerity and reform measures which will prove extremely unpopular with an already angry Greek electorate..
The latest word is that a document has been delivered to the three main parties and it doesn’t bode well. An economics reporter has told Flash News;
All of the ‘red lines’ that we were told would never be crossed have been crossed. We have just received the text of the agreement and there are cuts all round.”
One of the scenarios that apparently will have to be approved by party heads is a reduction of the minimum wage by 22% and a simultaneous 15% cut in supplementary pensions. The backlash from trade unions and employers groups is likely to be swift and sharp.
The European Central Bank has apparently agreed to take part in the Greek debt restructuring. The ECB will not join private creditors in a 70% haircut on the estimated €40bn of Greek debt on its books. It will exchange the Greek government bonds it purchased in the secondary market last year at a price below their face value.
That will reduce Greece’s total liabilities. The ECB may have acquired these bonds for less than their full face value, as nervous creditors ditched their holdings, the ECB may have enjoyed up to a 25% discount.
New polling data released this morning reveals that the Greek people have lost faith in the political leaders and the political process. A survey by Kathimerini/Skai found that 91% of people believe the country is ‘following the wrong track’, 13% believing that Greece is no longer a functioning democracy having seen a former European Central Bank vice president, technocrat, ex banker, installed as their unelected prime minister. 70% polled believe it would be a mistake to return to the drachma, suggesting that they still support membership of the eurozone.
The poll discovered that Papademos’s approval rating has dropped to 46%, from 55% last November. Separate polling from Greece has shown that New Democracy would win the most votes in an election, not enough for an outright majority. Support for Pasok, in power until last November, has plunged.
All Hail Angela Merkel
Support for German Chancellor Angela Merkel’s party has risen to the highest level since before her re-election in 2009. Merkel’s ruling Christian Democrats rose two percentage points to 38 percent in the weekly Forsa poll published today. The Free Democrats, Merkel’s junior coalition partner, were at 3 percent and the Social Democrats, were unchanged at 27 percent.
Merkel’s ratings have risen as she leads the drive to lock in euro-area budget discipline while resisting calls to provide more public money to fight the debt crisis. Merkel’s revived popularity has come as as unemployment declined to a two-decade low.
European equities have risen for the first time in three days whilst the euro touched an eight-week high as Greek leaders worked on the rescue plan with creditors. The Nikkei 225 Stock Average closed above 9,000 for the first time since October.
The Stoxx Europe 600 Index climbed 0.4 percent as of 8:30 a.m. in London. Standard & Poor’s 500 Index futures added 0.2 percent and the MSCI Asia Pacific Index jumped 1.3 percent, the biggest gain in three weeks. The euro advanced less than 0.1 percent, while the yen dropped 0.4 percent versus the dollar. Oil climbed 0.8 percent – an industry report showed U.S. crude stockpiles decreased. Copper gained 1.8 percent and Treasury 10-year yields rose two basis points to 1.99 percent.
The yuan approached an 18-year high after the Chinese central bank raised the currency’s reference rate ahead of Chinese Vice President Xi Jinping’s visit to the U.S. The People’s Bank of China set the fixing 0.14 percent higher, the most since Dec. 30, to 6.3027 per dollar. The yuan rose 0.17 percent to 6.2943 per dollar.
Market snapshot at 10:20 am GMT (UK time)
Asia Pacific markets enjoyed a strong rally in the early morning session, the Nikkei closed up 1.-0%, the Hang Seng closed up 1.54% and the CSI closed up 2.86%. The ASX 200 closed up 0.39%. European bourse indices have experienced a most positive start to the day, optimism that a Greek ‘result’ may be reached is buoying sentiment. The STOXX 50 is up 0.58%, the FTSE is up 0.2%, the CAC is up 0.56%, the DAX is up 0.82% whilst the ASE continues it’s recent bounce; up 3.36%, still 51.13% down year on year. ICE Brent crude is up $0.09 per barrel, whilst Comex gold is down $0.10 per ounce. The SPX equity index future is currently up 0.08%.
The Dollar Index could be headed for a two month low after the currency gauge dropped below its 100-day moving average. The index, which Intercontinental Exchange Inc. uses to track the U.S. currency versus its six major counterparts, slid as much as 0.8 percent to 78.488 yesterday, below its 100-day moving average of 78.747. The euro touched an eight-week high against the dollar today, reaching $1.3287.