Greek prime minister talks bailout deal in new conference call with Hollande …

1 Jun 2015 | Author: | No comments yet »

Grexit entering end game as Greece debt talks go down to the wire.

Investors are bracing for a bumpy ride this week, as the long-running “Grexit” saga – Greece’s potentially catastrophic exit from the eurozone – enters its final stages, with trading rooms around the world worried that the ending could go either way.

As with all good psychodramas, “Grexit” – which has been running since 2010, when Greece received its first international bailout – has kept investors in suspense right to the end, with plenty of complicated plot twists and surprise character revelations. Last week was no exception, with investors – who now react feverishly to even minor developments in the drama that has pitted the radical leftist Greek government of Prime Minister Alexis Tsipras against the country’s creditors (the International Monetary Fund, the European Central Bank and the European Union) – enduring a roller-coaster ride. European markets rose by almost 2 per cent on Wednesday, after comments from Tsipras that the country was “close” to a deal, amid reports that the two sides were in the process of drafting an agreement. But these hopes were tempered by the much more prudent German finance minister, Wolfgang Schäuble, who hosed down expectations of an imminent agreement.

Investors concluded that Athens’ optimism was more to do with a PR strategy aimed at avoiding a bank run in the lead-up to a long weekend (Monday is a public holiday in Greece) rather than reality. Total deposits fell to €139.36 billion ($200.25 billion) in April, down from €145.04 billion in March and over €170 billion just five months ago, leaving deposit levels at Greek banks at their lowest level in more than a decade. Negotiations will commence afresh this week aimed at breaking the impasse over what reforms Athens must agree to in order to access its remaining €7.2 billion in bailout funds. For instance, the IMF is pressing Athens to lift the retirement age to 67 years, Brussels is arguing for a less ambitious number of 65, while Athens wants it to be 62 years. Athens claims to have the money to meet this deadline but there are worries that it will not be able to meet three further payments to the IMF later this month totaling about €1.25 billion.

An agreement between Athens and Brussels would also clear the way for the ECB to again accept Greek government bonds as collateral for loans, giving the country access to much-needed liquidity. But it will be a tense week, starting on Monday when French President François Hollande is due to meet German Chancellor Angela Merkel and the head of the European Commission, Jean-Claude Juncker, in Berlin. And, more than ever, investors will be scrutinising the body language and decoding the language of leading European officials as they try to anticipate the ultimate denouement of this Greek tragedy.

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