Monday, 22 June 2015

They think it’s all over. It is .... Not.

We have had comments overnight that the new Greek proposal is much more solid and is a basis on which agreement can be reached. No details, just that.

I note that the two most quoted sources are Sapin and Moscovici. They are both French. France has never been the most aggressive opponent of Greek deals and looking at the state of their own finances I can imagine that they must be only too aware that hardening on the Greece line may not be in their best interests if France, with its own perilous finances, were to find itself in a similar position.

The people we need to have agreement from are the Germans, IMF and ECB.

But the equity markets appear to be trading as if a deal is done with the Dax up 380 and even the Ftse up 95 points and these moves have become self reinforcing with that belief. Yet Bunds are pretty unchanged and EUR/USD is now trading below fridays close, so the picture is not complete.

From what I gather volumes in equities are not that great, which leads on to the wondering if the move is as much algo driven with perhaps the self reinforcing social media monitoring machines picking up a storm of self reinforcement. Or perhaps I am just scratching my head as to how all the reasons for expecting no deal can evaporate without us hearing a squeak from Schaeuble, Weidmann, the ECB or Dijsselbloem.

ELA has been upped this morning, which is also seen as commitment but though the chances of a deal MAY have increased, to guess it in equities and deny it in bunds and FX appears odd. To suggest that everything is fixed and we can move on is absurd. We have a patch of hope appearing based on the Greeks folding and the normal modus operandi EU of face saving and redefinition, but it is hard to see how anything that is tough enough for the Germans is compatible with saving Greek faces.

I have just pressed the ‘yours' button on this morning's rally. Of course I am ignoring the other modus operandi of EU - Play the leaks ( Sources say).

1 comment:

hipper said...

Brilliant insight lol. Tsipras is just engaging in frustration tactics having much more realistic (IMHO) foreknowledge that EZ isn't really capable of handling the €100's billions of default contrary to all the political wishful thinking, which is pretty much aimed only at the moralizing election sheep public in the "hard working ethical" northern countries which contrary to Greece "run on balanced budgets". The Project is too precious to risk anything. If true then only hope of the Troika is that Syriza gets removed but for the Greek's the future consequences of folding to the presented demands as such would really be horrific which should say otherwise.

I guess the elephant in the room here is that Greece really isn't unique because France, Spain and Italy are all rowing in the same direction, only a bit further behind. The Eurobond idea might eventually break through along with some kind of marginal fiscal policy consolidation. The pressure to hold it together is mounting and that would pretty much provide another medium term band aid.