EUCOM Economic Analysis - Part I

[Firn]

So a deal is in doubt, as so often, and there might be long hours and days ahead, as so often before.

Alexis Tzipras is locked in talks with Greece’s creditors that could help determine whether Athens receives the bailout funds it needs to avoid bankruptcy.

Insiders say that that outcome of today’s negotiations with Christine Lagarde, Mario Draghi and Jean-Claude Juncker are highly uncertain, with no guarantee of a breakthrough.

Hopes of a deal tonight were badly dented this morning, after it emerged that Greece’s latest proposals have not been accepted by its creditors, putting the whole deal in doubt

The creditor's take on the Greek proposals seems to have been leaked, likely if you follow cui bono by somebody in the Greek team. Lots of red ink, especially about the pensions and VAT, but also a demand for bigger cuts in military spending which is very high by not so high European standards.

I have no idea how this will end or when but it is difficult to see a soft landing for Greece in the mid run. The Greek are right that such most cuts will deepen the recession but so many years of mostly pseudo-reforms and recent snubs has likely hardened the creditors stance which understandably has also been shaped by internal politics...

As I said before it is a great tragedy that it has come so far.

[davidbfpo]

[Firn]

I'm certain quite a few creditors are feeling that way. On the other hand many Greeks see it like that:



I have to repeat myself that it is really a farce and a tragedy that it has almost come down to this.

[Firn]

So we are stumbling towards a Grexit unless somehow an agreements gets someway found and maybe for some Draghi ex machina. Great tweet by Peter Spiegel:

Pretty much everything you need to know about Greece today in one footnote

Withdraw who can at many Greek ATMs, a sight we saw in Cyprus earlier and not a pretty one...

[davidbfpo]

Whilst a Greek exit from the Euro is a possibility, nay a certainity for many, coming up fast - for mainly political reasons - is a British exit from the EU. The UK is not in the Euro.

So this article's three charts put a different angle to the usual reporting that the EU is the UK biggest market:http://www.telegraph.co.uk/finance/e...e-charts.html?

This is the third chart:

[Firn]

The Uk is an interesting case, but I didn't have any time to take a closer look so I that one will have to wait.

Without just some Draghi to the rescue and no shortest term political soultion the predictable bank holidays and seemingly capital controls. As so often the details are not yet know and rumours are spreading. According to some the banks might close until the 07/07.

1900: TSIPRAS ANNOUNCES CAPITAL CONTROLS AND BANK HOLIDAY

It’s official, capital controls are being imposed in Greece, as the financial crisis takes an even more alarming turn tonight.

Speaking on live TV, Alexis Tsipras is saying that the Greek central bank has been forced to recommend a bank holiday and the introduction of capital controls.

Truth be told most smartish money should be gone for some time while the optimistic or 'patriotic' will access now restricted.

As I said before we seem to stumble ever closer to Grexit. History sometimes gets made in that fashion.

[Firn]

It has been a black Monday for Greece after many dark years as the country nears an exit. Maybe this is exactly strategic goal the leadership Syriza was working on and their abrasive style, lack of professionalism and wild attacks were their means to make pretty much any compromise with the creditors impossible. If this was their plan and they pull it off while most Greeks wants to stay in then I will be impressed. But it could well be that it was a play to secure an 'acceptable' agreement gone wrong and a Plan B was quickly needed. Who knows.

Personally it seems to me that a Greek exit from the Eurozone has become the best options for Greece itself. Many months ago I hoped that deep Greek reforms, and many are still desperately needed*, combined with another haircut with little to no austerity would have enable Greek to grow faster. However the lack of deep reforms, harsh creditor demands and the new Greek leftist government have tanked the economy again in an surprisingly short time and shaped a fait now almost accompli. Congratulations.

Now I think it is best to try the other bad option, which will be harsh and brutal but live will go on, hopefully with more hope.