Germany has made it clear that Germany is not willing to budge on the terms of the loans made to Greece according to Ms. Merckle and others in Germany. Greece is set to make its case this coming Wednesday at a meeting to discuss the escalating Greek situation and then at a summit of EU leaders in Brussels on Thursday. The Greek Prime Minister, Mr. Tsipras, is asserting that Greece can live up to approximately 70% of the terms of the loans , but will not continue with the other 30% of them. He’s talking strong, but I’d rather have the troika’s position as they can simply shut off Greece’s funding. When you see the schedule of events below it give you an idea of the timelines involved. There’s always the chance that Greece’s request for a “bridge loan” that doesn’t carry the austerity measures is considered or granted, but that outcome is highly unlikely.
Here’s an update of scheduled events facing Greece:
• February 9 Greek parliament holds a vote of confidence in new anti-austerity government
• February 11 An emergency meeting with 19 Eurozone finance ministers, to discuss negotiations over a possible new bailout for Greece
• February 12 Eurozone summit in Brussels where Greek PM Alexis Tsipras will meet German chancellor Angela Merkel on the sidelines
• February 16 Regularly scheduled Eurogroup meeting which is the deadline for Greece to agree an extension of the EU’s bailout program, which Prime Minister Tsipras has already rejected
• February 28 Eurozone bailout program ends. If no extension, Athens will not receive final aid tranche of €1.8bn
• March €1.4bn payment due on IMF loan and around €1bn to other Greek creditors
While many think that Greek contagion can be contained, that doesn’t mean there won’t be serious fallout. That means safe haven plays might at any point come into play if things play out with Greece start to fall apart. The fact that gold isn’t rallying is interesting. It’s as though gold is saying the situation will be contained but bond futures and stock indices both here and in Europe continue to decline. Bonds might be declining more on improved US job which has increased the odds that the Fed might raise interest rates later this year.
The Aussie dollar is another hot spot in world finance as their dependency on China vibrancy has them reeling and their currency relationship to the U.S. dollar has made “down under” pretty darn expensive. Australia’s business confidence went up 1 point to +3, while Australian Consumer Confidence fell 0.6% for the week ending February 8th. The weighted average of house prices across Australia’s capital cities rose by 1.9% in the fourth quarter from the preceding three months, the Bureau of Statistics reported tonight. House prices rose by 6.8% from the same quarter a year earlier, the slowest pace of year-on-year growth since the second quarter of 2013. Given the Lunar New Year is about to begin, the odds are things are going to slow down now rather than pick in China which will impact coal and iron trade between Australia and China. Hopes are high however concerning more economic stimulus being enacted in China, which will eventually translate into increased Australian trade for Australian resources. AT these currency relationships many think “Australia is for sale”.