European stock markets took a stride forward yesterday, as confidence grows that Greece will get a deal done.
Last night Athens submitted its revised proposals to creditors, who will review the submission on Sunday. In the meantime the Greek parliament will get to review the submission today which, given its content might not go down well. The proposal includes a €53.5bn bailout loan, payable over the next three years. In return there will be tax rises and pension cuts, which if we’re not mistaken, the Greek people voted against last weekend.
We should know by Sunday night whether this problem has been put to bed, which will be a welcome relief, albeit nobody knows when it will crop up again – particularly if there is another change of government and someone like Varoufakis came in as PM and wanted to re-write the conditions.
If the deal doesn’t go through, the transition to the Drachma might not be as tricky as everyone thinks. Bloomberg are reporting that when a reporter checked out of the Hilton in Athens, their credit card receipt was shown in ‘New Drachma EQ’! Nobody is commenting on the oversight, but it looks like some of the groundwork is already there if we don’t get an agreement tonight.
Another interesting twist is reported in the Telegraph. With America weighing on the argument and urging a deal to be done, they won’t be best pleased that Greece has admitted that they are going ahead with the Turkish Stream Pipeline deal with Russia. It was a pretty poorly kept secret, but the admission might frustrate the U.S. somewhat. It does stand to create 20,000 jobs though and with unemployment well north of 25% in Greece, we can understand the rationale.
The only other story making the wires is China, where yesterday’s 6% rise in stock prices has been followed by a 5% rise today, to close out the week. The government support for the market might be forcing this move higher, but a lot of people are saying it could simply be a ‘dead cat bounce’ and we’re nowhere near the bottom of the correction. The wider Asian markets will be relieved though, as their fates are intrinsically linked to that of China.
Today feels a little like groundhog day, with the prospect of Greece ‘finally’ establishing whether they’re staying or going for the umpteenth time. Sunday night is purported to be the decider, but it will be interesting to see if there is enough positive chatter following the Greek parliamentary presentation to get a big market swing (either way) before we go into the weekend. We’ve got Janet Yellen speaking at 5.30 UK time, so might be an interesting spin on the U.S. interest rate story was we head out of the door.