Good morning! Today looks like it may well be crunch time for the Eurozone and Greece. The game of poker has been ongoing for a while now and we could be seeing the final cards being dealt. After weeks of rhetoric, Syriza performed something of a U-turn yesterday as Greece asked for a six month extension of its bailout. Unfortunately for them, this was rejected in a matter of minutes by German PM Schaueble who has referred to the proposal as a “Trojan Horse”, which is something that anyone that studied GCSE Latin will be familiar with.
The German Finance Ministry claimed that the Greek proposal does not fulfil conditions of the programme or correspond to criteria agreed on Monday by the Eurogroup. An extraordinary Eurogroup Finance Minister meeting on Greece is scheduled to start in Brussels at 2pm British time. As the current bailout programme is set to expire on 28th Feb, there is hardly any time left to extend or modify the programme and it is unlikely we will see any resolution before markets close today. So, the markets will be on tenterhooks and Monday morning opening should certainly be interesting.
Failure to reach an agreement could well be catastrophic for both Greece and the Eurozone. For Greece, they would be booted out of the Eurozone and possibly the EU. There would also be even more austerity for a country that really can’t afford it. And it could also spell the end for the Syriza Party who came into power on a wave of Rock the Casbah inspired euphoria only a few weeks ago. For the Eurozone, it would be politically disastrous and even though it would appease the fear of contagion, we could see more defections in the future.
So we will have to wait and watch the politicians and economists do their bit….
Elsewhere, the UK economy continues to strengthen and rumours of an interest rate rise in Q3 have started to gather pace. In the US, they are currently betting on June to be the time when this happens although it is thought that they would prefer to do this later rather than earlier. The Fed are expected to look closer at the continued labour market improvement as opposed to the low level of inflation to see this happen.
We have PMI data from France, Germany and the Eurozone this morning, retail sales from the UK, PMI from the US, but all eyes will be on Greece.