What next for Greece after talks stall?
Well, a perhaps unsurprising end to the Greek/EZ talks in Brussels last night, with Greece absolutely determined to stick to its “negotiating” position of not budging a millimetre as regards extending a bailout. Indeed it may be that Greece and the European Commission heads are not so far apart, given that last Thursday’s “form of words” was suggesting the two sides were nearing a compromise. However it seems that in yesterday’s meeting, the eurozone finance ministers denied there had ever been a compromise on the table, and that either Greece sticks to the original plans, or gets zero ongoing help now. Tsipras – the new Greek PM – has seemingly been asked to replace his finmin Varoufakis at the negotiating table before Friday (“final crunch day” – just like last Monday was….) – a request that I suspect is a very long way too far. Greece (meantime) is being told to continue the reforms required by the existing agreements – ie more job losses, cuts to pensions entitlements, ongoing privatisations of state assets, and so on. I can’t see any possible way they’re going to do that without going back on every election promise they made – indeed to do so, could well risk revolution. So for the moment, nothing has changed – but there’s another meeting planned for Friday and yet again, it seems to me that what we’re looking at is simple politicking – indeed, “political posturing”. Each side is trying to prove how macho it can be. Nevertheless, there has to be a huge amount of worry in other peripheral countries – such as Spain and Italy – that’s to say, worry among the political establishment. If Greece does indeed get its way, and can pretty much walk away from most of its massive debt, reversing “austerity” and fulfilling its new government’s election promises – however temporarily – then the people of Spain and Italy are going to become very, very upset at their own governments’ clear negotiating ineptitude. And that will strengthen even more, the anti – euro/anti austerity parties such as Beppi Grillo’s in Italy and Podemos in Spain. On top of that, Mutti Merkel in Germany can’t be too delighted at the rise of AfD in her country…..
But let’s be clear here – I can’t see how Greece can continue to service its debt – in fact, it isn’t servicing it now. Its only way forward is a default by whatever name that eventually gets called. And even if Greece gets its way now, let’s not forget its government can justifiably be called “a rabble of loony lefties and ultra right wingers.” Its plans for the future are entirely unsustainable in my view, bailout or no bailout. Anyway, time will tell!
Elsewhere – in the forex markets – the euro is still treading water overall, while Cable (GBPUSD) continues to slowly strengthen in its rise of the past couple of weeks or so. A break of Monday’s high should see 1.55 in the crosshairs, while an unexpected break below 1.53 might signal a bigger temporary retrace than the way it looks for now.