Greece bailout talks: Compromise possible, says Merkel
The Greek fiasco continues then – today, it’s being suggested that both Greece and Germany may “compromise”. “Technical discussions” are being held ahead of Monday’s crunch meeting with EZ finance heads. Certainly there has already been some movement towards meeting the immediate and urgent needs of Greek banks, with the ECB’s “emergency liquidity” facility having been (very quietly) increased from €59.5bn to €65bn, more or less overnight. That of course means two things – there is still a run on Greek bank deposits, despite its recent central bank denial thereof, and the EZ is indeed moving towards some sort of overall deal for Greece. Word is that if the Greek government can show it’s being tough on tax evasion and its country’s endemic corruption, while reversing its recent ban on the privatisation of state assets such as the port of Piraeus, then the Eurozone (aka Germany) will cave in to the ongoing “no more calling our massive debt a bailout” demands of Messrs Tsipras and Varoufakis. And of course – in my view – that has been the new government’s plan all along. They actually need another €54bn by way of funding, in order to “stay alive” – but perish the thought it might be called a bailout. I’m afraid they simply want another handout, just so long as it’s properly dressed up not to look like one. More free money, no strings attached – business as usual. It’s that simple. Sure, there will be plenty fine words (Varoufakis is a true master of these!) but no real action when it comes to changing the Greek way of life as regards corruption, nepotism, and serial tax evasion. Time will tell, but I suspect my cynicism will be proved correct. In due course, Greece will be forced out of the euro as soon as the Germans realise they have “been had.” Meanwhile of course it’s all being perceived as “good news” and together with the alleged Ukraine ceasefire the effect on EURUSD was marked overnight, with a break well above 1.14. As I write, it’s dropping back a little but a further rise to above 1.15 is now likely. A break below 1.13 could see it revisit 1.12 however.
Elsewhere, Sweden dropped its interest rate to a tad below zero in a “beggar thy neighbour” move that will have won it few friends in Norway. Its central bank also announced the introduction of QE – a smallish amount admittedly, at about $1.2bn, but QE nevertheless. It’s the oldest central bank in the world, the Riksbank, but clearly its leaders have no more by way of intellect and common sense than do any other central bank leaders. Albert Einstein’s definition of insanity, was to “do the same thing over and over again, expecting different results each time”. Obviously a concept well beyond the brainpower of central bankers!