It’s yet another Monday morning in which the market is sat waiting for further clarification as to the path that Greece is likely to take over the coming years. Europe does not have the best record on agreements and compromise at the moment, given the failure of talks around Greek finances last week and a debate around the EU budget that never looked like yielding an agreement. News reports suggest that a teleconference between Finance Ministers on Saturday went well and that gaps were bridged.
Whether one of those gaps to be bridged was around the prospect of debt forgiveness remains to be seen. Reports from Germany over the weekend suggested some form of OSI with conditions had been agreed although the official line, as reiterated by Fin Min Schaeuble last week, is no debt forgiveness. Other likelihoods in the announcement include increasing the debt/GDP from 120% to 124% which will irk the already irritated IMF.
Euro has stayed solid over the Asian session on the belief that we will see some form of agreement tonight, however traders will be ready to take the single currency lower if that begins to look unlikely. European Finance Ministers are the finest fudgers out there and we could easily see a deal that only makes things look solved in their heads and the can is booted firmly into the distance – hopefully past the Italian and German elections that take place in 2013.
Another pressure point in Europe remains that of Catalonia with the inhabitants taking another step closer to independence over the weekend. Although the ruling party headed by Artur Mas lost ground it was more radical parties that took advantage and 64% of seats in the regional parliament are now held by parties in favour of independence from Spain.
While this was in no way a surprise it obviously adds to pressure on the Mariano Rajoy government and shows that he is unlikely to think that he has the political back-up to ask the powers that be for a bailout, with the attached austerity, anytime soon.
Spain’s bond yields are slightly higher this morning as a result.
Indicative Rates Sell Buy