Fridays agreement between Greece and the EU left both sides claiming victory, as well as pushing stock markets in the US to record highs, and looks set to see European markets open higher this morning with the FTSE100 potentially opening at a record high.
While the Greek government undoubtedly had to give up much more than it would have liked, the fact that there was an agreement at all also owed much to the Germans climbing down as well, however much they would like to spin it to the contrary.
German finance minister Schaeuble had insisted that there would be no extensions
and that Greece had to comply with the letter of the current agreement, so this extension can definitely be construed as a change of position by Germany and other EU leaders.
The agreement of a temporary four month extension or “bridge”
obtained by Greece now needs to be backed up today by a list of reforms, to replace the other 30% of measures that it didn’t agree with as part of its current program.
If the list submitted is acceptable
then there is likely to be votes to ratify the extension in the respective parliaments that need to have them later this week, including the German parliament. If they aren’t acceptable then we can expect to see further meetings.
While markets will no doubt greet Friday’s events with relief
, anyone thinking that this is the end of the matter had better think again. While the fear of a Greek exit has been avoided for now, it is by no means off the table
, and to all intents and purposes nothing much has changed, in Greece, or anywhere else for that matter.
Strains still remain with record unemployment, sluggish growth
as well as low or negative inflation, confirmation of which is expected to come later this week from Germany, Italy and Spain
There is also the damage this sorry episode has done to so called European unity and trust
when you have the finance minister of Europe’s biggest economy, Germany not wanting to be in the same room as Yanis Varoufakis, the Greek finance minister, with officials passing messages between the two.
On the plus side despite the fact that Greece’s ability to repay all or any of its debt remains as difficult as it was before,
there does seem finally to be an acknowledgment from EU finance ministers that some parts of the bailout conditions need modifying, with an acceptance that the surplus targets for 2015 and 2016 could well be too high.
Greek PM Alexis Tsipras now faces his next challenge
, namely selling Friday’s agreement as progress given that it remains well short of what he, or Syriza had promised in their election manifesto.
While there may be some disquiet amongst some of the more radical members of his party
, the four month extension will give both sides more time to come to a better solution, not only between each other, but for other countries being asked to implement painful reform programs.
As such, the next few months are likely to produce more twists and turns in this saga, with another big loan repayment due in June.
On the economic data front the latest German IFO business survey
is expected to continue its recent improvement with the latest February number expected to post its highest reading since July last year with a reading of 107.4, as the recovery in Germany’s economy looks set to continue helped by the recent large scale drop in energy prices.
– the euro continues to find support above range support at 1.1270, with the larger key support at the 1.1205 level. Resistance remains near the 1.1450 level, with resistance behind that at the highs this month at 1.1530. This remains the next target on a move through 1.1460.
– despite slipping below trend line support from the February lows, we found support at 1.5330 and while we remain above 1.5280 the risk remains for a move through the 1.5500 area, towards 1.5800. Only a move back below the 1.5280 area argues for a move back towards 1.5200 and a retest of the 1.5000 lows this month.
– while below the 0.7460 level the pressure remains on the downside and the 0.7250 level. There is interim support at last week’s low at 0.7340.
– currently ranging between support at the 118.20 level, and resistance just above 119.30. As long as we stay below 119 80 then we could well see a resumption of the recent down move, and a return towards the 117.00 level. This month’s sharp reversal at the 120.50 level throws the potential for further upside in doubt.
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