12 Feb 2015
Even a Greece-EU deal will not revert the EUR weakness – Westpac
FXStreet (Edinburgh) - According to Sean Callow, Strategist at Westpac, the bearish outlook around the single currency will remain intact even in case of an agreement between the EU and Greece.
Key Quotes
“What hasn’t really changed since 2010-2012 is that Greece wasn’t able to repay its debt in full and on time and surely is unable to do so now either”.
“The 2012 debt restructuring reduced the net present value of Greece’s debt burden but was always likely to be revisited”.
“Even if Greece’s New Democracy-led government had been returned in Jan, at least some revision of the bailout package was assured. But obviously the new Syriza-led government was elected to drive a harder bargain than the previous administration”.
“Wednesday’s meeting did not produce an agreement but much work will be done to avoid disappointment at Monday’s meeting. It is surely not in the interests of the European (and IMF) lenders to cut off funding to Greece, nor for the Greek government to make unreasonable demands from a position of weakness (they do not want to leave the Eurozone)”.
“Yet even if there is at least a temporary deal, perhaps to maintain funding through the debt maturities of the next 6 months, it is hard to see much upside on EUR. From March, the ECB will start a EUR60bn per month money printing program. The contrast between the Eurozone and an upbeat US outlook will only become more dramatic”.
Key Quotes
“What hasn’t really changed since 2010-2012 is that Greece wasn’t able to repay its debt in full and on time and surely is unable to do so now either”.
“The 2012 debt restructuring reduced the net present value of Greece’s debt burden but was always likely to be revisited”.
“Even if Greece’s New Democracy-led government had been returned in Jan, at least some revision of the bailout package was assured. But obviously the new Syriza-led government was elected to drive a harder bargain than the previous administration”.
“Wednesday’s meeting did not produce an agreement but much work will be done to avoid disappointment at Monday’s meeting. It is surely not in the interests of the European (and IMF) lenders to cut off funding to Greece, nor for the Greek government to make unreasonable demands from a position of weakness (they do not want to leave the Eurozone)”.
“Yet even if there is at least a temporary deal, perhaps to maintain funding through the debt maturities of the next 6 months, it is hard to see much upside on EUR. From March, the ECB will start a EUR60bn per month money printing program. The contrast between the Eurozone and an upbeat US outlook will only become more dramatic”.