Waiting for the Greek list

March 25, 2015

German Chancellor Merkel and Greek Prime Minister Tsipras leave after addressing news conference in Berlin

The Greek government could produce at any time a list of economic reforms which it hopes will prompt a flood of funds from its creditors.

It has pledged to do so by Monday at the latest and with the clock ticking furiously it’s like to come before that. We exclusively reported yesterday that Greece will run out of money by April 20 unless it receives fresh help.

Athens is hoping that if euro zone finance ministers approve the country’s latest reforms then it could claim about 1.9 billion euros in profits made by the European Central Bank on purchases of Greek bonds and also about 1.2 billion euros in cash left in the Greek bank bailout fund that was returned to the euro zone last month.

The euro zone bailout fund will discuss the latter possibility today with mixed views coming from Brussels as to whether it would be appropriate.

Once the Greek reform programme has been produced, euro zone finance officials will convene to discuss it with a meeting of the Eurogroup of euro zone finance ministers likely to called thereafter to nail down a deal.

The ECB is tightening the screws further, asking Greek banks not to increase their holdings of Greek short-term debt. Athens needs to refinance maturing T-bill issues and was hoping the euro zone would allow it to issue more. Greek banks are almost the sole buyers now so the ECB’s instruction means it doesn’t want them to plug the government’s financing gap by increasing their exposure.

The hitherto contrarian theme of the euro zone outperforming China and even the United States was firmed up yesterday when the currency bloc’s PMI survey for March jumped to a near four-year high, well above what was forecast.

Tail winds of cheap energy, a weak currency and ECB money printing should ensure that continues for a while. In Germany, inflation-busting pay rises are boosting domestic demand. The ECB appears to have launched its money-printing programme just as the euro zone economy picks itself off the floor.

Today, the focus will be on Germany’s Ifo index which is forecast to climb. Germany’s PMI showed its private sector grew in March at its strongest rate since last July, a further sign that Europe’s largest economy is gaining momentum.

The government’s last forecast for 1.5 percent growth this year now looks distinctly anaemic with many forecasters expecting something well in excess of 2 percent. Bundesbank chief Jens Weidmann speaks later in the day.

David Cameron and his opponent Ed Miliband will square off for the final time at Prime Minister’s Questions before campaigning begins in earnest for Britain’s May 7 election which is too close to call. The Conservatives are still grappling with Cameron’s shock admission that he will only serve five more years if re-elected. Calling time on your tenure is rarely a recipe for political longevity. He’ll be very lucky to last that long even if he wins in May.

The Scottish Nationalists, which could wipe out the opposition Labour party’s standing in Scotland, are on manoeuvres, declaring that if the Conservatives end up as the largest party and try to govern in minority, they would try to block its legislative slate, teaming up with Labour to bring the government down.

French President Francois Hollande, Germany’s Angela Merkel and Spanish premier Mariano Rajoy will visit the alpine area where a German budget airline went down on Tuesday, killing all 150 people on board including 16 German schoolchildren.

French Interior Minister Bernard Cazeneuve said all options would be investigated as to why the German Airbus ploughed into a mountainside on Tuesday but a terrorist attack is not the most likely scenario. He said the black box had been found, was damaged but would yield some information.

Israel’s president, after consulting all party heads over the past few days, is due to meet Benjamin Netanyahu and award him the official mandate to form a government. Netanyahu will then have up to 42 days to put together a coalition which is expected to be a heavily right-leaning cabinet.

The Czech central bank will not adjust its weak crown policy or postpone the planned exit from the programme, which is pencilled in for the second half of 2016, at its policy meeting today. But all economists polled by Reuters said the bank would be at some point forced to defend the cap preventing the crown from strengthening beyond 27 per euro.

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