Greek drama shifts to Washington

April 16, 2015

German Finance Minister Schaeuble attends news conference in Berlin

Much of the action switches to Washington where G20 finance ministers and central bankers are gathering for the IMF’s spring conference.

Most of the protagonists in the Greek saga will there including Finance Minister Yanis Varoufakis who is due to hold talks with both President Barack Obama and ECB chief Mario Draghi. He can presumably expect some sharp words with time running very short.

The euro zone is doubtful that a deal will be struck with Greece next week on economic reforms for bailout funds. Both the Greek government and its creditors have expressed the need for an agreement, at least in outline, to be reached when euro zone finance ministers meet in the Latvian capital Riga on April 24. But Athens has yet to produce a programme of reforms that is deemed acceptable.

The German government said on Wednesday it was unrealistic to expect euro zone countries to be able to pay out a new tranche of aid this month. Others concurred. “No one has a clue how we can reach agreement on an ambitious programme,” Finance Minister Wolfgang Schaeuble said in New York. Even European commission President Jean-Claude Juncker, who has given Athens a more sympathetic hearing, said patience was wearing very thin.

If it was possible to build the pressure further, Standard & Poor’s cut Greece’s credit rating deeper into junk territory, citing worsening economic conditions due to prolonged negotiations between the country and its lenders. Schaeuble said Greece must find a way to regain the trust of the financial markets and competitiveness of its economy and that Berlin was willing to help it.

Prime Minister Alexis Tsipras, elected on a promise to end austerity, is balking at politically sensitive reforms of the pension system and labour markets to which his conservative predecessor had agreed. EU sources say Brussels is pushing Athens towards more rapidly applicable measures to liberalise product and service markets instead.

Athens is dangerously close to running out of cash, with its reserves expected to dip into negative territory after April 20, sources familiar with the matter say. The government could still get by for another couple of weeks by using one-off measures or trying to raid the last remaining cash reserves at state entities – a tactic it has been using in recent months.

But without a deal in Riga, Athens could be forced to choose between making wages and pension payments of 1.6 billion euros due at the end of the month or upcoming debt payments in May. Greece must pay about 1 billion euros in May, most of it owed to the IMF.

With the European Central Bank’s QE programme in full swing, Spanish and French bond auctions today should be gobbled up. France will sell 7-8 billion euros of 2018, 2019 and 2020 bonds and 1.5-2 billion of 2020, 2024 and 2025 inflation-linked bonds. Spain is offering up to 5 billion euros of five-, 10- and 15-year bonds.
Russia’s Vladimir Putin will hold a long televised conference call with the nation, where ordinary (though carefully selected) people can ask questions.

The rouble fell below 50 roubles per dollar on Wednesday, its strongest level since late November. Nonetheless, Russia faces a deep recession due to western sanctions over Ukraine and a halving of the oil price since mid-2014.
Group of Seven foreign ministers said on Wednesday that sanctions against Russia could only be lifted once Moscow fulfils the ceasefire agreement signed in Minsk in February and respects Ukraine’s sovereignty.

Tonight, David Cameron will know whether his gamble has paid off of shirking most of the televised election debates in order to rob opposition Labour leader Ed Miliband of the chance to close the gap in their personal ratings. Miliband has exceeded expectations so far.

The opinion polls put both parties neck-and-neck so if Miliband closed the gap on Cameron as a potential premier it could be decisive. Tonight’s line-up involves five party leaders but not Cameron. Will they gang up on him in his absence?

British house prices grew at their fastest pace in five months in March, fuelled by a shortage of properties, a key survey showed on Thursday, adding to other signs that a cooling of the market may be ending.

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