FXStreet (Barcelona) – With Greece showing no signs of accepting the proposal offered by its crediotrs, Strategists at RBS, view EC President Juncker’s plan to disburse €34bn as beneficial in the long-term, but it won’t be a enough to remove the deadlock.
Key Quotes
“EC President Juncker said Greek PM Tsipras misrepresented the creditors’ position in the talks, while MNI reported that the Commission had offered Greece around €34bn in structural funds, “in response to continuous claims by the Greek government to have a longterm growth package”. Our guess is that this definition of structural funds encompasses all the financial instruments of EU regional policy (including cohesion funds): the bulk of the funds allocated out of the EU budget to member countries. These funds are not unconditional and cannot be used to pay back creditors: a suitable project has to be presented for the funds to be unlocked and national institutions have to cofinance it.”
“Greece was granted €20bn of structural funds for the period 20142020, and has so far failed to absorb the full amount made available by the EC for 2015. According to the same source, to avoid the impasse “Juncker was willing to lower the Greek side contribution to 0%”. While the plan could be beneficial for the economy, it appears to be doing little to solve the current deadlock in negotiations. In our view the funds are a sweetener the EC is willing to give to Greece for the harsh and unpopular requests made (cutting pensions, hiking VAT on medicines and energy bills as well as abolishing a benefit for elderly low earners).”
“We see a 60% probability) that Tsipras accepts a deal (with elections likely following), and a 40% probability that the government goes to new elections before a deal is signed. In the latter case, we envisage an almost 50/50 probability that events will ultimately lead to a Grexit. Our Grexit probability hovers therefore around 20%.”
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