FXStreet (Barcelona) – The Brown Brothers Harriman Team notes that although the Greece deal is gaining momentum after the reform proposal sent was in line with its creditors’ previous demand, the real question still seems to hinge on debt relief.
Key Quotes
“A Greek deal seems to be gaining momentum, with EU officials saying that discussions will take place on Saturday and that a summit on Sunday may not even be needed. Separately, the Greek parliament will debate the submitted proposals today. Press is reporting this would be at the committee level, with a full debate and vote possible tomorrow. Markets are trading as if this is a non-issued, perhaps an exercise by Tsipras to try to give an air of legitimacy to his proposals. The far-left wing of Syriza may break off in protest. This is because the new proposal is very similar to the one creditors have demanded, but rejected by Greek voters (including cuts to pensions and tax increases). So in the end, it looks like Greeks voted “no” but Tsipras is acting as if it were a “yes”.”
“The real question seems to hinge on debt relief. As we have argued before, debt relief for Greek will happen; the question is in what shape. A classic haircut seems out of the question, but even there, it seems as if Germany is softening on this issue, albeit marginally. German Finance Minister Schaeuble admitted that the IMF was right to say that the current burden of debt in Greece is unsustainable. About restructuring, he said he is “more cautious on this than Michel Sapin [French Finance Minister].” This sounds encouraging, or as encouraging as one can expect from the Germans at this point in the negotiations. It also exposes the already well demarcated difference in views between France and German. For example, French President Hollande was quoted today as saying that the new proposal was “serious” and “credible”.”
“The euro has pushed to its highest level since June 30 on Greek optimism, trading as high as $1.1180 ahead of the North American open. Yet we are still in the familiar $1.10-1.15 trading range. A break above the $1.1240 area is needed to signal a test of the June high near $1.1435.”
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