FXStreet (Barcelona) – FX Strategists at TD Securities, note that after an approval from the Greek parliament, the approaval to open negotiations for a new program for Greece will require parliamentary approval from six EUR nations, and the process might get messy.
Key Quotes
“Enthusiasm that a workable deal over Greece is on the table has fuelled an extension of positive market sentiment today. European shares have followed Asian stock markets higher while peripheral EGB spreads have tightened significantly this morning. The JPY is today’s clear underperformer, losing value against all 31 major currencies tracked by Bloomberg. Not surprisingly, higher-beta EM and European currencies are outperforming, with the NOK (+2.1%), EUR (+1.6%) and CHF (+1.3%) rising sharply in the G10 space.”
“These gains came after the Greek government submitted a proposal to meet most creditor demands in exchange for a €53.5 bn bailout. While the proposal was greeted with a general sense of cautious optimism, there are still potential stumbling blocks on the road ahead. The package is said to include a set of pension reforms, spending cuts, and tax increases that virtually duplicates the proposal rejected by Greek voters in their 5 July referendum.”
“The Greek Parliament will begin debate at the committee level at 3pm local time (8am NY/Toronto) while a full vote on the proposals may come on Saturday.”
“In addition to facing scrutiny by Greece’s creditors, six EU nations require parliamentary approval to open negotiations on a new Greek program. This includes Germany, the Netherlands, Austria, Slovakia, Estonia and Finland – countries that have tended to take a harder line on negotiations in the past. Once the EU leadership comes to a landing with Greece, however, we expect the national parliaments to fall into line although the process may be messy. That puts the focus on implementation risks, but those are likely to wait for another day.”
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