Thunderhawk » August 3rd, 2015, 1:34 pm Backdoc Alert
Greece Is Still Doomed Without Debt Relief
Keeping Greece inside the euro system was a questionable decision at best -- but, having chosen that course, the country's government and creditors are obliged to make it work. Early signs aren't encouraging.
When the Athens Stock Exchange opened Monday for the first time in five weeks, it tanked. Factory production, according to new figures, is in its deepest slump for years.
The International Monetary Fund told its board last week that the fund couldn't participate in the next Greek bailout unless Greece's other creditors agree to another round of debt relief. That's a problem. Germany and other creditors are opposed -- while continuing to insist that the next program can't happen without the IMF.
When Greek Prime Minister Alexis Tsipras capitulated to the creditors' demands last month, he thought he'd struck a deal. Not for the first time, he was mistaken: The new program is falling apart before it even exists.
Tsipras already has his work cut out to deliver his part of this vaporous bargain. The Greek parliament has passed two big packages of economic measures, including controversial tax increases and pension reforms.
The creditors next want to see those implemented, and are pressing for new privatizations and other changes, too. Greece is likely to need bridging finance for a payment to the European Central Bank next month, and the European Union may impose new conditions in return.
The ruling Syriza party, deeply divided over the concessions yielded so far, is on the verge of splitting. If that happens, Tsipras would probably have to call an election. No end to this confusion is in sight. While it lasts, there's little hope of any revival in confidence or investment -- and slim chance of the broader economic recovery that Greece so desperately needs.
No doubt, some degree of uncertainty was unavoidable. Greece has serially defaulted on loans and policy commitments. In extending further help, the creditors would be mad not to set conditions and closely monitor Greek compliance. As a result, the threat of a new financial crisis was bound to persist. Nonetheless, a strategy that offered Greece a navigable path to recovery was not too much to ask. As yet, there's no such strategy.
The creditors should agree right now on the principle that debt relief will be forthcoming so long as Greece negotiates in good faith and tries to keep its promises. Otherwise, with or without the IMF, the new program is likely to fail.
Germany and its supporters among the EU creditors will have to budge. Their claim that the rules of the euro area forbid debt relief is hard to take seriously: The rules are plenty flexible, given the will.
Persuading voters in Germany and other countries that debt relief is in their own interests is another matter, to be sure -- not least because the governments concerned have been saying the opposite for months. Yet the price of persisting with the no-debt-relief line is just too high: further damage to the flattened Greek economy, followed by the failure of the new program, and, in due course, nonpayment of the debts in question.
Surely that's not the ultimate goal of Greece's creditors. What they need to do, then, is stop taking steps to make it the most likely outcome.
Thunderhawk » August 3rd, 2015, 1:29 pm Backdoc Alert
Greek stock market bloodbath as exchange reopens
ATHENS, Greece (AP) -- Greece's top companies lost billions in market value in a matter of minutes on Monday, when the stock exchange plunged upon reopening after a five-week closure and investors worried over a dramatic new drop in the economy.
The main stock index shed over 22 percent soon after the open, as traders got their first opportunity since late June to react to the latest twists in the country's economic drama.
The index closed 16.2 percent lower, with bank shares hitting or nearing the daily trading limit of a 30 percent loss.
"There's a sense of panic," said Evangelos Sioutis, financial analyst and head of equities at Guardian Trust. He noted some traders are selling stock merely to raise cash because there is so little liquidity in the Greek economy.
"There are no buyers," he said. "The outlook is not clear."
Markets in the rest of the world, however, were largely unaffected, a sign that investors outside Greece have now largely cut off ties with the country after years of crisis there. European shares closed higher.
Greece's stock market and banks were closed on June 29, when the government put limits on money withdrawals and transfers to keep a run on the banks from bringing down the financial system. People were panicking over the prospect that the country could fall out of the euro after its talks creditors broke down.
Greece has since then resumed talks with creditors and reopened its banks. Strict limits on cash withdrawals remain, however.
Two surveys published Monday illustrate the extent of the damage wreaked on the Greek economy in July by the bank closures, money controls and general uncertainty over the country's future.
Financial information company Markit said its gauge of manufacturing activity in Greece plummeted during the month to 30.2 points, its lowest ever reading, despite improvements across the rest of the 19-country eurozone.
"Manufacturing output collapsed in July as the debt crisis came to a head," Markit economist Phil Smith said.
"Factories faced a record drop in new orders and were often unable to acquire the inputs they needed, particularly from abroad, as bank closures and capital restrictions badly hampered normal business activity."
Meanwhile, a monthly survey of business and consumer confidence, the Economic Sentiment Indicator, fell for a fifth consecutive month in July to its worst level since October 2012.
Greece is currently in intense negotiations with bailout lenders to negotiate the terms of a massive new rescue package in the next two weeks.
The country needs to complete the talks and get more loans before Aug. 20, when it has to repay more than 3 billion euros to the European Central Bank.
Deputy Finance Minister Dimitris Mardas did not comment on reports that Athens could seek a short-term loan to tide it over in case the talks have to be extended.
"The (negotiation) timetable is truly pressing ... We are preparing for what has been agreed upon, correcting any gaps that may appear," Mardas told private Skai television.
Negotiators from the European Union and International Monetary Fund are seeking faster cuts in early retirement plans set out by the government, and stricter conditions for a tax arrears payment program.
Prime Minister Alexis Tsipras is facing opposition to the new bailout from within his left-wing Syriza party that could force him to call an early election in the fall.
Syriza dissenters are openly calling for a return to the drachma, but failed last week to force an emergency party conference before the bailout negotiations are completed.
"The government has to choose between a humiliating agreement to sign a third bailout, or abandon the agreements reached in Brussels and seek alternatives for a positive course out of this crisis," former welfare minister and prominent dissenter Dimitris Stratoulis said over the weekend.
AP Television's Paris Ayiomamitis in Athens contributed.
Thunderhawk: » August 3rd, 2015, 1:32 pm Backdoc Alert
Greek stocks unofficially close 16 percent lower, banks plunge 30 percent
ATHENS (Reuters) - Greek stocks (.ATG) unofficially closed with losses of 16.2 percent on Monday, the first day of trade after a five -week shutdown.
Bank shares (.FTATBNK) fell 30 percent, hitting the bourse's daily volatility limit, with sellers liing up and no buyers.
Thunderhawk » August 3rd, 2015, 1:38 pm Backdoc Alert
VIDEO: Oil's losing streak at its worst for the year
Aside for the Greek stock market, it was the price of oil that attracted the most attention on Monday morning with both the WTI (New York Mercantile Exchange: @CL.1) and Brent (Intercontinental Exchange Europe: @LCO.1) closing in on their lowest price levels for the year.
Brent fell over 2 percent to $51.10 a barrel by 10:00 a.m. to a price not seen since the end of January. Reuters reported that the benchmark is now on its longest weekly losing streak since late 2014.
U.S. crude, meanwhile, fell 68 cents to $46.43 a barrel after hitting its lowest in four months at $46.35 a barrel. However, it was still off its March low which saw the commodity dip below $43 a barrel.
Barclays oil analyst Miswin Mahesh told CNBC Monday that a number of factors had coincided to inevitably lead to a price decline, but remained upbeat on the price over the longer term.
"As much as things are looking weak at the moment, I think the price in itself would be a catalyst to tighten market balances come 2016," he said.
Barclays expect Brent to rebound to $66 a barrel by the second quarter of 2016 and WTI to reach $63 a barrel.
Analysts have highlighted a raft of reasons for the latest fall with several data points weighing heavily on Monday morning.
Output from the Organization of the Petroleum Exporting Countries (OPEC) in July reached its highest monthly level in recent history, according to a Reuters survey on Friday. This has raised concerns of oversupply with the news agency also reporting Monday that Saudi Arabia is expected to raise its prices for its light crude by around $1 a barrel - a move that is likely to hurt demand.
Meanwhile, U.S. shale rigs also continue to see a slight rebound with Baker Hughes data on Friday showing a higher rig count for a second week in a row. Sentiment has also taken a hit, with net long positions on WTI declining last week, according to the U.S. Commodity Futures Trading Commission.
Elsewhere, a worse-than-expected Chinese economic indicator on Monday did little to lighten the mood with increased concerns that demand is set to weaken in the world's second largest economy.
Nonetheless, Mahesh stressed to CNBC that sentiment would change in the near future.
"Come the next six to nine months, do not assume that OPEC will produce at these high levels," he said, citing potential disruption in Iraq.
He added that demand is also "very much underestimated" and said that U.S. shale production was still around 60 percent lower than it had been at the end of last year.
"We're expecting global oil demand to grow by close to 2 million barrels per day this year," he added.