I observe market sentiment is not where it was, but we called for an advance of gargantuan proportio...
Markets can't decide on meaning of today's news from Greece
09/10/2012 4:36 pm EST
This morning markets were down on news that the troika of the International Monetary Fund, the European Commission, and the European Central Bank had rejected 3 billion euros of proposed cuts to Greek spending on the grounds that they were too vague and would take too long to put into effect. The troika has to approve the Greek plan in order for the country to get the next 31.5 billion euro installment from the 130 billion euro European rescue package agreed to in March. The country needs the money to recapitalize banks and to keep the economy running.
And then markets rallied on publication of an article in Germany’s Der Spiegel saying that German chancellor Angela Merkel had changed her mind on Greece and now wants to do everything she can to avoid a Greek exit from the euro. (See the article here http://www.spiegel.de/international/europe/merkel-wants-to-keep-greece-in-the-euro-zone-a-854879.html ) Everything she can turns out to be, according to the article, tweaking the Greek rescue program to give the country more time.
That was followed by a CNBC interview with Olli Rehn, European Commission for Economic and Monetary Affairs and the Euro, that emphasized that it is critical that Greece stay in the euro. The euro “is irreversible and it is essential that we will maintain the unity of the euro,” Rehn said.
How this all adds up is tough to calculate. Has Merkel really changed her policy as Der Spiegel argues? The Greeks seem to think so. That country’s Ta Nea has run a front-page illustration of Merkel in Greek national costume. Will Greek reaction lead Greek leaders to over reaction? Over the weekend Greek prime minister Antonis Samaras said that the latest proposed budget cuts will be the last that his government will offer until EuroZone leaders “resolve the injustices” inflected on ordinary Greeks.
Wonder how that’s going over with troika budget examiners?
(And by the way, a report over the weekend said that Spain might not apply for a bond-buying program by the European Central Bank until after regional elections in Spain on October 21. That would put off any buying of Spanish bonds by the ECB until after that date.)
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