As the clock ticks down to an agreement that would keep Greece viable and in the eurozone, the markets rally as Greece gets ready to deliver a formal proposal to its creditors.
An official from the Greek government said that the country would submit its request for a six-month loan extension to the eurozone on Thursday, one day later than initially scheduled.
To prolong Greece’s $274 billion bailout package beyond February, EU countries and Greece have conflicted about what formula to use. European Union’s most indebted state might default on some of its debts as early as next month if a solution is not reached.
Valdis Dombrovskis, European Commission Vice President for the Euro, told reporters in Brussels on Wednesday that “markets should be confident that an agreement is being reached between Greece and the Eurogroup and other institutions engaged in Greece’s bailout program.” Currently, the commission is “working and investigating whether there is a way to create common ground toward this expansion.”
After two days of closed-door negotiations with the currency bloc’s finance ministers, Greece made its request, which was met by papers published by the Ministry of Finance on Wednesday clarifying the government’s position. Finance Minister Yanis Varoufakis has said that Greece intends to maintain a budget surplus before interest payments of 1.5% of GDP, less than half the objective established in the country’s bailout program. He mentioned this in an interview.
Extension of the Bailout
Eurozone states have resisted Athens’ push to change the bailout agreement’s conditions significantly. When it comes to extending the present bailout, lenders want Varoufakis to suggest that he improve the economy and fiscal responsibility in exchange for assistance. Tsipras’ administration in Greece is seeking an interim deal that would enable it to distance itself from the budgetary policies blamed for the country’s economic downturn, followed by a new agreement.
The Eurogroup’s Jeroen Dijsselbloem gave Varoufakis till Friday to ask for an extension of the bailout.
Stocks in Europe surged to their highest level in seven years in hopes that a deal could be struck. The Athens Stock Exchange index rose 0.2 percent at 4:21 p.m. in Athens, the first increase in three days. The euro depreciated by 0.3 percent to $1.1376 in US dollars.
Confidence in the economy
In three days, Greek government bonds rose for the first time. At 17.12%, the three-year treasury rate has fallen by 112 basis points (or 1.12%). As of this writing, the debt is trading at a record 128 percent, the most since it began selling again last year.
Greek debt is measured by the Bloomberg Greece Sovereign Bond Index, which has a value of 88.48, five times the low of 17.45 recorded five years earlier.
Content of the article
According to JPMorgan Chase & Co.’s European economist, David Mackie: The Eurogroup is unlikely to approve any Greek government request to extend a Payday Loans in Texas without “concrete actions” it plans to implement while the extension is in place.
A semantic problem that has legal and policy ramifications for Germany, the largest donor of assistance and the leading proponent of economic and fiscal reforms in exchange, was brought to light by German Finance Minister Wolfgang Schaeuble when he indicated that Greece’s request could be insufficient.
Schaeuble expressed his skepticism in an interview with ARD television on Tuesday night, explicitly mentioning the idea of Greece being forced to abandon the currency.
Every day there are various reports, and then when we are all together, things sound entirely different,” he remarked. “We’re accustomed to this by now.”
Schaeuble said that Greece was on the “correct track.” We’re OK with it as long as we don’t see anything else.” We can’t just tell people, “We need more money, and we’re not going to work anymore,” because it won’t get us anywhere.”
Pledges Varoufakis Has Made
Greece’s January revenue fell short of bailout targets by 2 billion euros. Still, on Feb. 16, Finance Minister Yanis Varoufakis said the country plans to collect an additional $5.5 billion in taxes by fighting tax evasion and corruption, according to presentations released earlier this month.
The new Greek administration also wants to end the bailout agreement’s planned privatization program and evaluate each publicly owned asset that was to be sold on an individual basis. Greek Finance Minister Yanis Varoufakis also remarked that the bailout’s significant demand, labor market reform, is “unfit” for the present economic circumstances. They were also questioned for their support of government pledges halting primary house foreclosures.
Even though the odds of an agreement have improved somewhat, Athens still rejects the conditions related to the loans it needs, Berenberg Bank analyst Holger Schmieding said.
While creditors may accept Greek proposals to reverse structural changes rather than making moves that would threaten budgetary objectives, he added in a letter that they fell short.
Schmieding remarked, “Wanting to increase the minimum wage for young people when youth unemployment is 50% is a terrible idea.”. “It’s ridiculous to expect European taxpayers to foot the bill for the harm caused by such idiosyncrasies.”
Withdrawals from Accounts
Until late August, Greece wants to be able to access bailout money with few constraints attached. No “recessionary” measures, such as pension cutbacks or VAT increases, would be implemented during this time, Varoufakis said, adding that the government will not take any unilateral decisions that may derail the budget.
A piece of writing
Their only hope is the Bank of Greece’s Emergency Liquidity Assistance, which the ECB may withdraw. Yannis Stournaras, the head of Greece’s central bank, is expected to ask for an increase in the country’s banks’ ELA allocation over the current 65 billion euro limit at an ECB meeting in Frankfurt that begins on Wednesday, reports Reuters.
Liquidity in an emergency
Emergency money cannot be extended forever and must be matched by political progress, the European Central Bank (ECB) has warned. The European Central Bank (ECB) does not discuss ELA activities.
ELA policy will not alter much, but some national governors want to show that they are taking a challenging position. The ECB’s Governing Council, not President Mario Draghi’s Executive Board, decided to remove the ECB’s relaxation on its standards for Greek collateral acceptance on Feb. 4, two individuals involved with the deliberations said.