Group Economics
Daily Insight
Macro & Financial Markets Research Nick Kounis & Maritza Cabezas
On hold until after the referendum
+31 20 343 5616
2 July 2015
Eurogroup will not enter talks with Greece until after the referendum result… …despite Greek concessions, trust is low following Prime Minister Tsipras’ speech All eyes on Greece, but positive job market and manufacturing data signal US recovery
Eurogroup looks to have lost confidence in Greek
All eyes on Greece, while US job growth strong
government The Eurogroup met on Wednesday evening, and decided to hold off talks with the Greek government until after the referendum decision on Sunday. This was despite Greece’s efforts to reach a last ditch deal with its creditors. There appears to be a lack of confidence in the Greek government’s intentions. The referendum will go ahead and the outcome will be crucial. A YES vote could revive talks, likely with a new government in place, while a NO vote would further increase the chances of an eventual Greek euro exit.
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Private nonfarm payrolls
Tsipras ‘agrees’ to creditor plan… The Eurogroup decision followed an extraordinary series of events earlier in the day. To start with, Mr Tsipras sent a letter to the European authorities and the IMF, accepting almost all the conditions set out in last week’s creditor proposal that would have extended the now expired programme. Given that the referendum is asking the Greek people whether they are in
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ADP employment
Source: Thomson Reuters Datastream
US job market remains strong While all eyes are on the Greek economy, a ‘somewhat’ more important economy for the global outlook is turning convincingly. US ADP employment rose 237K in June, higher
favour of this exact proposal, it might have been expected that
than the consensus of 218K. This bodes well for Thursday’s
the Prime Minister would call off the referendum, or at the least
nonfarm payrolls. Looking at the details of the ADP report,
urge the public to vote YES.
professional and business services posted the largest gains (+61K). This is a positive sign since this is a cyclical area.
…then tells public to vote against it
Meanwhile, manufacturing employment picked up only 7K.
Instead, Mr Tsipras made a speech later in the day where he
Weak job gains in the manufacturing sector have been the
confirmed that the referendum was going ahead and also
trend in the past months as a result of strong dollar which has
argued that the public should vote NO in the referendum and
affected exports.
hence against the plan. This triggered doubts about how sincere his government was in reaching and implementing any agreement. In addition, given the old plan has expired, the way forward will be to negotiate a new ESM programme, which could require other measures.
US manufacturers leaving soft patch behind However, US manufacturing activity now looks to be reviving. The ISM manufacturing index rose to 53.5 in June from 52.8 the previous month. Almost in line with consensus. The recent
ECB maintains ELA, despite missed IMF payment
pickup in the forward looking components of the survey
Not long after the Eurogroup meeting, the ECB decided to
suggests a modest improvement of output and employment
keep the ELA limit for the Greek banks unchanged. This was
going forward. Finally, another report released Wednesday
despite the Greek government missing its IMF payment on
showed that US construction beat expectations with non-
Tuesday night and being declared ‘in arrears’ to the Fund. The
residential spending surging. This is good news since this adds
ECB is likely also waiting for the referendum result, knowing
to the positive picture that after a weak first quarter the
that a decision to restrict ELA will make the situation for the
recovery in the US is broad-based.
Greek economy and people even worse.