Daily Insight
Group Economics Macro & Financial Markets Research
5 April 2016
Euro political risks to the fore Nick Kounis
Head Macro & Financial Markets Research Tel: +31 20 343 5616
Greece, the IMF and Germany point the finger as WikiLeak ends in acrimony – fund suggests impasse could run to July
Meanwhile, Portugal faces a potential downgrade by the end of this month which could make its bonds ineligible for ECB purchases…
nick.kounis@nl.abnamro.com
…while Spain needs to form a government by 2 May or face new elections at the end of June…
…which is around the time of the Brexit referendum
The Greek crisis remains as unresolved as ever Just in case anyone thought that Greece’s crisis was on the way to being resolved, there was a stark reminder of the difficult times ahead over the weekend. In developments that were so farcical that they were reminiscent of last Summer’s Greek debacles, a war of words exploded between Greece, the IMF and Germany, with all parties essentially blaming each other. A private teleconference between the IMF’s two top officials on Greece (Poul Thomsen, the head of the IMF's European Department, and Delia Valculescu, the IMF Mission Chief for Greece) was published by WikiLeaks. In the discussion it was suggested that the Fund would tell Germany that it would abandon the programme if the IMF and the Commission fail to reach an agreement on Greek debt relief. The IMF officials also suggested that the impasse could continue until July, as that is when Greece’s next large payment is due (around EUR 2bn to the ECB). Alexis blames Christine, who blames Alexis, while Wolfgang blames Alexis The IMF has publicly been arguing for large-scale debt relief for some time so it is rather surprising that the Greek government reacted angrily to the leaks. Greek Prime Minister Alexis Tsipras wrote a letter to the IMF’s Managing Director Christine Lagarde accusing the fund of trying to push the country to a default. Ms. Lagarde dismissed the claims and expressed ‘concerns as to whether we can indeed achieve progress’ although she did allow IMF officials to return to Athens. Meanwhile, a German finance ministry spokesperson accused Greece of trying to play Germany and the IMF off against each other (as if that would be necessary) as well as noting that debt relief was not currently on the agenda.
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Daily Insight – Euro political risks to the fore – 5 April 2016
Risks to the Greek programme The finger pointing underlines the difficult times ahead for Greece and the institutions. It remains the case that the IMF wants significant debt relief for Greece for it to remain a participant in the programme. At the same time Germany is reluctant to go too far in the direction of debt relief, but the German parliament does not want to back the Greek programme without the IMF on board. Programme implementation and meeting fiscal targets in a tough economic climate are also risks to the programme. Political risks to the fore Greece is not the only political risk in Europe right now, to put it mildly. Portugal could see its sovereign credit rating downgraded to junk at the end of the month by the last agency (DBRS) that gives it an investment grade rating. That would make its debt securities ineligible for ECB purchases. In addition, Spain is still without a government. The socialist party has until 2 May to form a government or otherwise there will be new elections at the end of June. All this will be taking shape in run-up to the UK referendum on the country’s membership of the EU, which could lead to ‘exit contagion’ in other countries. Political risks could start to undermine peripheral government bonds despite the support of the ECB’s QE programme.
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Daily Insight – Euro political risks to the fore – 5 April 2016
Day
Date
Time
Country
Monday Monday Monday
04/04/2016 04/04/2016 04/04/2016
10:30:00 15:30:00 16:00:00
EC US US
ECB's Praet speaks Fed's Rosengren speaks New durable goods orders - % mom
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016
01:00:00 07:00:00 08:00:00 10:00:00 10:00:00 10:30:00 11:00:00 14:30:00 16:00:00 16:00:00
IN US US DE EC EC GB EC US US US
Repo rate - % Fed's Kashkari holds Town Hall on Too Big to Fail Fed's Evans speaks on Economy and Policy Manufacturing orders - % mom PMI services - index Composite PMI output PMI services - index Retail sales - % mom Trade balance - USD bn ISM non-manufacturing, index US Job Openings by Industry
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
06/04/2016 06/04/2016 06/04/2016 06/04/2016 06/04/2016 06/04/2016
CN CN DE US US PL
PMI services - index PMI composite - index Industrial production - % mom Fed's Mester speaks Fed releases minutes from March 15-16 meeting Reference rate - %
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016
CN NL US CH EC US US EC
Foreign reserves - USD bn CPI - % yoy Fed's Kaplan speaks Foreign currency reserves - CHF mln ECB's Constancio speaks at EU Parliament Committee Fed Reserve consumer credit - USD bn Fed's Yellen in NY with Greenspan, Bernanke, Volcker ECB's Draghi attends meeting of Portuguese President's Council
Friday Friday
08/04/2016 08/04/2016
US GB
Fed's George speaks Trade balance - GDP mln
03:45:00 03:45:00 08:00:00 18:20:00 20:00:00
02:00:00 09:00:00 09:00:00 21:00:00 23:30:00
02:15:00 10:30:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Feb F
-2.5
Apr 5
6.8
6.5
Feb Mar F Mar F Mar Feb Feb Mar Feb
-0.1 54.0 53.7 52.7 0.4 -45.7 53.4 5541.0
0.4 54.0 53.7 53.9 0.1 -46.0 54.2
-0.5
Mar Mar Feb
51.2 49.4 3.3
-1.9
-2.5
Apr 6
1.5
1.5
1.5
Mar Mar
3202.3 0.6
3205.5
Mar Mar Feb
571104.0 571104.0 10.5
Mar
571104.0
Feb
-3459.0
ABN AMRO
-0.1
14.9
-3633.3
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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