20 Feb 2015
An agreement today won’t mark the end to ‘Greek’ problems – DB
FXStreet (Barcelona) - The Deutsche Bank Team comments on the relevance of the Greece’s loan-extension request, noting that even if an agreement is reached today, it will only be the first step to a long road of discussions.
Key Quotes
“Assuming an agreement is indeed reached, it is important to point out that this will only mark the very first step in what is still a long road to resolution to the Greek crisis.”
“First, it is unlikely Europeans approve any fund disbursements or an increase in t-bill issuance after the loan extension has been granted. Fund disbursement will require the completion of prior actions by the Greek government. These remain to be specified and negotiated -"part two" of the three-step process we have been describing.”
“Second, the Greek government will need to be able to pass any such agreements through the Greek parliament, starting with the loan extension itself which will need to be ratified ("part three". Completing all steps in this three-part process will be a challenge.”
“On the positive side, a potential "agreement" tomorrow will provide a little breathing room to the Greek financial system."
“Still, even ongoing ECB funding will only buy a few weeks, because it will not solve the Greek government's exceptionally tight cash position. Press reports suggest that the government will struggle to fulfill financial obligations beyond March, with a potential default likely to lead to a suspension of ELA funding.”
“Over the next few weeks, Greece will, therefore, need to achieve substantial progress on fleshing out the exact parameters of the program as well as voting legislation through parliament.”
“For this to materialize, agreement needs to be reached at Eurogroup, with another breakdown again bringing ECB liquidity provision back into immediate question.”
Key Quotes
“Assuming an agreement is indeed reached, it is important to point out that this will only mark the very first step in what is still a long road to resolution to the Greek crisis.”
“First, it is unlikely Europeans approve any fund disbursements or an increase in t-bill issuance after the loan extension has been granted. Fund disbursement will require the completion of prior actions by the Greek government. These remain to be specified and negotiated -"part two" of the three-step process we have been describing.”
“Second, the Greek government will need to be able to pass any such agreements through the Greek parliament, starting with the loan extension itself which will need to be ratified ("part three". Completing all steps in this three-part process will be a challenge.”
“On the positive side, a potential "agreement" tomorrow will provide a little breathing room to the Greek financial system."
“Still, even ongoing ECB funding will only buy a few weeks, because it will not solve the Greek government's exceptionally tight cash position. Press reports suggest that the government will struggle to fulfill financial obligations beyond March, with a potential default likely to lead to a suspension of ELA funding.”
“Over the next few weeks, Greece will, therefore, need to achieve substantial progress on fleshing out the exact parameters of the program as well as voting legislation through parliament.”
“For this to materialize, agreement needs to be reached at Eurogroup, with another breakdown again bringing ECB liquidity provision back into immediate question.”