Greece Muddles Through, for Now
It appears the EU, IMF, and the ECB have come to terms on providing Greece with
the funds needed to avoid default. News of the agreement has been welcomed by the
markets, with stocks paring some of their earlier losses on the weaker than expected
May jobs data.
Greece’s problems are by no means over however. Over the next few weeks, details
of the plan are to be hammered out, and the next disbursement of aid to Greece is
expected in July. Details on expanding the current aid package to accommodate Greece’s
larger than expected fiscal shortfalls, and due to the country’s generally agreed
inability to re-enter public markets next year, will be examined closely by markets.
The plan will ultimately entail reduced government spending, higher taxes, and accelerated
sales of government assets. Whether or not current EU forecasts adequately incorporates
the likely negative economic effects of the additional austerity measures remains
to be seen. It is certainly obvious now that Greece’s first aid package was overly
The dollar has reversed earlier gains to trade lower against the EUR, while Treasuries
have eased off their best levels. Yields on Greek government securities have fallen
sharply across the yield curve as markets breathe a sigh of relief. The yield on
Greek 10 year debt remains above 16% however.
The major U.S. stock market averages have cut their opening losses by half. Commodities
have also reversed earlier losses. Gold continues to maintain its gains, with gold
futures up $11.00 to trade at $1,543.70. Silver futures are now unchanged at $36.155.
Copper has reversed direction and is now up $0.042 to trade at $4.1265 per lb. Oil
remains lower, but well off their session lows with WTI futures down just $0.23
to trade at $100.17.
Full text of EU Commission, ECB, and IMF fourth review mission to Greece: LINK
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