Greece update (Erik Nielsen)
Seems to me they need Eurozone approval of any plan, along with a ‘check.’
Without the check there’s a good chance the curve continues to go vertical.
Good time to be way on the sidelines (US govt secs, USD, etc.)
From: Nielsen, Erik
Sent: Wednesday, February 03, 2010
First of all, apologies for the radio silence last night and this morning ; caused by a “technical” problem. We are back in business:
Last night Greek PM delivered an important speech to prepare for today’s publication of the European Commission’s conditional approval of their 2010 budget. It was marginally positive, but – as always – the devil is in the details, and those we don’t have yet.
There is no time set for the Commission’s statement today, but sometime around noon seems likely. In a nutshell, PM Papandreou delivered something good and something less good:
1. Most importantly, the PM appealed to the opposition for national unity, and he received guarded support from the main opposition leader Samaras. Papandreou also appealed to the social partners to accept the hardship; he didn’t really receive any assurances from that side. Also positively, Papandreou outlined further fiscal measures, aimed at securing the 4% of GDP decline in the deficit this year, even under a more pessimistic (i.e. more realistic) forecast for GDP; now seen to decline by more than 1% this year rather than by 0.3%. The additional measures were not spelled out in detail, but they seem to include further wage restrain for the public sector and indirect tax hikes.
2. On the disappointing side, Papandreou launched into the blame game – while acknowledging policy mistakes in the past, he suggested that the trouble now is also the result of speculators. On this basis, he suggested that this is a Euro-zone problem and that the Euro-zone should issue a joint Euro-bond for the benefit of Greece. This was, of course, ruled out very quickly by other Euro-zone members last night. Also, Papandreou emphasized the government’s focus on taxation of real estate owned by of-shore companies, a meagre EUR200mn revenue line in their original budget, which – in my opinion – is diverting their attention from the big and more fundamental reforms.
Stay tuned for later in the day when we hear from the EU