After a 17 hour marathon, Greece has reached a deal with its European partners. The details of this agreement only to start negotiations do not look promising, and not only because of the horrible humiliation that preceded it. While the threat of a Grexit is currently off the table, the deal could certainly be recessionary.
EUR/USD leaped on the initial news but is now clearly reversing course and falling to support at 1.1050.
- Talks for a bridge financing for Greece will begin immediately, to help cover its debt immediate debt repayments.
- Greek assets worth 50 billion euros will be moved to a fund sitting in Athens. Germany wanted it in Luxembourg.
- Greece must pass measures through parliament until Wednesday.
- The Eurogroup will then begin discussions on a full ESM bailout, where debt sustainability can be addressed. Debt sustainability was always an issue, as the IMF was forced to admit.
- Debt relief will be discussed only after the first successful review.
- The ECB will discuss ELA later today. They may increase the emergency support now.
- Greece must also reverse any legislation that backtracks previous reforms.
- The IMF will be in play also in 2016.
- Greek Prime Minister Alexis Tsipras defends the deal, saying he faced difficult decisions.
- He also said that after fighting abroad, now it is time to fight against vested interests at home
- He tries to find victory in the general promises on debt restructuring and mid-term financing.
- On debt relief, the Eurogroup is ready to grant longer grace period and maturities – this is a concession to Greece.
- Confidence can be regained.
Her is how it looks on the chart: after closing the small gap, EUR/USD floated. The news of a deal sent it to 1.12 but almost instantly to 1.1052.
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