EUROGROUP MEETING ON GREECE TO SET TONE

Much of this week’s market sentiment will be dictated by Monday’s reconvened meeting of the eurogroup troika of the European Commission, International Monetary Fund and European Central Bank, as they attempt to finalise a plan for Greece, reports Financial Times.

At stake is the €44bn tranche of aid to help plug Greece’s mounting budget deficit and repay upcoming debt redemptions. Last week’s meeting drew up a number of measures aimed at reducing Greece’s debt pile, but the sticking points were the ECB’s and Germany’s reluctance to take haircuts on their holdings and the IMF’s reluctance to allow an extension on the 2020 timetable for bringing Greece’s debt to gross domestic product ratio to 120 per cent.

“The risk is that the IMF will not settle for such a solution and will walk away from the programme, but we do not think that this is likely at this point,” says James Ashley at RBC Capital Markets. “We expect a deal that will include a mix of options, such as lower interest rates on current loans, an interest moratorium and a longer repayment schedule.”

If such a deal emerges from Monday’s talks, the markets should get a boost, but economic data this week are not expected to add much to positive sentiment.

26.11.2012

 Source: Ft.com