Greece , if you haven't already read enough.
Could Greece do the same as Iceland did in 2008 and just forgive all of the mortgage debt and jail the bankers?
Iceland remains a politically and economically stable nation. Food for thought.
Below is a copy of the letter sent by Greece to the European creditors and the IMF. And a snippet of the crowd funding site set up for Greece.
So what does all of this mean for our markets?
Firstly, the Greek Government has not defaulted on its outstanding Bond program, buts it close and is technically insolvent.
Alexis Tsipras was elected on a populist vote, to do exactly what he is doing, negotiate a better outcome for Greece.
The Media as usual has taken the story and run with the default scare tactics to create attention to their own websites and cause.
With the closure of Banks on Monday the 29th this hardly invokes confidence in the Government.
But Greece has defaulted before, and used the military to keep essential services going.
What’s really going on now is a stare down between Greece and the Euro region banks.
The real issue facing Greece is the Euro banks unwillingness to negotiate the deadlines for repayment. This has not just happened in the past few weeks, but has really come to the front now that Tsipras has been elected.
The chart below shows the inflation rate since Greece entered the euro in 1981 declining and eventually entering deflation. No Inflation equals no growth, in this case the only growth was the level of debt taken on by the various Greek Governments. It is how a populist politician gets elected, as there is nothing else to lose as the population look for a way out of their obligations to creditors.
So to the Markets.
The markets have the great ability to “look” forward, as that is what makes them work, anticipation of better economic outcomes or uncertainty of the future will show up in trends.
Three chart below,
1st Chart is the US Dow 30 big picture view, since December 2014 the Index has traded sideways, reason? expected interest rate hikes from the Federal reserve. This chart is just range trading.
2nd Chart the Nikkei 225, the Japanese don’t care the Index is trending UP on an improving economy.
3rd Chart the Australian XJO, do we really care? or is there considerable uncertainty within the economy with a possible housing price collapse and rising unemployment.
The chart is trending down for this reason.
To the President of the European Commission
Mr. Jean Claude Juncker
To the President of the European Central Bank
Mr. Mario Draghi
To the Managing Director of the IMF
Ms Christine Lagarde
Dear Managing Director, dear Presidents,
I am writing to inform you on the position of the Hellenic Republic towards the list of Prior Actions of the Staff Level Agreement as published on the European Commission website on June 28
th 2015. The Hellenic Republic is prepared to accept this Staff Level Agreement subject to the following amendments, additions or clarifications, as part of an extension of the expiring EFSF program and the new ESM Loan Agreement for which a request was submitted today, Tuesday June 30th 2015. As you will note, our amendments are concrete and they fully respect the robustness and credibility of the design of the overall program.
1. VAT reform:
Maintain the 30% discount on islands, to be applied to the new rates.
2. Fiscal structural measures:
Gradually increase the advance payment of individual business income tax to 100 percent and phase out the preferential tax treatment for farmers (including the subsidies for excise on diesel oil) by end-2017.
Reduce the expenditure ceiling for military spending by €200 million in 2016 and €400 million in 2017 through a targeted set of actions, including a reduction in headcount and procurement.
The 2010 reform will be fully implemented but the 2012 reform (sustainability factor) will be postponed until the new legislative reform is implemented in October 2015.
EKAS will be phased-out by end-2019 but without any immediate action on the top 20% of beneficiaries.
All nuisance charges will be phased out by end-2017, starting from October 31, 2015.
4. Labour markets:
The new framework will be legislated in autumn 2015.
5. Product markets:
Immediately implement specific recommendations from OECD’s toolkit 1 (tourist rentals, tourist buses, truck licenses, code of conduct for traditional foodstuff and eurocodes on building materials), toolkit 2 (beverages and petroleum products), and open the restricted professions of notaries, actuaries, and court bailiffs, liberalize the market for gyms and eliminate significant portion of nuisance charges.
Moreover, in cooperation with the OECD, implement an ambitious reform package including:
Create One-Stop-Shop (OSS) services for businesses (best practice analysis, as well as a comprehensive roadmap already prepared and completed in cooperation with the OECD);
Conduct immediately a comprehensive competition assessment on specific sectors characterized by oligopolistic practices (e.g. construction, wholesale trade, agricultural products, media, etc.) and adopting recommendations accordingly (roadmap and timelines already prepared by the OECD);
Implement immediately a comprehensive strategy against corrupt business practices, for example in the area of public procurement procedures (roadmap and timeline already prepared by the OECD).
ADMIE will be split from the PPC into a separate legal entity under state majority ownership.
Thank you in advance for your support. I look forward to hearing from you.
Cc : – Mr. Jeroen Dijsselbloem, Chairperson of the Board of Governors of ESM and
President of the Eurogroup
Mr. Klaus P. Regling, Managing Director of the ESM