Greek – questions?
- Can a lender, the EU / ECB, force a government to accept a bailout even if the people / referendum and possibly the government reject it.
- Will the ECB be able to ensure the €86bn of bailout funds are properly allocated / spent.
- The last bailout for Greece turned more into a bailout of the French and German banks which had lent funds to the Greek government.
- We struggle to see how the Greek government is going to fundamentally reform its taxation regime with so much opposition and so little local support for reform.
China – New credit growth outpaced forecasts by nearly a third as the PBoC measures are feeding through the banking sector.
- Total financing increased to CNY 1.86tn compared with CNY 1.22tn in May and CNY 1.40tn forecast.
- New CNY loans hit 1.27tn v 0.9tn recorded in May.
- The PBoC cut the benchmark rate four times since Nov last year as well as cut the reserves requirement ratio.
- Q2 GDP numbers are due tomorrow with estimates for a +6.8%yoy reading.
Iran – The government agreed a breakthrough deal to put limits on Tehran’s nuclear activities for the next decade in exchange for a reversal of international economic sanctions.
- Oil prices are down c.2% this morning on the back of the announcement.
- The deal marks the end of two-week discussions between Iran and the US, Russia, France, China, the UK and Germany.
- The US and Iran will be holding votes in respective parliaments to formalise the agreement.
Greece – Eurozone members are considering options to release short term funding to Greece ahead of the €3.5bn repayment due to the ECB next Monday.
- The Eurogroup is looking to disburse €12bn in short-term financing for Greece.
- The proceeds may be source from the European Financial Stability Mechanism fund with €11bn currently remaining in the €60m EU-wide rescue pot.
- Other options include bilateral loans from the Eurozone members, lending €3.5bn in profits on Greek bonds held by the ECB and securitising publicly-held Greek assets.
- The government has missed another payment to the IMF this Monday (€456m) which brings the total to €2bn currently in arrears to the fund.
- Conditions of a larger €86bn bailout include a cut in pensions, VAT increase, limits on collective bargaining agreements and a number of other spending constraints. In addition, €50bn in public assets will need to be privatised under the supervision of foreign lenders.
- The reform package should be taken through parliament by Wednesday.
