The Most Anticipated Eurogroup Meeting For The Year…

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The Most Anticipated Eurogroup Meeting For The Year…

(GR) Germany, France, Italy and Spain to meet on Greece today, will look to reach a joint stance ahead of scheduled Eurogroup meeting on Tuesday Nov 20th (tomorrow)

  • Germany wants an enhanced EFSF supervision.
  • Will not release next aid tranche before Nov 26th- Extended Greek bailout target to 2022 is not a done deal.

(GR) EU/IMF/ECB Troika to report to the Eurogroup and provide an update on Tuesday, Nov 20th – Need to find an agreement on Greece tomorrow.

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(GR) EU President Juncker:

  • Progress is being made to find an agreement between IMF and Europe over differences on Greece; Expects a deal will be reached soon and next tranche of aid will be paid.
  • Note: The Eurogroup this week highlighted some difference between the IMF and EU on the Greek debt to GDP target.
  • Greece’s 120% debt/GDP remained still the benchmark for Greece sustainability, but that target might be pushed back from 2020 to 2022 (in line with request by Greece since the June elections).
  • The IMF seeks to keep the target for 2020 and not give Greece extra time

How to interpret these headlines?

This is probably the most anticipated Eurogroup meeting of the year, as the fate of Greece will be decided in this meeting, or at the very least, a cleared policy framework will be provided as time is literally running out for Greece.  With IMF now being the major hurdle because of the debt-sustainability issue, the Eurogroup may have to pickup the slack and take partial losses to cover the extra 2 years of discrepancy, eh Extension, for Greece.  If they are unable to reach an agreement, then there is a real risk that IMF may pullout of the deal as Lagarde is obviously playing hardball.

IMF’s Lagarde: Greek solution should be convincing and sustainable 

I believe that due to the uncertainty of the outcome of this Eurogroup meeting, EURUSD has the potential to swing in either direction, but assuming that Greece gets the extra 2 years of extension and Eurogroup somehow finds the funding needed to support that, then we should see a strong Euro… Any delay in approving Greece’s extension or release of the bailout tranche should add selling pressure to the Euro; after all, time is not on their side.

 

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About Henry Liu

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