Alessandro #IoMiVaccino 🇮🇹🇪🇺🇺🇸🇮🇱 · @pelias01
31st Jul 2015 from TwitLonger
Can EU agree to fund Greece bailout all by itself if IMF refuses to participate?
The government has set a deadline for Greece of 12 August for negotiations on a third bailout package to conclude, but this may be too optimistic. The next deadline for Athens is 20 August when a bond repayment of €3.19bn to the ECB is due. This would in theory allow one week for EU parliaments to ratify the agreement in time to unblock funds so that Greece can repay the ECB.
The market is right to take a sceptical view and has again pushed Greek 10y benchmark yields wider over the past week. A more credible scenario is for talks to drag on into the second half of the month, if not September. However, political dynamics in Greece have deteriorated since 12 July when PM Tsipras and the creditors in principle agreed a €86bn bailout.
Key reforms have been passed and have restored a degree of trust to commence new negotiations, but the risk that the implementation of reforms goes off the rails is still high. A revolt among Syriza party hardliners indicates that PM Tsipras, already in a weaker position since 12 July, may struggle to win a parliamentary majority to approve the third bailout.
"Elections as soon as September cannot be ruled out. The issue of a debt restructuring is key to the evolution of the negotiations in the coming weeks. But with the IMF and Germany at loggerheads over how to return Greece to a sustainable debt path, the country's future in the euro may still not be as secure as the EU have us believe", says Barclays.
Of the estimated €80bn of borrowing needs, €40bn-€60bn was supposed to come from the ESM. The IMF would contribute the rest.
Source: FxWire Pro - Commentary