Greece is rescued?

Monday, Jun 22 2015

Euro was pushed higher as BBC economic editor Robert Peston was told by the Greek economic minister George Stathakis that "he believes Greece's new proposals to balance the government's books have broken the deadlock with its creditors." He said he expects eurozone government heads to issue a communique later today that will say there is now a basis for a formal agreement with Athens to complete the current bailout programme and release €7.2bn of vital funds.

Peston also reports that according to the Greek minister, "technical work would need to be done in the coming days to formalise the agreement. But he was hopeful that Greece would be able to make its €1.5bn payment to the IMF on its due date of June 30 - and therefore avoid a devastating default." According to the latest and greatest proposal to raise money, there will be: a new tax on businesses, on the wealthy and some increases in the VAT rate on selected items.

Most importantly he said that his Syriza government, led by Alexis Tsipras, had avoided crossing its red lines. Which is curious considering the IMF has repeatedly said no deal can be struck without a haircut of Greek pensions and wages, which comprise 75% of primary government spending according to Olivier Blanchard. In any event, that's where the Greek proposal is right now: "there would be no further reductions in pensions or public-sector wages. And there would be no increase in VAT on electricity." In other words, if this indeed holds and the Troika agrees, or perhaps Dvoika without the IMF, Greece can indeed claim victory.

After the release euro was pushed higher and is currently being traded at 1.14 handle. Pair is likely to find support around 1.1320 area and resistance above 1.1430 level.

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