Greece: Stormclouds, But Maybe Closer To Debt Deal

By Dimitra DeFotis

Today’s tenuous reality in the continuing saga: Greece and its lenders are making gradual progress on a debt deal.

Teneo Intelligence Analyst Wolfango Piccoli writes today that Athens has enough money to pay the International Monetary Fund a €700 million ($789.3 million) installment due on May 12, but would struggle to find funds to pay pensions and civil servant wages at the end of May. (See our Wednesday post, “Greece Pays IMF $224 Million, Former PM Papandreou Decries ‘Antics.’ ”

Piccoli thinks that the best outcome from the May 11 Eurogroup meeting would be a positive post-meeting statement, but he does think negotiations between Greece and its international lenders are showing signs of progress. He writes:

“Our view remains that a deal will eventually be reached, but most likely at the eleventh hour … Although a bill passed in the Greek parliament earlier this week rolls back some reforms on public sector employment, gradual progress is being achieved on the fiscal front. Athens has apparently proposed a set of measures to reach a primary surplus of around 1.2-1.5% of GDP this year. The measures under consideration include a shift to a unified VAT rate (excluding food and medicine), scrapping the VAT reductions for the Aegean islands, an increase of the solidarity levy for incomes above EUR 50,000, a luxury tax, as well as retaining the single property tax (ENFIA), which raised EUR 2.65 billion in 2014. The Greek government has also signaled its willingness to push ahead with privatizations, but the details remain sketchy at this point. Despite this gradual progress, the deadlock on major issues such as pensions and the labor market persists.”

Bob Savage at Track Research notes that Greek bond yields were off 30 basis points to 10.66% on headlines about the possibilities of a Greek agreement with Eurozone leaders. Savage says “Greece maybe closer to a deal for debt – but that story is as tired as the IMF/EU/ECB are in thinking about it. ”

In other news, the Greek unemployment rate eased to 25.4 percent in February, from a downward revision of 25.6 percent in January, according to the Hellenic Statistical Agency and Greek economic data subscription service MacroPolis.

The Global X FTSE 20 ETF (GREK) is up 2.7% today. Shares of Piraeus Bank (BPIRY) andEurbank Ergasias (EGFEY) are the big movers, up 10% apiece today, among publicly-traded Greek banks.