Posted on March 10, 2015 by the XM Investment Research Desk at 2:30 pm GMT
The Eurogroup meeting of Eurozone Finance Ministers on Monday pointed to the direction of further talks between Greece and the institutions responsible for monitoring Greece’s adjustment program. Progress in setting and implementing a package of reforms – something the Greek government has undertaken to carry out as a result of the February 20 agreement – has been slow.
Technical discussions between Greek officials and officials from the institutions would start in Brussels on Wednesday, while teams in Athens would also support this process with evidence and data. The Greek government vehemently refused suggestions that the talks should take place in Athens, as this would remind Greece’s public of the past when inspectors from the institutions would walk into Greek government ministries in order to dictate painful measures. On the other hand, Greece’s Eurozone partners saw this request as potentially a waste of time and a move that could complicate negotiations as the teams needed to have on-site access to the Greek records that are kept in Athens. In the end a compromise was reached with the international lenders and the Greek government having teams both in Brussels and Athens.
Now the difficult part of the negotiations will begin, which will involve focusing on specific measures that raise money and implementation of such measures as well as other reforms. Unless Greece can convince the institutions it is implementing adequate measures, there will not be any additional funding for Greece. Greece does not appear to have enough funding to cover its needs, although whether it will run out of money in March, April or stay afloat until the summer is not clear. There was some respite for Greece as it received around 500 million euros from the Greek bank recapitalization fund – money that the Greek banks themselves had apparently paid up in fees and not money that came from Greece’s partners. The impression overall is that Greece is having difficulty to fund itself and a drop in tax revenues during the past few months has made it even more difficult for public finances.
The ultimate goal is not only for Greece to agree with its partners in order to receive financing in the short-term, but also to strike a longer-term deal as to what will happen after June when the four-month waiting period ends. Therefore the ongoing negotiations will be a theme that will attract plenty of attention. It is difficult to determine what impact the negotiations will have on the currency markets and specifically the euro, as it seems that ECB’s QE and the possibility of higher interest rates in the US sooner-than-expected, have been much more instrumental in driving down the single currency compared to Greece’s woes.