While a number of brokers have been preparing for the worst, Eurozone officials presented a final offer to the Greek government saving the country from an imminent default for five months.
Another kick-the-can or ban-aid solution has been adopted by the creditors in the country. While the Greek government has a weekend to consider the proposal and the attached conditions to it, the efforts with which some brokers have undertaken to advise their clients about incoming market volatility may still be useful even if a Greek deal is signed.
Addressing the Greek debt problem with a weak deal could be a blow to the credibility of the euro
The German Finance Minister Wolfgang Schaeuble commented that the risk of addressing the Greek debt problem with a weak deal could be a blow to the credibility of the euro. While not many have noticed it, the currency market has been signaling this all week long.
On Tuesday, when a Greek deal once again became feasible, the euro registered its largest drop since the 19th of May. Further to the announcement today, the currency market sold off the single european currency once more.
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Markets have begun to show signs that the “rules of engagement” present in the Eurozone have no standing value. Brokers’ efforts to prepare for higher euro volatility might not have been in vain, even if a “solution” to the Greek debt repayment problem for the next five months is reached over the weekend.
The Final Proposal Detailed
A note handed to the Greek government by Eurozone finance ministers proposed that the country is to receive financing to cover its debt repayment needs for the next five months, until November 2015.
A deal will eventually be reached, possibly not before Tuesday night
Amounting to a total of €16.3 billion ($18.2 billion), the band-aid solution is to be composed of the €10.9 billion euros set aside by the European Financial Stability Fund (EFSF) for the recapitalization of Greek banks, €1.8 billion remaining payment under the second Greek bailout program from the EFSF and €3.6 billion in profits made by the European Central Bank from holding Greek bonds.
The funds will be disbursed to Greece in several tranches, depending on the reform commitments the government passes in the Greek parliament.
Analysts from Barclays remained optimistic about a Greek solution, stating, “We continue to hold the view that a deal will eventually be reached, possibly not before Tuesday night, despite reported differences remaining in the programme discussions ahead of the weekend.”