News Headlines (to Sunday)
Our comment: A deal on Greece is reached. But no details on PSI financing etc yet, and parliament again put off. So some of the hard decisions may still have to be taken.
The Troika want to see maybe whether the Greek parliament will now vote for the asset sales budget measures, without the Greek MPs diluting them too much. We now will see several Pasok meetings Mon-Weds, with presentation of the MTFS in Greek and the parliamentary debate yet again put off. >>> Any rally in GGBs now should be capped by the dangers over the coming days.
Greece – general
Statement by the European Commission, the ECB and IMF on the Fourth Review Mission to Greece. … the financing modalities for Greece’s economic program are expected to take place over the next few weeks. Once this process is concluded and following approval of the IMF’s Executive Board and the Eurogroup, the next tranche will become available, most likely, in early July. http://www.imf.org/external/np/sec/pr/2011/pr11212.htm
Greece Recommended for Next Batch of Bailout Loans. EU and IMF authorities said Athens would likely get in July the next tranche of money from last year’s bailout. http://online.wsj.com/article/SB10001424052702303657404576362871746111938.html
Tax measures eyed for 2012 but not yet finalised include a reduction in the tax-free ceiling for individual property holdings.
EU may intervene in Greek tax system as €12bn loan approved. EU’ Mr Rehn “Assistance is not supervision in our view. Assistance is giving them a hand to overcome a lack of skills or experience”. http://www.irishtimes.com/newspaper/frontpage/2011/0604/1224298389722.html
Greece’s banking sector remains “fundamentally sound,”according to a report by an EU-led mission of officials
Budget gross revenues increase 4.6 pc in May.
ESTIA (Greek Newspaper): “All developments lead to snap elections”.
An informal cabinet meeting chaired by Prime Minister George Papandreou will take place on Monday morning
The ruling PASOK parliamentary working group on the economy will meet on Tuesday morning, while PASOK’s Political Council will meet in the afternoon of the same day.
The cabinet will meet on Wednesday morning.
Greece – PSI
EU Seeks 30 Bln Euros From Greek Private Creditors
http://online.wsj.com/article/BT-CO-20110604-701229.html
Germany’s MoF Schaeuble: More Greek Fiscal, Privatization Measures Necessary. The report of the findings of the review will only be available in a week. “Then we will diligently analyze it, and decide on further steps among euro-zone countries,” Schaeuble is quoted as saying in a release. However, it is already clear that the Greek government needs to take further fiscal and privatization measures, Schaeuble added. “Private lenders also will need to make a voluntary contribution,” he added. As soon as the German government has the report on the review by the so-called “troika,” it will inform Germany’s parliament about it, Schaeuble said. http://english.capital.gr/News.asp?id=1210604
ECB’s Paramo: Voluntary Debt Restructuring Could Help Greece
http://english.capital.gr/dj/news.asp?details=1210586
Greece Can Pay Debt With Its Assets
EU’s Juncker expects a “voluntary participation of the private sector.” http://www.ana-mpa.gr/anaweb/user/showplain?maindoc=10022099&maindocimg=10021181&service=6&showLink=true
Greek Restructuring May Be an Option — Rainer Bruederle, leader of the German Free Democrats group in the lower house of parliament, said “a restructuring could be reasonable at some point. But Greece is no protectorate. The decision about a restructuring has to be made in Athens.”
Institutions – Europe
S&P Credit FAQ On Sovereign Debt Reprofiling. (These considerations are somewhat different to a CDS triiger. The EU authorities have said they don’t want to see a trigger. I don’t see why we should doubt them. )
S&P. ‘A Default By Greece Is Far From Certain’> –Remoted Likelihood Of Default By Other EMU Members.
Passos Coelho Extends Poll Lead Heading Into Portugal Election
Italian bank UniCredit SpA (UCG.MI) hasn’t received any requests to buy Greek bonds, Chief Executive Federico Ghizzoni said
Moody’s Downgrades Bank of Ireland, EBS, Irish Life Junior Debt to ‘C’ from ‘Ca’, S+P cuts to D
Institutions – US
Fed’s Rosengren: Money Market Funds Remain Vulnerable to Shocks, … an unusually strong warning Friday about the vulnerability of some money market funds to unexpected credit shocks — especially those with large exposure to European bank debt. Specifically, Rosengren said problems could arise among “prime” money market funds — those which purchase a wide variety of debt instruments. He observed that “many (but not all) MMMFs have sizeable exposures to European banks, by virtue of holding the banks’ short-term debt. This means some MMMFs are potentially sensitive to a disruption in the European banking system Conversely,” Rosengren also noted, “European banks are reliant on the MMMFs — which are a major source of their dollar-funding needs”. … “we should note, the weakest link in the financial stability chain might be small, rather than large, financial intermediaries.” http://blogs.wsj.com/economics/2011/06/03/feds-rosengren-money-market-funds-remain-vulnerable-to-shocks
Fed Weighs Raising Capital Requirements For Banks<http://online.wsj.com/article/BT-CO-20110603-711305.html
Fed Board Gov. Tarullo said U.S. regulators should set additional capital requirements for financial firms. One plan goes about 20% to more than 100% over Basel III. http://online.wsj.com/article/SB10001424052702303657404576363482173819822.html
Markets
US Tsy Futures:COT Lg Specs Add Longs In Both 5Y And Eurodlrs. Meanwhile, in the 10-year and Ultra long bond, large specs cut shorts with the group reducing shorts in the 10-year by 5,343 to a new net short of -78,572.
US CFTC: Spec Accounts Increase Euro Long, Flip to Yen Short.
CIARAN O’HAGAN,
SOCIETE GENERALE