Talks Continue
At the time of writing talks were still ongoing between Greece and the Troika. A leaked document highlighted the tensions in negotiations with some of the main structural issues behind the deal revealed. The IMF changed its debt forecast to 129% of GDP by 2020 but noted that Greece may not be able to deliver reforms at the pace required under the baseline scenario. It added that actions by the ECB and national central banks could bring Greek debt/GDP back to 120% and suggested that the ECB forgoing profits could cut 5.5 percentage points off the total. The document noted that lower interest on bilateral loans to Greece could help by another 1.5% points. Greek bank recapitalisation were forecast to be up to EUR 50 bn, higher than initial estimates. On PSI, it was noted that the debt swap will involve a 3% coupon bond from 2012-20 which then changes to 3.75%. The private sector will also get a GDP-linked additional payment, capped at 1% of the outstanding amount of new bonds. Clearly negotiations are tense and Finance minister Venizelos revealed as much when he noted that talks would go on until ‘the very last minute’. The troika will all aim to fight their corners fully, even though time is clearly running out. Risk assets rallied into the meeting and policymaker talk was generally constructive during the European session but the lack of positive outcomes led to a modest sell off as the countdown continued. Ahead on Tuesday, the RBS minutes from the February meeting are due and Governor Stevens will also give a speech.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank