CL Redux
- Thread starter schizo
- Start date
GM 
Europe is up. Here's another story.
June 29, 2011, 6:45 a.m. EDT
Greece seen likely to approve austerity plan
Greek parliament due to vote Wednesday on additional measures
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) â Greek lawmakers appeared increasingly likely on Wednesday to approve an austerity plan deemed necessary by the European Union to avoid default as formerly wavering members of Prime Minister George Papandreouâs PASOK party lined up behind the unpopular proposals, news reports said.
The Associated Press said it appeared that only one PASOK lawmaker would oppose the five-year austerity plan indicating it was likely the measure will receive the 151 votes needed in the 300-seat parliament to win passage. PASOK holds 155 seats.
Reports said one or two members of the opposition New Democracy party may join the âyesâ camp. Read The Tell on "Greece's big fat Greek vote."
âDespite earlier wavering by some lawmakers within PASOK ranks, the ruling party majority now appears to be holding and the medium-term fiscal plan is likely to obtain the required parliamentary approval today,â said Wolfango Piccoli, director for Europe at risk consultancy Eurasia Group in London.
Expectations the government will prevail in the face of angry and sometimes violent protests and the second day of a two-day strike helped lift European equities and boosted the euro (ICAPC:EURUSD) . The shared currency temporarily pushed above the $1.44 level versus the dollar and changed hands at $1.4389 in recent action, up from $1.4366 in North American trading late Tuesday.
A vote is expected Wednesday afternoon. If the bill passes, a vote on measures to implement the legislation is expected Thursday.
âWe expect both todayâs and tomorrowâs votes to get through Parliament though it will not be easy,â said Elsa Lignos, currency strategist at RBC Capital Markets in London. âThe margin may be tight but we think the threat of default will ultimately swing the vote in favor of the measures. If realized, it will be a near-term positive for the euroâ and risk-correlated assets.
The package, which aims to reduce the nationâs budget by 28 billion euros ($40.2 billion) and accelerate â¬50 billion of government asset sales, is a prerequisite for the release of a delayed â¬12 billion tranche of aid under the â¬110 billion bailout package approved by the European Union and International Monetary Fund last year.
Without the funds, Greece could default as early as next month, a move that economists say could do tremendous damage to the European banking sector and reignite turmoil in global financial markets. Read "What happens if Greece votes no on austerity."
The additional austerity measures include provisions that would lower the income-tax threshold to those earning more than â¬8,000 a year and impose a âsolidarity taxâ on persons earning more than â¬12,000 a year. It would also boost taxes on heating fuel for businesses, further limit civil service hiring and hike consumer and road taxes, Eurasia Group noted.
A deep recession
The measures come as earlier austerity measures weigh on the economy. Greece is struggling with a deep recession and mounting unemployment. The IMF projects the Greek economy will contract by 3% in 2011 before rebounding by 1.1% next year. Unemployment hit 16.2% in March, data showed earlier this month, up from 15.9% in February.
Approval of the measures on Wednesday and Thursday would set the stage for euro-zone finance ministers to approve the release of their share of the latest installment of Greek aid when they meet on July 3. It would also move Greece closer to receiving an additional aid package from the EU and IMF expected to total as much as â¬120 billion.
Meanwhile, European banks are working on proposals to roll over a portion of Greeceâs maturing debt in response to calls by European governments for private bondholders to share in the cost of an additional bailout.
A plan proposed by French banks earlier this month would see private creditors reinvest some of the proceeds from maturing Greek debt holdings in a move reminiscent of the 1980s Brady bonds program credited with helping to solve the Latin American debt crisis. Read "Brady bond-style solution isn't a Greek guarantee."
But many strategists remain skeptical additional measures will be enough to allow Greece to avoid a future default or more aggressive restructuring of its existing debt obligations as it wrestles to bring down a debt pile seen near 160% of gross domestic product.
âNobody is going to think that Greece securing another tranche of bailout money, or even securing a second bailout later, is going to end the crisis,â wrote Steve Barrow, currency and fixed-income strategist at Standard Bank in London, in a note. âAnd even if it does in Greece (which is very unlikely), weâd still expect other bond markets to fall away as the market waits for the domino to fall again onto Ireland and Portugal â forcing them to roll over debt as well.â
Europe is up. Here's another story. June 29, 2011, 6:45 a.m. EDT
Greece seen likely to approve austerity plan
Greek parliament due to vote Wednesday on additional measures
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) â Greek lawmakers appeared increasingly likely on Wednesday to approve an austerity plan deemed necessary by the European Union to avoid default as formerly wavering members of Prime Minister George Papandreouâs PASOK party lined up behind the unpopular proposals, news reports said.
The Associated Press said it appeared that only one PASOK lawmaker would oppose the five-year austerity plan indicating it was likely the measure will receive the 151 votes needed in the 300-seat parliament to win passage. PASOK holds 155 seats.
Reports said one or two members of the opposition New Democracy party may join the âyesâ camp. Read The Tell on "Greece's big fat Greek vote."
âDespite earlier wavering by some lawmakers within PASOK ranks, the ruling party majority now appears to be holding and the medium-term fiscal plan is likely to obtain the required parliamentary approval today,â said Wolfango Piccoli, director for Europe at risk consultancy Eurasia Group in London.
Expectations the government will prevail in the face of angry and sometimes violent protests and the second day of a two-day strike helped lift European equities and boosted the euro (ICAPC:EURUSD) . The shared currency temporarily pushed above the $1.44 level versus the dollar and changed hands at $1.4389 in recent action, up from $1.4366 in North American trading late Tuesday.
A vote is expected Wednesday afternoon. If the bill passes, a vote on measures to implement the legislation is expected Thursday.
âWe expect both todayâs and tomorrowâs votes to get through Parliament though it will not be easy,â said Elsa Lignos, currency strategist at RBC Capital Markets in London. âThe margin may be tight but we think the threat of default will ultimately swing the vote in favor of the measures. If realized, it will be a near-term positive for the euroâ and risk-correlated assets.
The package, which aims to reduce the nationâs budget by 28 billion euros ($40.2 billion) and accelerate â¬50 billion of government asset sales, is a prerequisite for the release of a delayed â¬12 billion tranche of aid under the â¬110 billion bailout package approved by the European Union and International Monetary Fund last year.
Without the funds, Greece could default as early as next month, a move that economists say could do tremendous damage to the European banking sector and reignite turmoil in global financial markets. Read "What happens if Greece votes no on austerity."
The additional austerity measures include provisions that would lower the income-tax threshold to those earning more than â¬8,000 a year and impose a âsolidarity taxâ on persons earning more than â¬12,000 a year. It would also boost taxes on heating fuel for businesses, further limit civil service hiring and hike consumer and road taxes, Eurasia Group noted.
A deep recession
The measures come as earlier austerity measures weigh on the economy. Greece is struggling with a deep recession and mounting unemployment. The IMF projects the Greek economy will contract by 3% in 2011 before rebounding by 1.1% next year. Unemployment hit 16.2% in March, data showed earlier this month, up from 15.9% in February.
Approval of the measures on Wednesday and Thursday would set the stage for euro-zone finance ministers to approve the release of their share of the latest installment of Greek aid when they meet on July 3. It would also move Greece closer to receiving an additional aid package from the EU and IMF expected to total as much as â¬120 billion.
Meanwhile, European banks are working on proposals to roll over a portion of Greeceâs maturing debt in response to calls by European governments for private bondholders to share in the cost of an additional bailout.
A plan proposed by French banks earlier this month would see private creditors reinvest some of the proceeds from maturing Greek debt holdings in a move reminiscent of the 1980s Brady bonds program credited with helping to solve the Latin American debt crisis. Read "Brady bond-style solution isn't a Greek guarantee."
But many strategists remain skeptical additional measures will be enough to allow Greece to avoid a future default or more aggressive restructuring of its existing debt obligations as it wrestles to bring down a debt pile seen near 160% of gross domestic product.
âNobody is going to think that Greece securing another tranche of bailout money, or even securing a second bailout later, is going to end the crisis,â wrote Steve Barrow, currency and fixed-income strategist at Standard Bank in London, in a note. âAnd even if it does in Greece (which is very unlikely), weâd still expect other bond markets to fall away as the market waits for the domino to fall again onto Ireland and Portugal â forcing them to roll over debt as well.â