- Greece delivered a proposal in line with creditor’s requests.
- Greek Parliament to vote on Friday on 53.5 billion-euro bailout.
- Eurozone Finance Ministers to meet with major decision possible on Saturday.
- European Union Meeting on Sunday
The Greek government submitted their ‘last chance funding proposal’ to the European institutions on Thursday night. Last week, Greek banks closed their doors to slow down the flight of capital, as deposits were withdrawn as uncertainty grew. The controversial measure is only meant to slow down the rate that liquidity exits the Greek financial system, and are not enough to keep the institutions afloat. Thus far, comments regarding the proposal have been positive, although vague. The Eurogroup President Jeroen Dijsselbloem has called the plan thorough and that the eurozone will discuss a response on Saturday.
Optimism has boosted the EUR after it hit a 5 week low on the back of the “No” vote victory in the Greek referendum on July 5. The fact that four days later the Greek Prime Minister Alexis Tsipras is backing a similar deal to the one rejected by the majority of the voters speaks volumes about the precarious state of the Hellenic economy.
Greece’s creditors: The European Central Bank, the International Monetary Fund and the European Commission have had their hopes quashed on previous weeks as intentions have not been followed through with serious intent by conceding reforms. This time around, Tsipras is making sure to get their intent loud and clear with a parliamentary vote on Friday for the proposed reforms before the Eurogroup meets on Saturday.
A final decision on the Greek bailout will be announced over the weekend and investors have to take into consideration that the closing prices on Friday could be vastly different from open prices on Monday. The outcome of the negotiations remains uncertain and will determine the size of the price gap, as markets get back online as the Asian session gets under way.
Opinion on the proposal has been net positive. France has been the biggest supporter of the package while Germany remains uncertain of the feasibility, but so far has reserved judgement. French Prime Minister Francois Hollande called the Greek proposals “serious and credible showing a determination to stay in the euro zone”. The Eurozone has been pressured by Japan and the U.S. to reach a solution with Greece to avoid further impacts to the global economy.
Central banks will retake the spotlight from Greece next week, as there will be a host of rate announcements from the Bank of Japan, the Bank of Canada and the European Central Bank. Adding to the monetary policy maker’s rhetoric will be the Federal Reserve when Chair Janet Yellen testifies before U.S. congress and the Senate.