Bad news can be good news: because Greece and its creditors are so far apart in negotiations, could stalled talks be a sign that an extension of the current bailout is in store?
The latest headline, that the International Monetary Fund is yanking its negotiators from Greek discussions with creditors, halted a rise in Greek stocks in U.S. trading. But even with a gulf between the two sides after weeks of tedious headlines — and, technically, a missed payment last week — the iShares FTSE Greek 20 ETF (GREK) is up fractionally today. Why?
European Pressphoto AgencyGerman Chancellor Angela Merkel talks to President Barack Obama near the Wetterstein mountains in Elmau, Germany on June 8.
Eurogroup President Jeroen Dijsselbloem says that a deal before the next Eurogroup meeting on June 18 remains possible. German Chancellor Angela Merkel has said this week that no one wants a Grexit, and that sentiment has been echoed by other European leaders.
And, more importantly, European Union officials have been considering a short-term — rather than 9-month — extension and contingency funding plan, assuming some kind of agreement can be cobbled together, writes Sassan Ghahramani, CEO of SGH Macro Advisors, policy research company based in New York.
Ghahramani points to a little-noticed report in Germany’s Der Bild suggesting Germany would reject a third bailout but would extend the existing program:
“Buried in the piece is confirmation of one of the key developments we have been flagging – namely that German lawmakers may be considering the option of releasing the 10.9 billion euro EFSF/HFSF funds as an alternative to a formal program disbursement. But this will obviously also be controversial and assumes Greek Prime Minister Alexis Tsipras can and will deliver credible and politically ‘highly visible’ concessions and a budget plan for meeting the 1% primary budget target.”
U.S.-traded shares of National Bank of Greece (NBG) were down 2.2% in recent trading, while shares of Eurobank Ergasias (EGFEY) were down 2% and Alpha Bank (ALBKY) shares fell 1.6%. But shares of Hellenic Telecommunications Organization (HLTOY), the former state phone company now controlled by Deutsche Telekom (DTEGY), are up 4.7%. The stock has bucked the trend of other Greek stocks this month, with a 1.6% gain.
Meanwhile, hundreds of German lawsuits against Greece have been unleashed: Europe’s highest court paved the way for hundreds of bondholders, forced to take losses on their investments, to sue Greece in Germany, Bloomberg reports.