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Germany hints at limited Greek debt relief

Published Monday, July 20th, 2015

Relief was very much the theme across global equity markets last week as investors took heart from the greenlighting by parliamentarians across the eurozone of Greece’s proposed third bailout. Elements of uncertainty were present in the run up to the first major hurdle to the recently agreed debt deal which saw Greek lawmakers decide on whether to pass into law the contentious measures. However, not even a rebellion within the ruling-coalition could prevent policymakers in Athens from backing the harsh terms demanded by its creditors in order to safeguard its position in the monetary-union.

Alex Tsipras was quick to act following the revolt by Syriza members and carried out a reshuffle of his cabinet to ensure dissenters were no longer in a position to prevent the implementation of looming economic reforms. His cause for debt relief also gained traction as Britain’s David Cameron joined endless calls by the IMF for the need of a debt restructuring while Angela Merkel surprised many by hinting that she may eventually consider such concessions. With several of the obstacles to Greece’s new bailout removed, the liquidity taps to its stricken banks were turned back on after the ECB increased its ELA provision by €900 million while EU finance ministers agreed to a €7 billion bridging to cover the embattled nation’s upcoming debt obligations. The move to restore funding to Greece’s banking sector prompted officials in Athens to announce the scheduled reopening of its banks today although capital controls are set to remain in place.

Headline-grabbers weren’t solely reserved for Greece’s financial woes as China’s 2Q GDP growth estimate beat expectations to hold steady at the 7% recorded in the previous quarter and matched the long-term target set by Beijing. The GDP figure release subsequently provoked doubts about the accuracy of official data but the initial response helped temper recent volatility on the country’s stock indices and along with ongoing government liquidity support, largely contributed to the Shanghai Composite’s 2.05% weekly gain.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.