The latest Greek reform proposal was rejected by the international creditors. What does it mean for Greece and the gold market?
The Greek debt crisis is a serious problem, but it is getting funnier and funnier. Yesterday, Greek Prime Minister Alexis Tsipras said that Greece’s international creditors had rejected the last proposals presented by Athens to bridge a budget gap. He wrote on Twitter that some of creditors either “don't want a deal or they are serving specific interests in Greece”. Only a bit later, the Greek government turned down the creditors’ counter-proposal that was issued in response to the Athens' latest plan. The time is running out (Greece’s bailout expires and payments to the IMF come due on June 30), but both sides seem to have fun rejecting proposals and tweeting about it.
Well, the Greek stance can be understandable. They have nothing to lose, while the ECB has been reluctantly keeping Greek banks afloat. This is really funny. The ECB, one of the Eurozone institutions and Greece’s creditors, is constantly providing support for the Greek banking system, which gives the Greek government room to negotiate a bailout with the creditors, including the ECB itself. Now, we at least understand why Greece is the homeland of philosophers, as such things could be dreamt only by them.
On Wednesday, the ECB approved the amount of emergency funding requested by Athens. According to data, emergency liquidity assistance (ELA) rose to €77.58 billion in May from €74.37 billion in April, while the President of the ECB Mario Draghi says that total liquidity support to Greece amounts to €118 billion, or about 66 percent of GDP, the highest level of any country in the euro. The ECB is very patient this time, at least compared to warning Ireland or Cyprus that ELA may be cut-off. Perhaps the political stake is too high for the ECB, and also halting ELA could be considered as practically kicking Greece out of the Eurozone. The Greek government could then blame the evil banksters for capital controls or even a Grexit.
To sum up, Greece and its creditors failed to reach a deal again. The time is running out, but both sides are still rejecting proposals, counter-proposals and counter-counter-proposals. The bones of contention in the talks are, as usually, tax hikes and pension cuts. The creditors decided to stick to their red lines, but as long as the ECB supports the Greek banking system, their tough stance is completely incredible. The prolonged negotiations increase risks of a Grexit (the ECB’s support depends on political will, which can run out), and this should be positive for the gold market.
Thank you.
Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
Gold News Monitor
Gold Trading Alerts
Gold Market Overview
