Though markets opened on an up note on news that Athens had sent a revised proposal to its European creditors—and that the creditors had received said proposal warmly—details emerged in the early hours that suggested a final deal was not in the offing today.
In a sign that Prime Minister Alexis Tsipras’ Syriza coalition is deeply riven on the issue, the Greeks claimed that they had sent the wrong proposal to the Europeans and had to re-send a new one early this morning. (Deja-vu alert: a similar thing happened earlier this year!)
As a result, European leaders have started ratcheting down the optimism. German Chancellor Angela Merkel: “There are still a lot of days in the week in which decisions can be taken.” French President Francois Hollande: “If we get a deal tonight, that would be better, but if not, we’ll need to set the foundation tonight so that a deal can be reached in coming days.” The Irish Finance Minister seemed to indicate that today’s meeting would be in vain, and that “a lot of air miles” have been “wasted”: “There’s been such confusion during night with alternative versions of the Greek proposal coming in that there hasn’t been proper preparation for the eurogroup.”
Yet after an upbeat presser given by Jeroen Dijsselbloem, president of the eurogroup, during which he confirmed that a deal was overwhelmingly not likely today, markets shot up even further. The Wall Street Journal:
David Vickers, a senior portfolio manager at Russell Investments, which has around $272 billion in assets under management, said that market optimism Monday is being fueled by the fact that the two sides are still engaging.
“Both parties have in the last day or two showed that it’s in their interest to find an agreement and that is something that is still instilling confidence in the investor community,” he added.
Wealthy Greeks seem similarly unperturbed, the Financial Times notes in a dispatch from the front lines:
Back at the party, the dancing had begun and cocktails were flowing. “It is like the last days of Rome, no?” remarked one guest, as plates of ice-cream truffles were whisked through the laughing crowd on the edge of the dance floor.
“But there will be a deal,” he said, assuredly. “I am sure there will be a deal.”
€6 billion have fled Greek banks since last week, according to JP Morgan analysts, leaving Greek banks in a precarious position: “The €117bn of deposits lost cumulatively since the end of 2009 has brought the bank deposit to GDP ratio for Greece to 66%. This is well below the Eurozone average of 94%.”
The ECB voted to provide enough emergency liquidity assistance to Greek banks on Friday to tide them over through Monday night. Had they not done so, banks would probably not opened this morning in Athens. If there are signs that a deal is in the offing, however, it’s hard to imagine that the ECB won’t extend the help for another few days so that the politics can be worked out definitively. It appears there’s still a little bit of road down which the can could be kicked—not much road, but some.