A bridge to a bailout?

The Greek Government is expected to announce today that it will formally ask for an extension of the current bailout programme. The Syriza Government had previously insisted that it would do no such thing, but pressure from EU counterparts is thought to have forced the hand of Alexis Tsipras and Yanis Varoufakis. However there remains some obstacles to any deal being agreed.

Reports emerged in Greek media last night that the government would sign up to a deal negotiated with EC economic chief, Pierre Moscovici, which would offer Greece a four month extension to the existing programme. However the Greek government do not want to agree to the measures imposed by the existing memorandum, something that may prove unpalatable for EU politicians.

The tone of the two sides could hardly be described as concilliatory, with German Finance Minister Wolfgang Schauble telling German media yesterday:

“They settle for saying ´We need more money now and we won´t do anything more´ and insult the others,” thought to be a reference to other countries which have successfully completed their bailout programmes.

For his part, Alexis Tsipras insisted “the Greek government will not be blackmailed” into making concessions which go against his party´s election mandate. Tsipras also indicated his intention to go ahead with social reforms on Friday which would row back on some of the measures imposed by the troika. Such an action would be like showing the proverbial red rag to a bull at this point, and any proposed unilateral action from the Greeks in the coming days is likely to scupper the chances of a deal.

One way or another, we should know the outcome of this intractable saga by this time tomorrow. A deal seems the most likely outcome, but the unpredictable nature of the Greek negotiating strategy means it is difficult to predict the outcome with any degree of confidence or certainty.

The IBEX 35 opened up 87.50 at 10,785.50, while the euro suffered early losses against the dollar and was trading at $1.1385.

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