Greece, China, Iran latest economic news today

Greek – questions?

  • Can a lender, the EU / ECB, force a government to accept a bailout even if the people / referendum and possibly the government reject it.
  • Will the ECB be able to ensure the €86bn of bailout funds are properly allocated / spent.
  • The last bailout for Greece turned more into a bailout of the French and German banks which had lent funds to the Greek government.
  • We struggle to see how the Greek government is going to fundamentally reform its taxation regime with so much opposition and so little local support for reform.

 

 

China – New credit growth outpaced forecasts by nearly a third as the PBoC measures are feeding through the banking sector.

  • Total financing increased to CNY 1.86tn compared with CNY 1.22tn in May and CNY 1.40tn forecast.
  • New CNY loans hit 1.27tn v 0.9tn recorded in May.
  • The PBoC cut the benchmark rate four times since Nov last year as well as cut the reserves requirement ratio.
  • Q2 GDP numbers are due tomorrow with estimates for a +6.8%yoy reading.

 

Iran – The government agreed a breakthrough deal to put limits on Tehran’s nuclear activities for the next decade in exchange for a reversal of international economic sanctions.

  • Oil prices are down c.2% this morning on the back of the announcement.
  • The deal marks the end of two-week discussions between Iran and the US, Russia, France, China, the UK and Germany.
  • The US and Iran will be holding votes in respective parliaments to formalise the agreement.

 

Greece – Eurozone members are considering options to release short term funding to Greece ahead of the €3.5bn repayment due to the ECB next Monday.

  • The Eurogroup is looking to disburse €12bn in short-term financing for Greece.
  • The proceeds may be source from the European Financial Stability Mechanism fund with €11bn currently remaining in the €60m EU-wide rescue pot.
  • Other options include bilateral loans from the Eurozone members, lending €3.5bn in profits on Greek bonds held by the ECB and securitising publicly-held Greek assets.
  • The government has missed another payment to the IMF this Monday (€456m) which brings the total to €2bn currently in arrears to the fund.
  • Conditions of a larger €86bn bailout include a cut in pensions, VAT increase, limits on collective bargaining agreements and a number of other spending constraints. In addition, €50bn in public assets will need to be privatised under the supervision of foreign lenders.
  • The reform package should be taken through parliament by Wednesday.
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