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22 May 2015
Greek optimism hits a wall – BBH
FXStreet (Barcelona) - With the Eurogroup meeting in Riga, yesterday’s comments by Merkel shattered any hopes for a breakthrough in talks, as noted by Brown Brothers Harriman.
Key Quotes
“Greek Prime Minister Tsipras was hopeful that a political breakthrough was at hand. French President Hollande also seemed cautiously optimistic that a special Eurogroup meeting would be held to discuss the progress. However, Merkel seemed to play this down by emphasizing that greater efforts are needed and that there is "a whole lot to do”.”
“One of the stumbling blocks that have emerged over the past week or so is the conflicting demands of the EU and IMF. Germany, which was not keen on the IMF's participation initially, now says no deal is possible without the IMF.”
“As we have noted before, everyone seems to be cognizant of the moral hazards of the debtor if concessions are made, but very few are considering the moral hazard of the lenders. The IMF overrode its own rules on lending to Greece, over the objections of some of its senior staff.”
“Back in 2010-2011, prior to the EFSF and ESM, countries in EMU were so fearful of the impact of a Greek default on their own financial institutions that they lent money to Greece, not for Greece's sake or based on its ability to repay, but as a way to support their local institutions.”
Key Quotes
“Greek Prime Minister Tsipras was hopeful that a political breakthrough was at hand. French President Hollande also seemed cautiously optimistic that a special Eurogroup meeting would be held to discuss the progress. However, Merkel seemed to play this down by emphasizing that greater efforts are needed and that there is "a whole lot to do”.”
“One of the stumbling blocks that have emerged over the past week or so is the conflicting demands of the EU and IMF. Germany, which was not keen on the IMF's participation initially, now says no deal is possible without the IMF.”
“As we have noted before, everyone seems to be cognizant of the moral hazards of the debtor if concessions are made, but very few are considering the moral hazard of the lenders. The IMF overrode its own rules on lending to Greece, over the objections of some of its senior staff.”
“Back in 2010-2011, prior to the EFSF and ESM, countries in EMU were so fearful of the impact of a Greek default on their own financial institutions that they lent money to Greece, not for Greece's sake or based on its ability to repay, but as a way to support their local institutions.”