Weekend politics: Greece debt mounting and so too are investor's concerns

Possible risk-off start to trade today?

The weekend news was more of the same concerns in the EU as the main subject matter for forex markets to get their teeth stuck into this week.

Greece is taking back the headlines after dominating the FX space back in the summer of 2015 when a three-year bailout plan was agreed by the Eurozone finance ministers after Athens backed it. The agreement demanded tax rises and more tough spending cuts in return for Greece's third bailout in five years. 

However, just a couple of years into the agreement, we have started to see Greece's debt problems rear its ugly head again, just at a time when we are headed towards the Dutch and French elections that are on the horizon at a time where globalisation has never been so under threat from the likes of Brexit and Trumps protectionist proposals to put USA first and make it "great again" - all of which are very concerning to investors. 

A fresh Greek crisis on the cards? 

With mounting concerns this week from Greece's economy that is shrinking again, the debt crisis that it faces is again threatening a break with the EU, and in-fact, Germany said recently that Greece must implement reforms or leave the EU. 

The weekend news from The Guardian reported that "quitting the euro is back on the table" with a headline that read, "From bad to worse': Greece hurtles towards a final reckoning..." 

Key Quotes:

"The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July."

"The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July."

"With the Netherlands holding general elections next month, and France and Germany also heading to the polls in May and September, fears of the dispute becoming increasingly politicised have added to its complexity...."

"In talks with Christine Lagarde . . . Merkel agreed to discuss the issue during a further meeting between the two women to be held on Wednesday..."

"...The IMF has steadfastly refused to sign up to the latest bailout, arguing that Greek debt is not only unmanageable but on a trajectory to become explosive by 2030. Berlin, the biggest contributor of the €250bn Greece has so far received, says it will be unable to disburse further funds without the IMF on board..."

"With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest."

"Like every crisis government before it, Tsipras’s administration is acutely aware that salvation will come only when Greece can return to the markets and raise funds. What happens in the weeks ahead could determine if that is likely to happen at all."

"Even if the latest impasse is broken and a deal is reached with creditors soon, few believe that in a country of weak governance and institutions it will be easy to enforce. Political turbulence will almost certainly beckon; the prospect of “Grexit” will grow."

Other headlines and weekend news:

"Merkel calls for joint efforts with Russia to battle Islamist terrorism" - Reuters 

China will suspend all imports of coal from North Korea until end year - Reuters

Iran sees oil output reaching 4 million bpd by April, aims for 4.7 million bpd - Reuters

Merkel suggests euro is too low for Germany - Reuters

Market reactions:

• USD/JPY 112.88 (closing price) to 112.73 (opening price) - minor risk-off
• USD/CHF 1.0027 (closing price) to 1.0200 (low) minor risk-off
• EUR/USD 1.0604 (low) to 1.0621 (high) - funding /carry trade