Global Markets: Euro slips on Greece bailout, Italian vote concerns; stocks drift

SINGAPORE - The euro came under pressure on Tuesday after a media report that Greece may forego its next bailout payment if creditors cannot strike a debt relief deal, while Asian stocks were shackled by holidays in some regional markets and the United States and UK.

The common currency slid 0.2 percent to $1.1136 in its third session of declines after a German press report Athens may opt out of its next bailout payment.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week but did come close enough to aim to do both at their June meeting.

"The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro-zone," said James Woods, global investment analyst at Rivkin in Sydney.

However, Woods cautioned against reading "too much into it" without more details or confirmation, adding that it is unlikely that Greece would opt out of the bailout payment at this stage.

A statement by European Central Bank President Mario Draghi reiterating the need for continued stimulus, and the prospect of early Italian elections also weighed on the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat early on Tuesday.

Japan's Nikkei slipped almost 0.1 percent.

China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.

European blue-chip stocks fell 0.2 percent on Monday, with Italy's banking index sliding 3.4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.

Sterling retreated 0.2 percent to $1.281 after British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.

The dollar inched back 0.1 percent to 111.15 yen in early trade.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, advanced 0.2 percent.

In commodities, oil prices climbed in light trade but failed to make up last week's losses as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.

US crude futures added 0.4 percent to $50 a barrel.

Gold was steady at $1,266.89 an ounce.

source: news.abs-cbn.com

Greece votes in referendum with future in euro in doubt

ATHENS - Greece votes on Sunday on whether to accept more austerity in exchange for international aid, in a high-stakes referendum likely to determine whether it leaves the euro-currency area after seven years of economic pain.

Staged against a backdrop of shuttered banks and threats of financial apocalypse, the vote is too close to call and may not produce the clear mandate for negotiations that Athens' creditors seek.

Greeks are split on whether to accept an offer by creditors that Prime Minister Alexis Tsipras calls a "humiliation" and is urging people to reject. Investors and European policymakers say a rejection would set Greece on a path out of the euro, destabilizing the global economy and financial markets.

"On Sunday we should all send a message of democracy and dignity to the world," Tsipras told tens of thousands of Greeks rallying for a 'no' vote before campaigning ended.

Voting on whether to accept more taxes and pension cuts would be divisive in any nation, even at the best of times.

In Greece, the choice is faced by an angry and exhausted population who, after five years of crippling austerity, have now suffered through a week of capital controls imposed to prevent the collapse of the nation's financial system.

Pensioners besieging bank gates to claim their retirement benefits, only to leave empty-handed and in tears, have become a symbol of the nation's dramatic fall over the past decade.

Eleven years ago, in the early morning of July 5, 2004, Greeks poured into the streets, united in celebration of their country's victory in the European Cup soccer tournament. Today, Greece is divided -- and scared -- as rarely before.

"There is an atmosphere of fear. You can just feel it," said Sarafianos Giorgos, a 60-year-old teacher in Athens, who says he will vote in favour of the creditors' proposals.

Polls open at 7 a.m. local (0400 GMT) and shut at 7 p.m, with the first official projection of the result expected at 9 p.m.

Four opinion polls published on Friday showed the 'Yes' vote marginally ahead. A fifth put the 'No' camp 0.5 percentage points in front. All were well within the margin of error.

Anxious Greeks rallying for a 'Yes' vote agree Greece has been handed a raw deal but say the alternative, a collapse of the banks and a return of the old drachma currency, would be worse.

Those pledging to deliver a rousing 'No' to tax hikes and pension cuts in return for more loans say Greece cannot afford more of the austerity that has left one in four without a job. They agree with Tsipras that Europe is "blackmailing" Greece.

"As a Greek woman, I am embarrassed at those who are going to vote 'Yes' for fear of leaving the euro. They are asking us to accept unending slavery. I am offended," said Tenekidou Ermioni, a 54-year-old teacher.

NIGHTMARE RESULT

Greeks are likely to face more financial and political turmoil in the days and weeks ahead.

"All in all, Prime Minister Alexis Tispras' early exit from office is still more likely than Grexit," wrote Wolfgang Piccoli of Teneo Intelligence.

"Regardless of Sunday's result, significant levels of political volatility are here to stay."

Finance Minister Yanis Varoufakis promised Greeks on the eve of the vote that European creditors would immediately have to grant Athens better terms, including massive debt relief and less austerity, if they voted 'No'. EU ministers and officials have warned that his pledge is a cruel illusion.

If Greeks vote 'Yes' to the bailout, both Tsipras and Varoufakis are expected to resign -- triggering a new chapter of uncertainty as political parties try to cobble together a national unity government to keep talks with lenders going until elections are held.

European creditors have said a 'Yes' vote will resurrect hopes of aid to Greece. But capital controls, and default last week to the IMF, have undermined Greece's economic standing and creditworthiness, so a new bailout package would probably entail harsher terms than those on offer even last week.

A 'No' vote would bring even greater uncertainty, and the prospect of a sudden financial collapse.

European policymakers have openly warned such a result would be read as a rejection of talks with creditors and the euro, leaving Greece to fend for itself without any realistic prospect of funds to avoid bankruptcy.

Much would depend on the European Central Bank, which will review on Monday morning its policy on emergency liquidity, which Greek lenders rely on.

The ECB could decide to freeze the liquidity or cut it off altogether if Greeks vote 'No', or if Athens subsequently defaults on a bond redemption to the ECB on July 20.

There is concern that an inconclusive result might sow further confusion, and possibly lead to violent protests, rather than sending a clear signal about Greek intentions.

"The nightmare result would be 51-49 percent in either direction," a senior German official said. "And the chances of this are not insignificant."

(Additional reporting by Noah Barkin in Berlin and Lefteris Karagiannopoulos; Writing by Deepa Babington; Editing by Alessandra Galloni and Andrew Roche)

source: www.abs-cbnnews.com

3 questions you may be asking about a possible 'Grexit'

ATHENS - The arduous negotiations between the EU and Greece over a temporary loan to resolve Athens' bailout crisis has reawakened fears of a "Grexit", or Greek exit from the single currency bloc.

Here are in three questions some of the issues at stake:

1. Could Greece really exit the eurozone?

The European Commission insists that a country cannot leave the common currency, because there is no provision for it in the EU's treaties. So once you're in, you're in.

"Even if there is no clause" permitting a country to quit the eurozone, "it is still possible to find a legal construct" which would allow it, according to Janis Emmanouilidis, from the European Policy Centre.

Leaving the euro might have to be tied to an exit from the European Union.

If Athens fails to fulfil its bailout obligations, the eurozone and European Central Bank (ECB) have the means to push the country out by putting the squeeze on its lenders and forcing it to introduce a parallel currency.

That drastic measure is not on the cards for now, with the ECB Wednesday extending and increasing for two weeks the amount of emergency liquidity available to Greek banks.

The Jacques Delors institute in Berlin has warned of two other possible scenarios, in the first of which Greece introduces a parallel currency to enable it to fulfil its pledges to end austerity and ease the burden on the poor.

But most Greeks are in favour of sticking with the euro and the radical left ruling party Syriza has never hinted it would contemplate such a dramatic move.

In the second scenario, Greece exits the euro "by accident", because a failure to reach a deal or even just a pause in negotiations sparks a sudden bank run, forcing the Greek government to introduce a parallel currency.

Greece's Finance Minister Yanis Varoufakis has said the eurozone is like the Hotel California of the Eagles song, somewhere you can never leave.

2. Consequences for Greece?

Athens would default on its debt and would no longer have access to the financial markets.

The country, heavily dependent on imports which would soar in price, would find itself at the mercy of "vulture funds", or be forced to ask China or Russia for help, a move which would have unprecedented geopolitical consequences.

But the Greek economy could profit from the expected rapid depreciation of its chosen new currency, as well as boosting exports and tourism.

Former French president Valery Giscard d'Estaing has said Greece cannot get back on its feet while in the eurozone because of the strength of the euro -- and has called for it to leave on its own in a "friendly exit".

3. Consequences for the eurozone?
Numerous analysts believe a Grexit would be less damaging to the eurozone than if Athens had crashed out at the height of the debt crisis in 2012, because since then safety nets such as the European Stability Mechanism have been put in place.

Standard & Poor's ratings agency said Thursday that a Grexit "would not lead to a degree of direct contagion that would drive other sovereigns out of the euro".

It also believes "the financial burden of a Grexit on the remaining 18 eurozone sovereigns would be moderate and absorbed over decades."

But an exit would still be very costly for those countries holding Greek debt, and a domino effect cannot be ruled out, according to experts such as US economist Barry Eichengreen.

"When a Portuguese family or Spanish businessman sees that euros have been converted into drachmas, they will take their cash out of their accounts. That could lead to a run on the banks," he told Germany's Die Welt daily.

Matthieu Pigasse, CEO of investment bankers Lazard -- who are advising the Greek government in their talks -- says the exit of any country, however small, from the eurozone would mean the end of the common currency.

source: www.abs-cbnnews.com