StreetAccount summary - EU weekly recap

StreetAccount Macro Summary: Eurozone 
Friday, May 27, 2016 10:16:01 AM (GMT)

  • ECB:
    • ECB stimulus pushes euro junk-bond yields toward 10-month low: Bloomberg reported that junk-bond yields in Europe are poised to fall to the lowest since July as the ECB prepares to expand its bond-buying program next month to buy corporate debt. It cited BofA-ML data which shows yields on the notes fell to an average 4.74% from a more-than three-year high in January, leaving them less than 1bp from this year’s low, set in April. It said that demand for euro-denominated paper on ECB stimulus expansion has resulted in drop in borrowing costs in investment-grade debt, causing investors to seek riskier assets. 
    • ECB expected to reinstate waiver on Greek bonds within weeks: The WSJ cited a source, who said the ECB is expected to reinstate the waiver on Greek bonds within weeks. Recall, the FT also this week reported that the ECB could use the 2-Jun policy meeting to discuss this matter. The source said that the ECB could reinstate the waiver next week, but the timing depends on Athens. Recall, the ECB scrapped the waiver in February 2015 and its ELA scheme has kept Greek banks afloat since. The source pointed out that the move to reinstate the waiver would allow Greek banks to access cheaper ECB funding, but it’s unlikely that the central bank will accept Greek government debt in its QE program before H2’16.
  • Greece:
    • EU’s Moscovici expresses hope of IMF support for Greece: In an interview with MNI, Moscovici, the EU commissioner for economic affairs, said the EU will try to bridge all gaps to find a common line when trying to bring the IMF on board with supporting Greece’s bailout program. He said this week’s agreement with the Eurogroup is a "win-win" deal that will not only provide "oxygen" to its economy. He added that he was "confident that the IMF will come on board because there is a strong desire among the member states and now there is clear commitment from the IMF staff on the reform program and the rest of the (Greek) package,” added Moscovici
    • Greek debt deal reflects shifting powers among IMF members: The FT discussed how this week’s Eurgroup/Greece breakthrough which includes IMF participation, depending on EU offering detailed debt relief, also indicated a shifting balance of power among the Fund’s members and what its staff see as a principled stand to uphold its rules in the face of pressure from European capitals. The story noted that the Fund is becoming more attuned to the wishes and needs of emerging markets, especially China. It argued that this gives the Fund an opportunity to take a hard line on Greece, and noted that for many IMF officials, Greece current situation is no longer pose a systemic threat to the global economy.
  • Eurozone:
    • Europe ready ‘Plan B’ for life after Brexit: The FT reported that EU leaders at several meetings in recent weeks have drawn up a “plan-B” in event of a Brexit. Recall, Reuters this week reported EU has launched Brexit contingency talks. The FT cited more than a dozen politicians and officials involved at various levels, who have sketched out ideas for concerted action for closer Eurozone integration, but German Chancellor Merkel and French President Hollande are instead looking to deepen security and defense co-operation. The story added the first task in aftermath of a Brexit is for EU to manage any financial and political turmoil that may follow. It noted that EU leaders will meet 28-29-Jun without the UK involved, to discuss the bloc’s response.
  • France:
    • Hollande surprised looks for exit from labor law backlash: FAZ reported that as nationwide strike action paralyses the nation in protest at President Hollande’s unpopular labor law reforms, the French leader was now desperately looking for an emergency exit and would probably follow the road of his predecessors by coming up with a list of concessions designed to weaken the breadth of the country's reform process. In another report, AFP cited Hollande, who at the G7 meeting said to press that he would stand firm over the labour law, hitting back at unions which urged workers to step up a wave of industrial action.
  • Italy:
    • Boccia says Italian growth is not real recovery: ANSA cited remarks by Vincenzo Boccia, the new president of Italian industrial employers' confederation Confindustria, who said that Italy's return to growth after years of recession was so modest it could not be considered a real recovery. He also said the level of growth in Italy “will not take us back to pre-recession levels in a short period of time” and that the country was basically “starting from scratch” in its journey top become a modern day economy. "We have to construct a modern market capitalist system that is open to capital and investment in industry of the future,” he added

Subjects: News and Summaries - EU, Recurring Summaries - EU, Politics - EU