August 20, 2018 / 7:47 AM / 8 months ago

Daily Briefing: Greece - freedom, of sorts

LONDON (Reuters) - Greece can now "stand on its own feet" for the first time since 2010 after exiting its final, three-year bailout programme, the euro zone's rescue fund declared today.

People make their way on Syntagma Square in Athens, August 16, 2018

This is undoubtedly an historic moment, but Athens remains obliged to turn in budget surpluses for the next four decades in return for the agreed debt relief - a continuation of the bitter euro zone medicine which detractors say will crimp investment and growth so much as to be counter-productive.

Even the International Monetary Fund fears social and political fallout from the painful years ahead; what is to come will be as much a test of European Union policy as it will of Athens.

Meanwhile, Germany's finance ministry says Turkey's currency crisis is an additional risk to Germany's economy on top of trade frictions with the United States and the threat of a no-deal Brexit.

Germany is the second-biggest foreign investor in Turkey, whose biggest trading partner is the EU. More clues on the state of the euro zone’s largest economy come at 1000 GMT with the Bundesbank’s monthly report.

Two pictures this weekend give fresh insight into European politics. The first was the photo of Vladimir Putin dancing with Austrian Foreign Minister Karin Kneissl after she invited the Russian leader to her wedding in the small town of Gamlitz near the border with Slovenia on Saturday. That invitation was much criticised, especially given the fact that Austria is the current holder of the rotating EU presidency.

The second photo, more significant, was Putin several hours later sitting down at a table decorated with flowers for one-on-one discussions with Angela Merkel at a German government villa outside Berlin.

As its ties with Donald Trump get ever more tense, is Europe taking a more pragmatic approach to relations with Putin? From some angles, it certainly looks like it.


The early global markets pulse on Monday has been positive, with attention moving to low-level trade talks between the United States and China later in the week and the Federal Reserve’s annual Jackson Hole conference at the end of the week.

But the dollar nudged higher again across the board after Friday’s retreat and Turkey’s lira was weakening again after both Moody’s and S&P cut Turkey’s sovereign credit ratings again late Friday.

The overall mood emanating from Wall Street continues to be upbeat as U.S. economic and earnings numbers continued to tilt positive, with the S&P500 closing up 0.3 percent on Friday – partly on the news of U.S./China trade talks.

Shanghai and Hong Kong stocks rose 0.7 percent and 1 percent respectively early, with Indonesia stocks outperforming with gains of almost 2 percent.

MSCI’s emerging markets index, which has been battered recently on concern about contagion from Turkey’s currency crisis and a rising U.S. dollar, firmed for the second day in a row on Monday and added 0.7 percent. European stock futures were higher, with U.S. equivalents little changed.

The dollar rebounded  slightly from Friday’s low, meantime, with the euro/dollar exchange rate slipping back close to $1.14 and the dollar’s DXY index up about 0.2 percent. Speculators hold their biggest net long dollar position since 2015, according to CFTC data released late Friday.

Ten-year U.S. Treasury edged below 2.86 percent first thing. China’s offshore yuan slipped back after a rally of almost 2 percent between last Wednesday and Friday to as low as 6.8264 at one point.

Even though Turkish markets are largely closed for public holidays this week, the lira failed to retain a foothold at levels under 6 per dollar and has weakened again on Monday to about 6.05 after the twin one-notch sovereign downgrades on Friday.

S&P said it expected a Turkish recession next year while Moody’s said a weakening of Turkey’s public institutions had made policymaking less predictable.

The weekend signing of a currency swap agreement between Turkey and Qatar’s central banks – which followed Doha’s pledge last week of some $15 billion to support Turkey’s financial system – had little immediate impact on the lira.

Slideshow (2 Images)

Tension between Washington and Ankara over the detaining of a U.S. pastor in Turkey remains high. A Turkish court on Friday rejected his appeal for release, drawing a stiff rebuke from President Donald Trump, who said the United States would not take the detention "sitting down".

Early on Monday, several gunshots were fired from a vehicle at the U.S. embassy in the Turkish capital, Ankara, hitting a window in a security cabin but causing no casualties, police and broadcaster CNN Turk reported.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own —

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