Recap 5-18-12

Main Items:

· Alexis Tsipras, head of the Syriza party, said there was little chance of Europe actually cutting off Greece financially. He said if they did take such an action, Greece would renege on all of its international debts and devote tax dollars towards paying worker salaries and pensions.

· ND and PASOK would have ~164 seats per the latest polls, up from the 151 they received during the last election – the survey of 1,027 Greeks by Marc for Alpha TV showed (out Thurs)

· There is some vague speculation about the imposition of a new short sale ban (apparently Spain’s banks have requested one)

· Canada Core CPI increased to 2.1% YoY in Apr vs 1.9% exp and prev. The headline measure increased to 2.0% vs 1.9% exp and prev

Overseas:

  • German PPI declined to 2.4% YoY in Apr vs 2.5% exp and 3.3% prev

Upcoming Data:

  • Fri: Canada CPI
  • Mon: Chicago Fed
  • Tues: UK CPI EU Consumer Confidence, Richmond Fed Mfg Idx, Japan Trade Balance

Commentary:

The prerequisites for a Greek exit are:
1) Greece refuses to pursue austerity measures
2) The rest of the EU has to agree to cut Greece off from the ECB liquidity operations, because the ECB would not do that unilaterally.
In the meantime the Greek central bank is allowed to print unlimited Euros vs any Greek bank asset, so Greek banks will not run out of cash. The interesting thing here is that it doesn’t matter that Germany is adamant about Greek adherence to the austerity process. As long as the majority of EU countries remain unsure about forcing a Greek exit, Greece will stay in the EU.

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