Brinkmanship, Yes, But Where Is The Brink?

Without top tier data in the US, and another Arctic chill, look for a subdued North American session, with much of the focus on the Eurogroup meeting to discuss Greece. It is due to formally start around 14:00 GMT (9 am ET), so headline risks likely grows toward the end of the European session and into the US afternoon. Of note, US Treasury officials acknowledge they have stepped up pressure on both sides to reach a compromise. Still, it appears easier said than done.  

Greek banks are closed on Monday for a holiday. There is some concern that the Greek government is running out of funds, but our impression is that there are a number of things that it can do. Remember how the US government borrowed from the Social Security Trust Fund. The Greek government has domestic equivalents.  

Acknowledging that brinkmanship game being played out, investors seem to think the brink is the end of the month when the two-month extension to the aid program expires.  However, this may not be the true brink. The key may not be when the program ends, but when Greece has to service its debt. The first payment to the IMF is on March 5 (~300 mln euros). That same day, Greece has about 1.4 bln euro in T-bill maturing that need to be rolled over. This could prove difficult as foreign investors are not keen and Greek banks interest is curtailed by falling deposits and limits on use ELA funds to finance the government.    

The point is that Feb 28 might not be the hard and fast deadline of all deadlines that it is made out to be. The brink may be a few days into the new month.  Note that March 5 is also the date of the next ECB meeting. It will be held in Cyprus. 

Meanwhile, the flash eurozone PMI showed further improvement. The composite rose to 53.5 from 52.6.  This is the highest since last July.   However, the details were more mixed.  Manufacturing edged up to 51.1 from 51.0. The consensus was for a rise to 51.5.  The service sector saw greater improvement, rising to 53.5 from 52.6.  The consensus was for 53.0.  

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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