Greece, however, remains the focus of the Eurogroup and the markets, regardless of the additional two years to implement the reforms and the new aid package agreed to previously. At the latest, the 12th November meeting will have to produce a decision before Athens runs out of money. Meanwhile, the Finance Ministers will hold a telephone conference today to discuss the renewed haircut to bring Greece back to a sustainable path. Such haircut has its limitations: “because of its statutes the IMF is not allowed to participate, the ECB has rejected to participate in contributing to Greece’s national finance in such an obvious manner and the European governments are struggling to let Athens out of repaying the bilateral loans provided in early 2010”, wrote analyst Lutz Karpowitz, expecting the German Finance Minister not to be the only one referring to the principles of national budget law.
“It is also likely to be difficult in other countries to provide a debtor with further funds if their previous liabilities have just been waived as they are no longer able to service them. It is therefore hardly surprising that other proposals, such as a debt buy-back are making the rounds. At first glance this might seem like a tempting solution. As the Greek bonds are trading well below 100 the outstanding liabilities would be lowered by buying them back. At closer inspection the plan does not work out though. In the end the bonds are only trading below 100 because the interest the country has to pay has risen. So the new, lower debt would have to be financed at higher interest rates unless funds are being introduced from elsewhere. The cash value of the debt is not going to change notably as a result of the buy back”, he added, concluding that someone will have to pay if Athens is not going to be abandoned. If today's telephone conference fails to bring progress to the table, the EUR/USD risks a fall towards 1.28.