Reports that Euro zone leaders may hold another emergency summit on Sunday to discuss and perhaps approve the latest Greek loan request and reform proposals sent U.S equities and the euro soaring near the end of today’s trading, erasing their earlier losses.
The euro climbed from about 1.0980 to 1.1052, its high of the day, in about 20 minutes as the news hit the markets. It slipped back to 1.1010 at the close. The Dow closed 109 points higher at 17,777 up from down about 30 just before the report. Earlier in the day it had been down about 200 points.
The Greek reform plan and loan request requires initial approval from her creditors, the IMF, ECB and EU commission later this week. It is expected they will require two or three days to consider the feasibility of the Greek proposals.
According to Reuters its "sources set out a tentative timetable that could offer a breakthrough to keep Greece afloat and in the euro zone, provided it accepts credible reforms and spending cuts to make its public finances sustainable in the mid-term."
Greece is asking for a medium-term assistance program from the European Stability Mechanism, the financial organization that funded the two prior bailouts, and is expected to submit its official plans sometime today. Euro zone finance ministers have said they will hold a conference call Wednesday morning to consider that request.
Greece could receive a short-term interim financing arrangement to meet the 3.5 billion euro July 20th ECB bond redemption and to clear the missed 1.5 billon euro payment to the IMF that had been due June 30th.
The ECB payment is the most crucial because without it the central bank would be unable to continue its funding of Greek banks, whose deposit base have been devastated by withdrawals. Absent the ECB funding the Greek banking system would collapse. .
The Greek government has not sought any reduction or ‘haircuts’ in its overall debt load but a 'profiling' involving lengthening maturities and lower interest rates, could be part of any deal.
Several of the prospective terms would require approval by the German parliament which is scheduled for a summer recess shortly.
The week long closure of Greek banks and the resounding rejection by the Greek electorate over the weekend of the previous austerity plans have injected new urgency into the negotiations.
But as with several previous proposals, the difficulty in in the details.
The demands of the creditors for pension cuts and new taxes have not varied over the past several weeks. Thus far Greece has refused to meet these terms.
Prime Minister Alexis Tsipras has said that his victory at the polls gives him greater negotiating leverage. That opinion is about to be severely tested.
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