Greek Debt to Fall Far Short of Target

(eToro Blog) A preliminary report from the International Monetary Fund shows that Greece will still need additional reforms and likely more austerity before any additional bailouts can be given. According to the IMF, Greece will be unable to meet the 2020 debt target of 120% of GDP, with debt likely to be as much as 136% of GDP even given an outlook that includes a resumption of economic growth, privatization and a primary budget surplus. One official said that the 89 reforms already agreed to will need to be increased in order for any further tranches of the bailout to be released.

The Troika, which is comprised of the IMF, the E.C. and the ECB, has been assessing how much additional funds Greece would need if the Greek government is given an additional two years to 2016 to reach the 4.5% primary surplus that had been agreed to this past February. Estimates are, however, quite broad, ranging from as little as €13 billion to as much as €30 billion. Where exactly that money would come from is the critical question. The IMF is leaning towards a restructure of Official Sector Involvement or OSI loans from the Eurozone members which is most definitely opposed by Germany. Other options are also currently being considered including new direct funding from the European Stability Mechanism (ESM), though that is also likely to be opposed by Germany, as well as the Netherlands and Finland.

The primary surplus or deficit is defined as the balance of a budget before government debt is serviced; in the case of Greece, it means that tax revenues must exceed spending. The addition of two years would be seen as a welcome move and could make all the difference between the present situation and debt which is sustainable.

Currently, the EUR/USD pair is lower at 1.2929, closer to the day’s low than the high of 1.2956; sentiment on OpenBook is favoring the bulls with 59% of traders buying against 41% selling. OpenBook trader zinhocmoi from France is hedging his bet and earlier put in several orders to buy as well as sell. The trader has had some good success over the past quarter with realized equity in his portfolio at a high of 106.1%; for the last week the trader’s realized equity was at 16.8%, for the last month 24.7, for the last six months 42.1% and for the last 12-months 18.8%. Over the last three months, the trader’s 96.8% allocation in the pair has returned 3.6%, and his trading history shows a majority of gains and only a few losses, primarily in the EUR/USD pair. The trader had his TP hit on a short with a 3.75% gain, which was preceded by a TP on a long with an equal return; in the past day, the trader has closed 10 positions with gains that ranged from 3.75% to 17.50%.

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