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Has Greece lost its negotiating power out of desperation?


Greece now seems to have lost its negotiating power to a reasonable extent as reports show the country is just about a week away from running out of cash. Last week, Prime Minister Alexi Tsipras was invited to a meeting with German chancellor, Angela Merkel to discuss about the possible release of the bailout cash in lock down. Although Tsipras received a warm red carpet welcome in Germany, along with a warm atmosphere for discussion, reports show that he failed to impress over the proposed reform programs to which the bailout funds will be applied.

According to a report on Bloomberg, even members of Merkel’s coalition party who have sought a more understanding accord with Greece and its situation where left in doubt over whether Tsipras was on the right path to solving Greece’s problems. This comes over a month after the country won a lobby for extension of a bailout deal as the indebted nation’s policy makers have failed to submit an impressive plan on how the bailout funds will be used, with a new proposal expected to have been submitted on Friday.

“What’s coming out of Greece is moving completely in the wrong direction,” Joachim Poss, a Social Democratic lawmaker who is the party’s deputy parliamentary spokesman on finance policy, said in an interview. “The situation is really worrying -- we’re stunned watching the developments.”

“Grexit” concerns continue

When the financial crisis hit California and Illinois there was no discussion of these states dropping the USD as both of these states were part of one country. One thing the world is confusing is that EU is not USA, each of EU states are separate countries, hence Grexit fears still continue.

The situation in Greece has prompted renewed speculation over the possibility of “Grexit”. Finance Minister Wolfgang Schaeuble joined Social Democrat Bundestag floor leader, Thomas Oppermann in speculate about a possible Greek exit, as Oppermann said: “A Greek exit from the euro zone would be a political disaster, not only for the euro zone but for the whole idea of Europe,” Oppermann told Deutschlandfunk radio March 24. “Of course we can’t rule that out. It’s first of all down to the Greek government whether it does what is required to stay in the euro zone.”, as reported by Bloomberg.

Even the ECB has been covering its downside by withdrawing a waiver that allowed the ECB to accept the Greece’s junk-rated debt as collateral prompting criticism from Portuguese lawmaker Marisa Matias, accusing Draghi of blackmail. Draghi defended the ECB’s decision by stating that they have played by the set rules and that the ECB still had ample exposure to Greece which totals about 104 billion ($113.8 billion).

Will the new reform proposal save Greece?

Over the weekend, Greek officials have scheduled talks with its Eurozone creditors to put finishing touches to its renewed reform plans for an economic overhaul which the country hopes to finalize by Monday.

What about the Fed’s rate hike?

According to the GDP figures releases on Friday, the US economy grew by 2.2% annualized rate in the last quarter, commensurate to the growth experienced in the previous quarter. An interesting fact though is that corporate profits dropped in the last quarter of the year, making it the worst annual performance since the recession.

Source- Federal reserve economic data

FED Chair Yellen said on Friday that she expects the Federal Reserve to raise interest rates this year, with gradual subsequent increases without adhering to a specific path, according to changes in the economic situation. This is in line with Fed Vice Chair, Stanley Fisher’s opinion earlier in the week, as he also stated that increase in interest rate would begin soon. The impending increase to occur this year has become a cliché as markets wait the actual time for the rate hikes to begin.

Source: https://www.orbex.com/
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