German Finance Minister Wolfgang Schaeuble issued a statement late last night in New York criticising Greece for backing out of agreed bailout reforms. He said that ‘nobody expects that there will be a solution’ to Greece’s drama by next Friday’s ECB meeting on 24th April 2015; this fully contradicts with the Greek Finance Minister Yanis Varoufakis’ comments last week when he said he was ‘very confident’ a solution would be reached.
Greek officials had approached the IMF to ask for an extension to loan repayment deadlines but these requests were quickly denied. Greece is due to repay €195.2bn to the IMF by 1st May but must also find the cash to cover its public-sector wage bill for the same month. These are clearly not possible without help; the ratings agency S&P downgraded the country’s credit rating again to CCC+/C from B-/B citing their financial commitments being ‘unsustainable’.
Greek bond yields have soared, the 2-year climbing 2.9% to 25.9% with the 10-year up 1% to 12.6%. This has had a massive impact on the Dax30 June 2015 Forward contract currently trading a whopping 200 points lower at 12,071.
What will happen next is anyone’s guess but whatever happens a resolution isn’t going to be straight forward. The possibility of a Greece default was further fuelled by a local newspaper, saying that the New Democracy party believes that a Greek exit is possible. ECB's Mario Draghi said pretty much the same thing on Wednesday in the ECB economic policy meeting, when asked by a journalist.