Mithril Asset management - Weekly Bulletin presented by Square Mile Financial Services
Finance News - Weekly Bulletin Market Roundup 30th of July 2012
**We wish to point out that Mithril Asset Management, Mauritius has no affiliation whatsoever with Mithril Capital Management**
Here we go again. Greece, insolvency, exit. Last Sunday night’s news (as briefly commented in last week’s newsletter) set the tone for the week. The IMF stated that it threatened to halt aid payments to Greece, following the stunted progress Athens had made on tackling its cancerous debt problem. Its goal: to cut debt to GDP to 120% by 2020. It’s currently estimated at 165% serviced by an economy in recession. Markets worldwide shivered on the news, with Germany’s DAX suffering a 3% 1 day fall on Monday, as Moody’s slapped Berlin with a negative outlook threatening its AAA rating. The outlook of Holland and Luxembourg was also downgraded.
If IMF aid to Greece ceases, then it becomes insolvent by as soon as September and even relaxed repayment terms will require Athens to come up with as much as €50bln in either spending cuts or debt relief.
Indeed on Thursday, Greek Prime Minister Antonis Samaras announced nearly €12bln in cuts to kick start reforms. The spending cuts will come from pensions, health support and benefits. This is more of a political tool than anything as Greece begs for more time. An ECB payment is due on August 20th and investors will have that date firmly in their diaries.
There was some respite later in the week as European Central Bank President Mario Draghi expressed strong commitment to support the euro, when talking at an investment conference in London. In addition, U.S. jobless claims fell by 35,000 to 353,000. The longer term macro picture still remains as uncertain and constitutes the ‘business as usual’ scenario for Europe.