Forex Flash: 11th-hour meeting concludes without consensus on Greece – Deutsche Bank

FXstreet.com (Barcelona) - An agreement to shore up Greece's funding gap and debt sustainability remains elusive after Tuesday's 11-hour Eurogroup meeting concluded without a consensus course of action. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, "It also means that Greece will need to wait a little while longer until at least the next Eurogroup meeting (26th Nov) before it knows whether the troika will release the next bailout tranche (and the conditions attached)." Ahead of the ¬5.0B T-note redemption last week we heard PM Samaras say that without the new bailout tranche Greece will run out of money "within days". The next debt redemption dates for Greece are 14th and 21st of December where ¬5.4B and ¬1.6B of T-notes are due.

Although we're yet to have a deal, EU's Junker said after the meeting that Greece has made "considerable progress" and that there are "credible options" to improve Greece's debt position. Nevertheless, the lack of a definitive outcome saw the EURUSD sell off 30 pips and is currently hovering around a 2-day low of 1.2750. In terms of the "credible options", a 15-page document prepared for the Eurogroup meeting suggested that relief measures currently on the table include ¬10.0B of debt buybacks, reduction of interest on bilateral loans by between 25-70bp and interest deferrals on EFSF loans of up to 10yrs (Reuters).

"Importantly however, the document suggests that Greece's debt cannot be cut to 120% of GDP by 2020 (the level deemed sustainable by the IMF) without haircuts on Greek loans held by the official sector. We suspect whether Greece needs additional debt haircut was probably one of the key sticking point in the negotiations." they add.