Group Economics
Daily Insight
Macro & Financial Markets Research Aline Schuiling & Maritza Cabezas
Greek talks moving forward
+ 31 20 343 5606
13 May 2015
Eurogroup more positive on progress in negotiations with Greece … … but gaps still need to be bridged, while Greece is running out of money US small business more optimistic, suggesting that economic activity will firm after a weak first quarter
Progress in negotiations with Greece … The Eurogroup issued a statement about Greece yesterday,
Greece’s economy hit by uncertainty
which probably was not as positive as the Greek government
% qoq
had hoped, but still struck an optimistic note. According to the
level
4
120
been achieved so far”, while acknowledging that “the
2
110
reorganization and streamlining of working procedures has
0
statement the Eurogroup “ welcomed the progress that has
made an acceleration possible, and has contributed to a more substantial discussion”. However, “ more time and effort are needed to bridge the gaps on the remaining open issues” . Eurogroup head Dijsselbloem added that the negotiations were “more efficient, more positive, more constructive”, while “faster progress” was being made. Still, he reiterated that a
100 90
-2
80
-4
70
-6
60 06
08 GDP (lhs)
10
12
14
Economic sentiment (rhs)
comprehensive deal is necessary before any disbursements can take place.
Source: Bloomberg
… financial resources are drying up
US small business rises
The Eurogroup statement probably was also not positive
Yesterday’s NFIB small business optimism index, based on a
enough for the ECB to raise the cap on the amount of T-bills
sample of 10,799 small business owners, signaled more
that Greece is allowed to issue, for which Athens was hoping.
positive sentiment. The overall index increased to 96.9 in April
In the meantime, the Greek government is running out of cash
from 95.2. Its components were broadly positive. Earnings
quickly. It met its obligations to the IMF yesterday, and paid
trends rose, while hiring plans edged up. The net percent of
EUR 750 million that was due, though it had to use funds from
firms planning to raise compensation increased slightly as well.
its emergency IMF holding account to do this. According to
This is positive for wage growth prospects. Other indicators
finance minister Varoufakis the liquidity issue had become
such as plans to increase capital outlays also increased, while
“terribly urgent”, referring to a time period of “the next couple of
they were a bit more cautious when asked about future sales.
weeks”. The official deadline of the current bailout extension is
This survey is consistent with economic activity firming.
the end of June, but we have serious doubts about whether the country could wait that long for financial aid. Several payments
US job openings decline in March
to the IMF are due in June (total around EUR 1.5bn).
Job openings in the US fell slightly in March after reaching a 14-year high the previous month. This data is consistent with
Deal still likely
March’s nonfarm payrolls report that showed a job market
Our base case remains that Greece and the EU will reach an
cooling down, mainly as a result of a harsh winter. The decline
agreement eventually. All parties involved have continuously
in jobs openings was 150K, reaching 5 million . This resulted in
repeated that the starting point of the negotiations is that
a job openings rate of 3.4%, down from 3.5% the previous
Greece will remain a member of the eurozone, and Greece’s
month. The number of positions waiting to be filled decreased
prime minister Alexis Tsipras seems committed to reaching a
mainly in the health care and social assistance. Elsewhere in
deal. Meanwhile, according to press reports, Mr Dijsselbloem
the report, the total quit rate, a measure of labour market
suggested that Europe could consider disbursing the financial
confidence increased one-tenth to 2%. We expect the labour
support in proportions, as the Greek government passes
market to improve at a faster pace than in the first quarter,
pieces of economic legislation.
which should keep the Fed on track for a September rate hike.