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Our top story of the week is the abrupt, though not entirely unexpected breakdown of high level negotiations between a debt-burdened Greece and its Eurozone creditors regarding the fate of an extremely contentious and controversial bail-out program. At stake for the Mediterranean nation is geopolitical legitimacy as the hard-left Syriza party, which had campaigned on the promise of pushing for a partial debt write-off, looks to establish itself as a viable alternative to previous administrations, of which many Greek citizens have grown weary and disillusioned. However, if the newly elected prime minister, Alexis Tsipras, whose party also ran on campaign pledges towards ending austerity measures and reversing painful reforms, fails to initiate substantive changes, he is at risk of merely recycling empty political rhetoric during a time when all patience amongst his countrymen has expired.
This latest news out of Brussels, where negotiations between the Greek finance ministry and Eurozone officials had occurred this past Wednesday, is a political blow to Tsipras, but one that has significant implications for the entire European region. While the Greek constituents are suffering from an unprecedented surge in national unemployment, leaders within the European Union, Germany in particular, have expressed concerns over regional unity and the rule of law. Wolfgang Schaeuble, Germany’s Federal Minister of Finance, has publicly scoffed at what he regards as obfuscation by Greek authorities, pinning the blame of the fiscal circus on their unwillingness to come to terms with the near 240 billion euro rescue loan that was conditionally granted.
However, much of the bailout package was contributed by Schaeuble’s country, which means that their efforts would be effectively negated should the Greek economy collapse. According to statements of financial analysts recorded by Reuters, many experts believe that Greece could run out of cash as early as March unless they receive additional support. Unicredit bank noted in their recent research paper that the country’s financing needs may require 30 to 35 billion euros over the next five years, and if privatization programs, or the proposed sale of government held assets, cease as Greek officials are demanding, then this number could balloon to 60 billion euros.
But the real pressure cooker in this ongoing crisis is time. In short, Greece will soon be out of it as under the conditions of the original bailout package, local banks are no longer eligible to use national government bonds as collateral in daily refinancing operations with the European Central Bank. The only resort at this point is to rely on emergency liquidity funds from the Greek central bank, a tenuous option given that the ECB has the authority to shut down transfers if it deems that the bailout negotiations are showing little meaningful progress. As it stands, Greece may be forced to default and to eventually be kicked out of the European Union; that is, unless both parties agree to stop this dangerous stare-down.
In financial news, the U.S. equities sector rebounded from a slow start to the week, with the S&P 500 now on the cusp of another record breaking move at a closing point total of 2,088, while the Dow Jones added 110 points to finish the session at 17,972. In contrast, the precious metals complex is in a precarious position, with gold barely holding steady at 1,220, while silver is stuck in a trading range just underneath the 17 dollar level. Palladium traders saw their fair share of volatility throughout most of the week, although the industrial metal did manage to bid up to 773 dollars. Finally, in digital currency news, the bitcoin market settled into a tight range over the past two weeks, with the price at last count at 220 dollars.
And that will do it for this edition. Thanks for watching and we’ll see you next week!