A Fun Week Ahead

Greece’s future is really on the line and everyone seems to have dug in their heels. It has been announced that the Greek stock market won’t open on Monday, although a short delay may not materially affect the expected carnage. In addition the Greek banks will remain closed. This may be a necessary precursor to capital controls, which always require some internal adjustments before they can be implemented.

As of 6pm Tuesday their time, Greece will essentially be bankrupt. It won’t have the funds to repay $1.8B to the International Monetary Fund and the ECB says that it won’t help any more. This automatically triggers a number of financial actions that will aggravate and freeze the crisis. The various players in the EU and world financial community really want to work out a deal so I wouldn’t call Greece toast quite yet. But negotiators may not be able to sell continued forbearance to their national legislators who are completely out of patience with what they see as Greek profligacy.

Greek Prime Minister Alexis Tsipras proposes a referendum next weekend on the creditors’ proposals, while simultaneously strongly arguing for their rejection. This muddled response is too little and too late. It is fairly clear that the EU’s Plan B is now in effect. This is intended to arrange a smooth transition of Greece out of the Euro zone and to mitigate expected financial turmoil. Even if a last-minute delay is negotiated, the writing is on the wall – in indelible ink.

The other big item is the looming deadline for Iran Nuclear Negotiations on June 30. It is obvious to anyone with a grain of sense that this deal, if there is one at all, won’t satisfy any of the red lines established by the Obama administration. Effective inspection is dead. Maintaining the sanctions until we have proof of compliance has been summarily rejected by Iran, and our coalition of sanction partners will likely collapse with or without a deal. I suspect that this deadline is yet another head fake, one of many. Even though progress has been negligible recently, our negotiators led by Secretary Kerry are so committed to a deal that they just won’t take no for an answer. Still, whatever comes of this won’t past muster in Congress by either political party.