What's Bad for Greece is Good for Market? -- Barron's Blog

        By Dimitra DeFotis
        With the Eurogroup's Greek debt bailout agreement set for a vote, U.S. markets rose Monday but the Global X FTSE Greece 20 ETF ( GREK) fell 4%.
        The Internet is awash with headlines pointing to the pent-up frustration that may be about to unwind in Greek parliament and on Athens' streets. The Vanguard FTSE Emerging Markets ETF ( VWO) fell nearly 5%. The National Bank of Greece ( NBG) fell more than 1%. But with some uncertainty lifted, the Dow and The Standard & Poor's 500 Index each rose more than 1%.
        Lost in the rally that followed the tentative Greek bailout agreement of EUR86 billion ($96 billion) -- subject to a vote in the Greek parliament by Wednesday: Greek Prime Minister Alexis Tsipras lost plenty of Syriza votes over the weekend and he may not survive as prime minister. For now, the bailout vote must come by Wednesday, and then European creditors will vote immediately thereafter. SGH Macro Advisors' Sassan Ghahramani and Kevin Muehring write:
        "The most humiliating measure of many, for Tsipras on a political level, was the 50 billion Euro escrow fund negotiated with Germany. After the all-night negotiations, he got little more than a concession that the "pledged" assets be left under Greek and not foreign (Luxembourg) jurisdiction ... Despite guaranteed defections ... we are told Tsipras has an estimated 100 or so Members of Parliament still that will do what he asks them to do ...
        The Greek banking system is highly likely to be consolidated, although under an orderly scenario - meaning as part of the Eurozone and with all the support to the financial system that this inclusion earns from the ECB - we would expect that recapitalization and consolidation will be conducted gingerly, with considerable effort to limit the reforms to equity and subordinated debt and to avoid the far more controversial haircuts to deposits (i.e., those over 100,000 Euros)."
        The Greek parliament has 300 seats, so Tsipras will have to count on a coalition of votes. And that seems likely: Athens has to find EUR12 billion by the end of the month to pay its bills. And within days, Greece needs to reopen its banks. It won't be able to do that without more European Central Bank Emergency Liquidity Assistance. And that won't happen without a positive vote in parliament on the bailout.
        Here are some themes, headlines and links:
        " Tsipras faces clash with Syriza radicals opposed to eurozone bailout for Greece." The Guardian.
        "All the EU's 28 nations are expected to be asked to contribute towards a GBP10bn-GBP12bn bridging loan. UK chancellor George Osborne
        Economist and austerity critic Paul Krugman in The New York Times said creditor demands on Greece go " beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can't accept ."
        In his first interview since resigning, Greece's former Finance Minister Yanis Varoufakis told NewStatesman that the Eurogroup is "completely and utterly" controlled by Germany, Greece was "set up" and last week's referendum was wasted.
        (END) Dow Jones Newswires

        July 13, 2015 16:13 ET (20:13 GMT)

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