Robeco: Endlich der Durchbruch für Griechenland?

Main market events 

Peripheral markets sold off in the beginning of the week after the strong ‘No’ vote in the Greek referendum. Greek banks remained closed as the ECB refused to increase the emergency funding any further. On Thursday evening, the Greek government sent a list of new proposals, containing reforms they previously refused. The market response was very positive, as this means a ‘Grexit’ might be avoided this weekend. Portuguese bonds have returned 0.8% this year, Italian bonds -0.1%, Irish bonds -1.3% and Spanish bonds -1.9%.

Greece

Proposals sent by the Greek government Thursday night look even tougher than the proposals refuted in the referendum. They cross previous ‘red lines’ like VAT increases, pension and labor market reforms and privatizations. The Greek government asks EUR 53bln of financing in return.

The institutions (ECB, IMF, EU) will examine the proposals and give their verdict to the Eurogroup by Friday evening. The Euro Finance ministers will meet on Saturday, and on Sunday, the leaders of the euro countries will convene, to be followed by a summit of all 28 EU countries’ leaders. 

IMF

In its World Economic Outlook update, the IMF noted that the economic recovery in the euro area seems broadly on track, with a generally robust recovery in domestic demand and inflation beginning to increase. 2016 real GDP growth forecast for the euro area was revised up to 1.7%. 

Italy

The Italian Lower House gave final approval to the government’s controversial school reform bill. The reform includes increasing powers for school managers over hiring and promotions, tax breaks for private schools, and permanently hiring up to 100,000 teachers before the start of the new school year in 2015.

Robeco

Euro Government BondsWe remain cautious on the periphery. Although the current Greek proposal should be a basis for agreement with Europe, implementation of these measures might be more difficult. Negotiations on debt relief still have to take place. On the other hand we continue to see the ECB’s QE program, the generally supportive stance of EU policy makers towards the periphery and the improvement in growth as positives for peripheral debt. The fund has an overweight position in Irish bonds and an underweight position in Italian bonds. 

Peripheral bonds make up 38% of the fund. Year-to-date the fund’s absolute performance is -1.10%.