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Euro Futures – Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.
“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”
Greece raised 1.3 billion euros ($1.7 billion) of 26-week Treasury bills today at a yield of 4.69 percent, compared to 4.55 percent at the previous auction on April 10, according to the Athens-based Public Debt Management Agency. Investors bid for 2.6 times the securities offered.
The nation’s political leaders are meeting for a second day to try to form a government after New Democracy’s Antonis Samaras, who won the most seats in Parliament, said he couldn’t forge a coalition. Another election may be held in mid-June if politicians fail to form a governing coalition.
The attempt to form a government now passes to Alexis Tsipras, the head of Syriza. Tsipras ran on a pledge to overturn Greece’s bailout, helping Syriza emerge as the country’s second- most voted party. He has said he will seek to form a coalition with other parties that favor reversing the 130 billion-euro bailout, the country’s second aid package, which came after Greece carried out the biggest debt restructuring in history.
“I think that people are feeling the implications of a Greek exit aren’t so bad,” Taylor said. If Greece leaves the euro, Europeans will “turn around and huddle together and say, ‘how do I help Portugal and Spain?’”
Of Greece’s 266 billion euros of debt, about 194 billion euros, or 73 percent, is held by the European Central Bank, euro-area governments and the IMF, according to the Greek Debt Management Office in Athens. In 2010, before the first bailout, Greece owed about 310 billion euros, all to the private sector.
Tsipras said in Athens today that he wouldn’t agree to join forces with New Democracy and Pasok, the two Greek parties that have supported austerity measures in return for international funds. He called on the leaders of both parties to withdraw their pledges to impose the terms in writing by tomorrow when he is to meet with both of them to discuss forming a government.
The 17-nation euro extended its longest run of declines against the greenback since September 2008 as German Chancellor Angela Merkel rejected government stimulus as the way to spur economic growth, setting up a clash with French president-elect Francois Hollande.
“Merkel is in a position where she can’t go too far to push the Greeks to stay in or to give too much money to them,” Talyor said. “I also feel passionately that the euro is effectively a breakup.”
The euro declined 0.4 percent to $1.30 at 9:01 a.m. in New York after sliding to $1.2955 yesterday, the weakest level since Jan. 25.
- John Detrixhe and Erik Schatzker in New York at Bloomberg.