Greece and Eurozone leaders reach a tentative deal

July 13, 2015

After an intense negotiation session that carried on through the night, Greece and the Euro leaders have drafted a tentative deal to prevent Greece from exiting the Eurozone. If approved, the deal will be a bailout of €82-86Bn (exceeding the €60Bn that the IMF suggested was needed in their most recent debt sustainability report). Approximately €10-25Bn will go to recapitalize banks, and the rest will provide funding for Greece for the next three years. The Greek parliament must now approve the reforms demanded by the eurozone by Wednesday, July 15. As in the previous deal rejected by Greece, these reforms include streamlining pensions, raising tax revenue, and lifting regulations and restrictions in the labour market.

In terms of conditions, this deal seems to indicate capitulation by Greece. This validates earlier views that the Greek government, despite the no vote in the referendum, still had the weaker hand in negotiations with the eurozone.

What can we expect now?

Markets were up last week Thursday and Friday in anticipation of a deal being reached, and are up again today. However, much work still remains to make the deal a reality. Greece must enact key reforms by Wednesday, and secure approval by the Greek government. In addition, 85% of eurozone countries must approve the deal. The general expectation is that the deal will pass the required legislative hurdles. This is positive news, and we expect the situation to stabilize.

If you have any concerns or questions about the impact of events in Greece, or other market uncertainty, on your portfolio, we encourage you to speak with your MD Advisor.

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