ANZ morning brief: Europe remains in the spotlight

EUROPE REMAINS IN THE SPOTLIGHT, WITH ONE EYE ON GROWTH AND THE OTHER ON GREECE: Headlines on Greece ’s next tranche of aid and how to meet the predicted shortfall again generated some volatility in markets overnight. Policymakers seem to be making slow progress, although no final decision about the disbursement of the next tranche of aid will be made until Tuesday next week. Headlines suggest a number of options are being discussed to meet the Troika’s new predicted shortfall. Options have included adjustments to timing of interest and bond maturity repayments for the different parties in the Troika, through to a slightly bigger loan package and adjustments to Greek’s debt targets.

German Finance Minister, Wolfgang Schaeuble gave his expectations that previous Greek debt targets were not realistic and a cut in Greek loan rates and longer maturity for loans were possible. He also ruled out public haircuts for Greece . Nevertheless some other Troika members views seem to differ, with the Eurogroup wishing to follow a timetable that sees Greece’s debt to GDP fall to 120% by 2022, but the IMF wanting to stick to the original 2020 goal, but include cuts in debt owed to official Eurozone creditors (notably the ECB). Overnight Greece auctioned €4.062bn of one- and three-month T-bills to help roll over €5bn worth of debt maturing on Friday. Elsewhere in Europe the German ZEW investor confidence survey fell from -11.5 to -15.7, well below the consensus of a slight rise. Taken with weakening business confidence in October and industrial production falling in September the outlook for economic growth in Germany continues to look more challenging as the optimism of the ECB bond purchases for indebted sovereign’s fade.