In addition to giving the world democracy, Greece is on a course to shake up the global financial world.
Greek voters, in a referendum Sunday, rejected creditor demands for more austerity as a way to find a solution to the country’s debt crisis, opening the way to a possible exit from the European Union. The vote was more than 61% in favor of rejecting creditors’ demands.
On Tuesday, Greece failed to make a 1.6-billion-Euro ($1.8-billion) payment to the International Monetary Fund as European creditors and Greek government officials failed to come to terms. Greek Prime Minister Alexis Tsipras then put the issue to the voters on Sunday.
Weary of the austerity measures already in place and an economy with 25% unemployment, rejected even more government austerity.
But figuring out just what it means is a little like reading tea leaves – it’s hard to tell.
In response to the innumerable possibilities, the US dollar has been spurred to new heights against the Euro over the last few weeks as investors sought the relative safety of the greenback. Investors don’t like uncertainty.
Rejecting creditor demands for more belt-tightening from a country where tourism is the economic engine sets up the possibility that Greece will exit the Eurozone and revert to using the Drachma instead. This would allow it to print more money, which might help internally, but would not be a big help in international markets since its value would be low.
GREECE NO STRANGER TO DEBT FORGIVENESS
Of course, Greece’s creditors could simply forgive the debt, which would go a low way toward putting the country back on sound financial footing. And a recent IMF report says the country should get help. After all, Greece has forgiven debt.
After being pounded into submission during WWII, Germany was in no position to repay surrounding European nations for the damage done to them during a war its leaders started. The Federal Republic of Germany, or West Germany, received massive debt relief from its former foes, including Greece.
The Associated Press said the debt relief and restructuring after the war fueled what became known as the German economic miracle. In that 1953 agreement, Greece was one of about 20 countries that wrote off the debt.
So today, Germany is one nation resisting Greece’s request for debt relief.
Part of that resistance is understandable, though, since in 1953, Germany had exportable goods and services if they could just rebuild the factories. Greece has very little except its history.
Nevertheless, many are calling for similar deals for Greece and other debtor nations now. The deal with Germany was based on the country’s ability to pay, and Greek officials now are calling for payment restructuring based on economic growth, contrary to current payment schedules where payments are due in spite of economic depression.
So will Greece exit the EU or will Sunday’s referendum shake creditors into giving Greece enough breathing room to rekindle its economy? It’s hard to say, but the economic press is talking more about the worst-case scenario – a Greek exit – than about meaningful debt relief.
CASH CATTLE MARKETS AWAIT DIRECTION
Cash cattle markets in the Plains await direction from futures markets and news of holiday weekend beef movement. The Independence Day holiday can be a big beef mover, and mild weather in major consuming areas may have helped retail movement.
Futures markets also will be weighing the effect of Greece’s Sunday referendum, and movement in Chicago’s market could have a large influence on cash action.
Cattle traded last week at mostly $150 per cwt on a live basis, up from mostly $148 last week. In Nebraska’s dressed market, cattle traded from $235 up to mostly $240, compared with the bulk of last week’s sales at $237 to $238.
Boxed beef prices were lower Thursday, with the USDA reporting its choice cutout value at $250.12 per cwt, down $2.17, and its select cutout at $248.05, off $1.21.
The CME Feeder Cattle Index for the seven days ended Wednesday was $224.82 per cwt, down $3.45. This compares with the Aug futures settlement Thursday of $217.45, down $1.05.