The Troika, which includes the EDCB, EU and IMF are expected to conclude their review of Greece and follow with a statement focusing on the ESFS on Tuesday. According to the Greek finance minister there are sufficient funds available until mid-November, despite conflicting reports. Greek financials moved lower by more than 10% on Monday as the government needed to tapped bank rescue funds to save Proton Bank. The failure of Greek banks is the underlying reason Germany and France met over the weekend to discuss a European bank recapitalization efforts.
German economic data slowed last week, but third quarter growth near .5% still seems likely. The overall macro picture now seems slightly better than the outlook just weeks ago. The European governments have scrambled to act in the face of a disaster than continued to unfold. The EFSF legislation was approved by all the countries with the exception of Slovakia which is expected soon. Merkel and Sarkozy have announced that they are discussing a plan that will be announced by November 2, that will put closure to the Greek crisis. The plan lacks pertinent details but the announcement has given further life to the short term relief rally in riskier assets. The currency markets seem to have over reacted to the Fitch downgrade of Italy before the weekend. Fitch was lagging the other rating agencies and was just playing catch-up with their change to Italian credit.
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