Daily Agenda: Greek Resolution Remains Elusive

Bank of England and ECB officials announce a new clearinghouse agreement; UnitedHealth Group announces $13 billion merger; Nigerian elections draw protests ahead of results.



After meetings in Brussels with leaders from the European Commission, European Central Bank and the International Monetary Fund over the weekend, Greek leaders were expected to come to an agreement today on reforms that will clear the way for $3.3 billion in additional government revenues and create a marginal budget surplus. The likelihood of this happening now appears less certain, with sources inside the negotiations indicating that the proposed Greek reforms were unrealistically optimistic. Prime Minister Alexis Tsipras and members of his cabinet continue to seek a balance between the social spending commitments that secured victory in the recent national election for their Syriza party and the reforms demanded by their European Union colleagues to secure bailout funds but the clock is ticking. Even if an agreement is reached it may not calm all fears, however. Fitch Ratings downgraded Greece’s credit to CCC from B on Friday, noting that although “we expect that the government will survive the current liquidity squeeze without running arrears on debt obligations,” the long-term risk of default is heightened because if remaining political uncertainty and fragile liquidity in the nation’s financial system.

PBOC prepared to act. People’s Bank of China governor Zhou Xiaochuan said in a speech over the weekend that he and his colleagues are prepared to take action to ward off deflation. Addressing an audience at the Boao Forum for Asia, Zhou said that the decline in growth in China was steeper than the central bank would prefer but that quantitative easing is not the only option.

Bank of England and ECB announce clearinghouse initiative. On Sunday a joint statement from the Bank of England and the ECB outlined a new agreement for coordinating information about central counterparties (CCP) conducting euro-denominated transactions in the U.K. This agreement follows a ruling by the EU General Court earlier this month that upheld the U.K. central bank’s primacy in regulating Euro counterparties operating in the country. The release also announced an expansion of the existing swap line between the two banks to handle multicurrency CCP contingencies.

Major airport retail deal unveiled. In a transaction valued at $1.4 billion, Basel–headquartered travel retailer Dufry announced on Saturday an agreement to secure a majority stake in Italian company World Duty Free. The deal, if approved by Dufry shareholders, will allow a divesture by Benetton family-controlled Edizione at a discount to the closing price this past Friday of World Duty Free’s stock.

Another health care merger announced. Suburban Minneapolis–headquartered health insurance company UnitedHealth Group today announced an agreement to acquire drug benefit manager Catamaran Corp. in a $13 billion transaction. At $61.50 per share, the deal represents a premium of more than 25 percent to Catamaran’s closing market price on Friday.

Nigeria elections met with allegations of voting irregularities, demonstrations. In advance of official results for the national elections held over the weekend, opposition leaders in Nigeria’s Rivers State, a key oil-producing region, have encouraged supporters to take to the streets in protest over allegations of voter fraud. Police used tear gas to disperse one protest group made up of hundreds of women earlier today. The combined pressures of declining oil prices and an ongoing conflict with terrorist group Boko Haram have eroded popular support for President Goodluck Jonathan and his People’s Democratic Party. On Friday, Fitch Ratings reduced the nation’s credit rating outlook to negative.