We are moving back to Europe. Covering Yellen’s testimony, we were not able to report that the Greek reform proposals had been accepted by the Eurozone and the Bundestag. Does it mean the end of Greek saga? How can it affect the gold market?

On Tuesday, the new Greek government sent a six-page list of proposed economic reforms to Brussels. What are the proposals? There are very general and without any details. The main points are as follows: commit not to roll back already introduced privatizations (but review privatizations not yet implemented), tackle corruption, combat tax evasion, introduce collective bargaining, stopping short of raising the minimum wage immediately, reform public sector wages to avoid further wage cuts (but without increasing overall wage bill) and tackle the Greek "humanitarian crisis" with housing guarantees and free medical care for the uninsured unemployed, with no overall public spending increase. They seem to demonstrate Syriza’s failure, since even efforts to alleviate the “humanitarian crisis” will not have a negative impact on the fiscal budget.

The ECB and IMF said that Greece had failed to adhere to the current program, however they are only advisors to Eurozone finance ministers, who accepted the list of economic reforms proposals as a valid first step to a four-months extension of the rescue package. Why is it only a first step? The reason is that the individual member states also have to give the green light.

Today, the German parliament, Bundestag, voted overwhelmingly in favor of the four-month extension of the Greek bailout, which means that the main last hurdle for the extension was removed, as Germany was considered as the core critic of Syriza’s effort to abandon fiscal austerity.

How can it affect the gold market? The green light for the bailout extensions eases tensions and the risk of Grexit. It means that Greece is going to get some time. Therefore, the pause in the Greek drama is negative for the gold market in the short run. However, the tragedy is not over and Greece’s problems will return in April with the negotiations for a new bailout deal expiring in July (Syriza’s support at home may also fall, which may trigger some political changes and further uncertainty). Since Greece’s problems were not solved, but only postponed, this spring may be quite hot for gold investors.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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