TheChek News Flow

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BFW 05/08 14:12 FOMC Not Likely to Move in June, Seen Lifting Rates in Sept.: DB BFW 04/08 14:10 FOMC Not Likely to Raise Rates in June After Weaker 1Q Data: DB BFW 02/17 18:34 FOMC’s Jan. Minutes May Be ‘Primer’ for Yellen Testimony: DB

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FOMC Minutes to Show Officials in No Rush to Raise Rates: DB 2015-07-07 17:53:01.340 GMT

By Vivien Lou Chen (Bloomberg) -- Minutes of FOMC’s June mtg should largely reflect balanced tone of statement, Deutsche Bank economist Joseph LaVorgna writes in note.

* Possible there’s more detailed discussion of international developments, given escalating situation in Greece * This might be interpreted “positively” by financial mkts, meaning Fed will stay on hold longer * Even if economic data warrants rate increase or two, Fed may worry about spillover from Greece on global financial mkts * DB says U.S. fundamentals warrant “modestly” higher rates, yet Fed is worried about tightening too soon * “We would be much more confident” about Sept. liftoff if there were clear signs of rising wage pressures * “May be premature to count out 2015 liftoff just yet”

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Vivien Lou Chen in San Francisco at +1-415-617-7078 or vchen1@bloomberg.net To contact the editors responsible for this story: James Holloway at +1-212-617-4454 or jholloway8@bloomberg.net Vivien Lou Chen

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Greece Delegation Said to Have Sent ESM Request Letter: FT 2015-07-07 18:30:55.950 GMT

By Lee Spears (Bloomberg) -- Greece delegation has sent ESM request letter, FT’s Peter Spiegel reports in tweet, citing unidentified people.

* Spiegel tweet: “I’m now told that, after not arriving with written proposals at Eurogroup, Greece delegation has sent ESM request letter.” Link * NOTE: Earlier, Eurogroup Says Greek Aid Talks Need New Formal Request for ESM Link

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Lee Spears in New York at +1-212-617-5806 or lspears3@bloomberg.net To contact the editors responsible for this story: Joanna Ossinger at +1-212-617-7789 or jossinger@bloomberg.net

Greece to offer new bailout proposal

Athens is to submit a new proposal to eurozone authorities for a third bailout by Wednesday morning after Greek negotiators stunned some eurozone finance ministers by arriving at their meeting without a revised economic reform proposal. Despite the apparently abortive start to what had been billed as a last-ditch effort to salvage Greece’s place in the eurozone, eurozone officials said they drew some comfort from Euclid Tsakalotos, the new Greek finance minister, who made a strong presentation to his counterparts. His intervention gave some hope that a deal could still be reached before Athens defaults on a €3.5bn bond payment owed to the European Central Bank in two weeks, considered to be the moment it crashes out of the euro. Athens is expected to request a new 2-3 year bailout and interim bridge financing, including through bond purchases by the ECB, to tide it over for three to four months. Both would require Athens to implement unpopular reforms and spending cuts. But some eurozone governments are known to be strongly against bridge financing or ECB bond-buying. Even though the willingness to accommodate Athens all but evaporated following Greece’s emphatic rejection of previous bailout terms in Sunday’s referendum, eurozone leaders were expected to discuss the Greek plan at an emergency summit in Brussels on Tuesday night. The ECB has also been sending strong signals that it cannot keep providing emergency loans to Greek banks. Late on Monday, it tightened the screw on Greek lenders when it required them to stump up more assets in exchange for emergency loans. It was a largely symbolic decision, but one official said would come before a complete withdrawal of its liquidity lifeline. On Tuesday the ECB said it could not be "overly generous" with emergency loans. Even though ministers expressed a willingness to consider a new Greek plan, several eurozone leaders arriving for a summit after the finance ministers’ session continued to express pessimism that an agreement on a new set of economic reforms could be reached in time. "There is still no basis for negotiations," said Angela Merkel, the German chancellor. "I say it’s not a matter of weeks but of a few days." A Greek government spokesman said the plan verbally outlined by Mr Tsakalotos was the same as that sent to creditors on June 30 "with certain improvements". The June 30 plan conceded to many of the demands made by bailout monitors but was still considered insufficient. Eurozone officials have said that in order to agree a new bailout programme, further reforms and savings would be needed on top of those demanded under its now expired bailout, given the recent deterioration in the economy. That led several to worry that Athens still had not come to grips with what it needed to do to win over sceptical colleagues. Dividing lines between Greece sympathisers and hardliners deepened during the course of the day, with French and European Commission officials attempting to find ways to bridge differences, while a growing number of national delegations — including many that have not been so outspoken in the past — angrily denounced Greek prevarication. "We can’t do it with a gun to our head or a knife at our throats," said Charles Michel, the prime minister of Belgium. "A prime minister has to face up to his responsibilities. If there’s nothing on the table and there continues to be nothing on the table, that means [Greek prime minister Alexis] Tsipras is not able to honour the demand of the Greek people to stay in the eurozone." Officials said that while the tenor of the eurogroup meeting was less combative than those with Mr Tsakalotos’ predecessor, Yanis Varoufakis, ministers continued to push for significant, detailed reforms that could be difficult for Mr Tsipras to swallow. In a bid to round up additional support, Mr Tsipras telephoned Barack Obama, the US president, before arriving in Brussels for Tuesday night’s summit, according to an American official. Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, said ministers would hold a conference call again on Wednesday morning, where they were likely to task the European Commission to assess the new Greek submission. However, several officials said it was unlikely that ministers would be able to commit to any deal and only the bloc’s leaders had the authority to broker the difficult political compromises required to prevent Greece’s exit. Only then would national capitals weigh whether to formally open bailout negotiations — a process that requires parliamentary approval in several eurozone capitals, including Berlin. "We will see if we can formally start the negotiations," said Mr Dijsselbloem after Tuesday’s meeting. "All of this has to be done in a matter of days. We have very little time." Eurozone officials have been weighing a plan where a quick, short-term "bridge financing" programme would cover Athens’ needs over the summer to give both sides time to negotiate a more in-depth multiyear programme. But one senior eurozone official said that plan had lost favour after the No vote in Sunday’s Greek referendum on the bailout package and officials were now likely to see firm commitments to a two- to three-year programme as the only option.

Dollar rise threatens US growth, says IMF

More gains by the dollar could leave US growth "significantly debilitated" and have repercussions across emerging markets, the International Monetary Fund says. In a health check on the US, the fund reiterated its advice that the Federal Reserve should delay raising interest rates until next year, partly because of a risk that a rate increase would trigger another rise in the dollar with destabilising consequences globally. Continued appreciation of the dollar, up more than 20 per cent against a basket of key currencies in the past 12 months, is a "prominent risk" because of growth divergences between the US and other economies, the IMF added, as it forecast a steady widening of the current account deficit towards 3.5 per cent of gross domestic product over the rest of the decade. Janet Yellen, the Fed chair, has pledged that rate rises from near-zero levels will be gradual as she tries to prevent a lurch in yields and the dollar when a move finally happens. Rapid dollar appreciation helped torpedo the chances of a Fed interest rate increase in March, as the high currency restricted exports and dragged on growth in the first quarter. Official figures on Tuesday morning showed that the US trade balance continued to be influenced by the high currency, as it widened to $41.9bn in May from $40.7bn in April. The dollar index rose another 1 per cent on Tuesday morning amid concerns that Greece may leave the eurozone. The Fed’s plans will have huge ramifications worldwide. Central banks and finance ministries around the world are braced for possible capital outflows and currency gyrations as investors funnel money into higher-yielding US assets after a rate rise. The IMF said the Fed had "carefully prepared and telegraphed" its intentions to raise rates. But the move could still trigger a "significant and abrupt rebalancing of international portfolios", accompanied with market volatility and damage to financial stability around the world. "A shift in expectations about the future pace of rate increases could create flows into US dollar assets and a further meaningful appreciation of the dollar," it added. The fund found that the dollar was already moderately overvalued. If the currency were to rise towards a "substantial" overvaluation, widening the current account deficit towards 5 per cent of GPD, "this would likely point to the move in the dollar having gone ‘too far’, potentially creating future risks, including in some emerging market economies, as global imbalances reassert themselves," the fund said. The IMF analysis came in its detailed "Article IV" report on the US economy, where it was cautiously optimistic. "A solid labour market, accommodative financial conditions and cheaper oil should support a more dynamic path for the remainder of the year," the report found. The fund predicted that GDP growth would accelerate from 2.5 per cent this year to 3 per cent next. Potential growth, which gauges the rate the economy can grow with stable inflation, will be "considerably weaker" than before the financial crisis at 2 per cent, however, unless the US pushes through reforms to boost its dismal productivity performance, incentivises innovation and investment and increases labour force participation, the report found. The fund warned against a repeat of "down to the wire brinkmanship" in negotiations over fiscal policy and the debt ceiling this year, saying this could damage confidence — particularly if the timing coincided with a Fed rate rise. Asked about the possible restructuring of Puerto Rico’s $72bn debt mountain, Nigel Chalk, the IMF’s US mission chief, said the lack of a strong and consistent legal framework was a problem for the US territory given the need for at least some reprofiling of the debt. "It is generally viewed that the institutional and legal framework for Puerto Rico to undertake any kind of workout process with its creditors is made much more difficult by the fact there is no real legal framework like Chapter 9, particularly for some of the government agencies," he said. The island cannot seek Chapter 9 bankruptcy protection as Detroit did and since it is not a sovereign country, it cannot ask the IMF for help or loans to tide it over while it restructures its debts. The Obama administration has encouraged Congress to take a "close look" at Puerto Rico’s inability to seek Chapter 9 bankruptcy protection, something only the legislature can change.