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On February 20th, a tentative deal was agreed between Greece and its European peers. On paper the deal is an extension of the current bailout program that can be extended to up to four months. There is one critical caveat keeping financial markets from staging a decent relief rally. The extension is conditional on the Greek government to provide a clear detailed outline of measures by Monday 23rd February (today). FX markets will be held in check till Greece provides the strategy and German accepts it as solid compromise. Looking ahead any agreement today will have to ratify by the Troika and Eurogroup by the end of April in order for additional bailout funds to be distributed. We suspect with the recent flexibility of the Eurogroup suggests that the Greece measures will be accepted and the short term uncertainty will be removed. However, implementation of any measures has provided difficult for Greece and this fact is unlikely to change now. In addition, the Syriza government received a 75% approval rating to play hardball with Europe so taking back any austerity will be hard to accept for the average Greek. Greek critics are already referring to Syriza posturing in Europe as an “illusion.” We believe that in four months we will be faced with the exact same issues we are discussing today. The probability of a “Grexit” has increased significantly. European peripheral bond markets have risk contained to Greek debt. The primary rational is that when Greece come back for cash with no cuts Europe will be unacceptable. When combined with the fact that the strong arm efforts by Greece has not been lost on left wing parties in the rest of peripheral Europe. There have been reports that Spain’s Luis de Guindos took the hardest stance with Greek Finance Minister Yanis Varoufakis conjectured to damage the popular rise of Spanish government opposition Podemos (and Syriza ally). As pressure mounts to renegotiate reform programs, European policy makers will hit an exhaustion point. With growing political risk and divergence monetary policy (ECB has yet to launch bond buying program) we suspect Euros bearish momentum to remain intact.

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