In the early hours of that morning, Greek officials were in Brussels negotiating what they needed to give up in exchange for a second bailout.
The eurozone finance ministers subsequently agreed a Greek rescue package; Greece has approved it; Germany has approved it.
Meanwhile, financial markets continue to rise. Indeed this has been one of the best early year gains for the FTSE All Share Index for many years. Investors seem less concerned with events in the eurozone than last year.
It is as if they believe that political leaders now fully appreciate the issues and are wholly engaged in finding a solution. Moreover this has combined with further evidence of improving economic data in the US and signs of a soft landing in China.
However, what is really fuelling this cyclical rally is the abundant liquidity being pumped into the markets by global central banks. The US and UK have been committed to low interest rates and quantitative easing for some time, but it is only recently that the eurozone and Japan have cranked up their own printing presses.
Late last year the ECB launched its Long Term Refinancing Operation (LTRO), introduced to diminish the potentially nasty tail-risk of the failure of a major European financial institution. The Bank of Japan then surprised the market by announcing further economic stimuli to boost growth. Most Japanese fund managers regard this as the Bank of Japan bowing to significant political pressure applied by another unpopular government. However, it did state that it would target a 1% inflation rate to fight deflation and help weaken a strong yen to support export growth.
The rally in risk assets seems a little overdone in the short term, with many of last year’s laggards having to play catch-up. Although inflation has been falling in emerging markets, policy makers are hesitant to ease monetary tightening too quickly. A spike in the oil price is the fear, as trouble continues to brew in both Iran and Syria.
Of course investors will soon refocus on Athens. After five straight years of recession, the Greek government desperately needs popular support, not rioting on the streets. It needs to convince the electorate that the alternative, an exit from the euro and a return to monetary independence, is far worse – potentially, out of the frying pan into the fire!
