Markets Not Convinced by Aid Package
The euro fell on Thursday (April 15th) as Greece’s borrowing costs rose prompting concerns that Greece will have trouble servicing its debt. The Greek/German bond spread widened to near record levels putting the troubled euro on track for the largest fall vs. the US dollar in three weeks. EU finance ministers agreed last Sunday on a loan package of 30 billion Euros from the EU and an additional 15 billion Euros from the IMF. Boris Schlossberg of GFT in New York stated, “Markets are not pacified by the bailout package agreed upon last weekend and still consider Greece to be a high default risk.” Recent news reports state that Greece has asked for talks with the EU and the IMF. In a letter sent to the European Union, the European Central Bank and the IMF, Greek Finance Minister George Papaconstantinou asked for talks on “a multi-year program of economic policies.” Papaconstantinou also said that the multi year program “could be supported with financial assistance from the euro-area member states and the IMF, if the Greek authorities were to decide to request such assistance.”
IMF, European Central Bank, European Commission to Meet in Athens
The International Monetary Fund said it will send representatives to Athens on Monday and would be joined by representatives from the European Commission and the European Central Bank. Representatives of the Athens government and IMF officials said that Greece has not decided whether to ask for emergency loans. IMF spokeswoman Caroline Atkinson said that the IMF will focus on Greek policies that could prompt a request for outside aid. Atkinson stated, “When we’re discussing with them the policies that could form the basis, at a certain point that could mutate into a discussion for the (financial) arrangement.”Some analysts say that borrowing costs faced by Greece are unsustainable and that Greece may have no choice but to seek outside aid. Ben May of Capital Economics stated, “The fact that they are asking for clarification on various issues about the mechanism suggests that they are seriously considering activating the package.”
Loans at Below Market Rates
Greek Prime Minister George Papandreou told his cabinet that the nation’s debt crisis, “has created psychological terrorism in our economy and among Greek citizens and we have to deal with that. We must ensure safety and confidence.”EU governments have said that they would provide Greece with three year emergency loans at a rate of 5% which is less than the 7% demanded by investors to hold Greek debt. The EU decision to provide loans would have to be a unanimous decision by all 16 EU nations and markets are concerned that Germany may block or delay the loans.
Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate. In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.
