EU Remains Divided Over Greek Debt Solution
Some economists believe that the EU/IMF aid package for Greece only offers a short term solution for Greece’s massive debt problems. Financial markets had a positive reaction to last Sunday’s teleconference of EU finance ministers and the euro gained slightly on Monday. The agreement has reduced investor fears of a Greek default which would put the euro under even more pressure and could easily undermine the credibility of the multi nation currency. Some economists say the euro zone remains divided and point out that Sunday’s conference was the third attempt by the EU to boost investor confidence in Greece but that the conference did not address slow European growth and other economic problems in the euro zone. Simon Tilford of the Center for European Reform stated, “This is not a defining moment for the euro zone. What is concerning is that at every stage in recent weeks the EU has been resisting the inevitable and has been forced into action by financial markets. The immediate danger is averted but very little has been done to address longer-term problems. This is not a blueprint for additional crises. It might work for another small country like Portugal but not a big country like Italy or Spain.”
Euro Zone Image Damaged
Should Greece request aid the EU has agreed to a 30-billion-euro ($41 billion USD) three year loan package at 5% interest and the International Monetary Fund would provide 15 billion Euros during the first year. The credibility of the euro zone has already been damaged say several economists by the EU disagreement on how to solve Greece’s debt problems. Some economists fear the debt crisis could spread to other vulnerable EU members. Cinzia Alcidi of the Brussels based European Policy Studies think tank stated, “The image of the monetary union is weakening. The way the Greek crisis is managed and resolved will be crucial to the future of the euro zone and, if the euro survives, to the EU’s future.”
Germany Drops Opposition
The result of Sunday’s conference was a compromise by EU members that Germany would drop objections to Greece receiving loans at below market rates. Previously German Chancellor Angela Merkel had voiced strong objections to any bailout for Greece due to widespread opposition to any Greek bailout by the German public. Merkel is wary of offering any loans in advance of German elections on May 9th. Of Merkel’s previous objections Ulrike Guerot of the European Council on Foreign Relations stated, “I don’t see how she could do a U-turn on what she has been saying until now and release aid before the May 9 election.” In addition to massive deficits Greece also faces falling tax revenues and growth contraction which may make it difficult for Greece to rely solely on market based solutions.
Quick Forex Tip: The forex market offers investors the opportunity to profit even during a recession. If one currency rises another must fall creating constant opportunities for savvy investors to profit from currency moves. It is not difficult to learn how to trade forex currency and there are many very well written and user friendly learning programs and training courses available for free on the internet. Besides training, the most important thing those who trade forex currencies must learn to follow political and economic news and interpret the results and the affect current events will have on forex markets.
