How fast things can change. The euro has slid more than 200 pips from a five-week high just two days ago on March 17 as concerns over the Greek debt crisis have undermined the Euro-Zone's common currency.
The market had been put relatively at ease after Greece received a boost from the EU finance ministers and Standard & Poors earlier this week. The finance ministers announced that they had worked out a framework for a theoretical bailout package, while the credit rating agency deemed the Greeks' austerity plans as sufficient enough to avoid further downgrades of Greek debt. The euro reaped the benefits, peaking above 1.3800 against the US dollar.
But all that changed yesterday when Greece tried to play hardball by saying it may just have to go to the International Monetary Fund if Europe does not throw them a lifeline. The Germans, in turn, proceeded to call the Greeks' bluff.
Greek Prime Minister George Papandreou began Thursday's contest of brinkmanship by saying that he had spoken to the IMF and that he hoped for a European solution at next week's EU summit.
German Chancellor Angela Merkel then hit back by saying to the German parliament that EU members who broke the rules should be expelled from the union.
Greece's budget deficit stands at 12.7% of gross domestic product, four times higher than the amount allowed by EU rules.
The euro, in turn, has fallen back to trade around 1.3600 against the Greenback.
The EU summit on March 25 & 26 is shaping up to be D-day for Greece. If its European partners fail to commit to an firm rescue plan, then Athens may just have to go elsewhere for help.
In-Depth Analysis
- Gold Rose Despite Broad-based Declines in Commodities. Safe-Haven Demand amid Greek Deficits by Oil N' Gold
- Greek Struggles Pressure Euro; May have to Turn to IMF for Help by ForexHound.com
- Greek Dilemma Pressures EUR/USD by CMS Forex
- Euro Stumbles on Speculation that Greece May Seek IMF Aid by CMS Forex
- USD Gains on Greece Flare Up by Easy Forex
- Greece Upsets Markets as it May Seek IMF Aid, Euro Sold Off by CMS Forex
- Eurozone Needs Markets Not Bailouts by Merk Hard Currency Fund
- Dollar Up as Greek Finance Woes Continue by ForexHound.com
- Greece: The bargaining game continues by Danske Bank A/S
- Risk aversion sentiment continues to simmer as perception that Greek bailout plan is faltering by TradeTheNews.com
Related News
- Asian markets mixed with concerns about Greece looming, Euro and Pound, weak
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FXstreet.com
Analysts Comments
- Ambrose Evans-Pritchard, Business Editor at The Telegraph:
"Mr Juncker, the Commission’s Jose Barroso, and their allies, have been trying to exploit the crisis to advance the EU Project, pushing the boat stealthily across the Rubicon towards fiscal federalism and a de facto debt union. They hoped that the Germans would not realize fully what was being done to them until too late. Chancellor Angela Merkel appears to have balked at this – understandably — seeing a standby facility for Greece as the beginning of a slippery slope that would leave German taxpayers on the hook for €3 trillion of Club Med debts." - The Telegraph - Stephen Fidler, Wall Street Journal Brussels bureau chief:
"Recent developments around the Greece story raise the question: Is there really a Greek bailout? As officials in Athens suggests that it may go to the International Monetary Fund after all, the lack of detail over what the Europeans have cooked up to rescue Greece is receiving increasing attention." - Wall Street Journal
