Greek Deal- The Hold Off Fuels Uncertainties

Greek is the foremost thing on everybody’s mind. Everybody is closely watching the developments on the Greek deal. It will have repercussions on both the sides- up or down on the markets. Currencies like Euro, US dollar etc have reacted positively and negatively over the past few days. It is in your interest to keep an eye on the developments.

Economic Problems in Greece

Greece has been in the recession for the past five years. In the past, Greece has accepted the bailout package and also had agreed to austerity measures. In return as a bailout package, European countries along with International Monetary Fund had asked for reforms. But Greece has failed to bring in the reforms as per the expectations of the creditors. This time when second bailout package is being delivered, stringent austerity measures are demanded by other European countries.

Important Payment in March

The second bailout package will be of 130 billion Euros. The upcoming payment on debt of 14.5 billion Euros is in March. If Greece doesn’t receive the bailout of 130 billion Euros, it will fail to pay its creditor the coupon in March. A default by Greece will bring catastrophic effects on the world. It will be a domino effect. Country defaulting on its debt is huge setback for the world economy. It will push the whole economy to the brink of collapse.

Difficulties of Greek Politicians

There are many problems for the Greek deal going through from either of the parties involved. Greece is going into the elections this April. The bailout will bring with it many difficult measures like tax increase, wage cuts, lay offs etc. Considering the polls, it will be a tough task for politicians in Greece. Many unions in Greece are protesting hard against the austerity measures proposed by the European leaders.

Demand of the Creditors

On other side, leaders from European countries have asked for a stronger commitment by the Greek politicians. The polls in April have worried the creditors. The creditors demand that reforms should be the priority of any government which comes into the power.

Time is Important

It is important that the deal is finalized as early as possible. Parleys in the last few days have improved the sentiments of the people. But nothing more than a hope has been achieved from these talks. The 14.5 billion euros payment in March is not possible without the bailout package. Finance ministers from different European countries will gather next week. An agreement will have to be reached by then. It is not just an issue limited to financial world.

In response to the events, Euro swung between 1.3200 and 1.3000. As a reaction to the positive developments on the Greek front, Euro managed to go above 1.3200 level four times during the last week. But it was unable to break the resistance of 1.3230. If the deal goes through the single currency can touch the 1.3400 levels. If the stalemate continues, the Euro can see 1.2500-2600 areas.