Euro surges on €30bn Greek loan deal
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The euro has surged against the dollar and the pound after a deal was yesterday agreed between eurozone countries to put together a €30bn or £26.4bn loan package for debt-stricken Greece.
The euro rose by nearly 1p against the pound to 88.408p and it rose by 1.5 per cent or 5 cents against the dollar to $1.3672.
The surge came after finance ministers from the 16 eurozone countries agreed the loan package yesterday by teleconference, although Greece is still hoping not to need to draw on the loans and that its austerity measures will be enough.
On Friday, Fitch Ratings downgraded Greece to BBB-, just one notch above junk status.
Creditsights analyst David Watts says Greece must use the breathing space offered by this package to slash spending and increase tax revenues if it is to reduce its deficit of 8.7 per cent over the next few years. He says this will be even more challenging in the face of growing debt obligations the country must face in the next two years.
Watts says: “Greece has its work cut out if it is to rein in its runaway debt ration. Given the scale of the refinancing hurdle over the next four years, it will be a test of Greek politicians’ resolve to force voters to endure the full pain of any cuts.
“But Greece is not the only country in the region in which deficits are a problem and the process by which the EU arrived at this latest solution has been close to farcical. The good news is that the relief trade will be on in earnest and this time it should last for more than just a few trading sessions. But the core problem of overleveraging has been masked, not mended and it simply remains to be seen where - and when - it will next appear.”
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Readers' comments (1)
John Harding | 12 Apr 2010 2:23 pm
While the UK is a much larger and more diversified economy than Greece we are lucky to have retained our credit rating thus far. But for how much longer? The worlds economies have a long way to go to get on an even keel and the UK is in a much worse position than any of the politicians are currently willing to admit.
Brown's pitch seems to be based solely on 'I've been playing with this train set for many years now so I'm the best at pulling the levers' seems to miss the point that we have had FOUR large banks crash while he has been in the signal box, even with all the extra spending.
Even without the, only just avoided, global economic meltdown the UK was going to be struggling.
UK spending (that is 'investing' in the topsy turvy world of 'Brownomics') was already totally out of control well before the 'Credit Crunch' hit.
This spending was rising at a rate that, even with Gordon taxing pensions almost out of existence and with all the 'stealth' and more visible tax rises, was going to result in major tax rises and austerity for well into the future. All this without the hugely adverse conditions we now find ourselves in.
I believe the only way forward, if the Tories form the next Govt. is for them to go through the time honoured ritual of 'opening the books' and declaring that they are so much worse than they had been led to believe that all projections and therefore promises are off.
Should Labour form the next Govt., with the support of smaller parties, I don't quite know what the excuse can be.
One can only hope that the electorate looks at 'Past Performance' and understands that the resulting 'Projection' is something we cannot afford!
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