Greek Austerity Measures Cause Strikes, Unrest
The first decade of the multi nation currency the euro was marked by relative economic stability allowing most EU member states to enjoy low interest rates making the EU economy competitive. The recent Greek deficit crisis is now threatening the stability of the euro zone and its currency. Austerity moves by the Athens government of Prime Minister George Papandreou have caused widespread social unrest in the country. Communist protestors tried to blockade the Greek stock exchange and strikers attempted to shut down air, rail and shipping networks to protest cuts in pension and welfare benefits. Bank of England Governor Mervyn King expressed concerns that Europe’s economic recovery has “stalled.” Delegations from the IMF and the EU arrived in Athens to begin talks with the Greek government on how to rein in excessive spending.
Greece Faces Further Downgrades
The Greek fiscal crisis has rippled through currency markets prompting a flight to safe haven assets and currencies. The Japanese Yen is now at a one year high vs. the euro as threats of a further Greek downgrade sent investors away from riskier assets. Standard & Poor’s and Moody’s Investors Service said that the Athens government faces a further downgrade as early as March. Omer Esiner of Travelex Global Business Payments stated, “There’s a rush to cover short positions in yen when there’s a spike in economic uncertainty. “Sovereign credit concerns are keeping the markets in check. Higher- yielders are trading sharply lower.” The yen gained 1.1% vs. the euro trading at 120.66 per euro while the US dollar traded at $1.3550 per euro. The euro has fallen 2.3% against the dollar in February. About the euro negative sentiment in currency markets Brian Kim of UBS AG stated, “Euro sentiment was weighing lower in the morning, but when you see disappointing data come out, it starts to bring up some questions and you get a bit of a pullback in the dollar. The dollar’s gained so much versus the euro that to get a strong move down up versus the euro we’ll need to see economic better data.”
Greek Crisis Threatens Euro Zone Stability
The head of Germany’s debt agency Carl Heinz Daube warned that a bankruptcy of an EU nation or a nations exit from the European Union would mean the end of the European Monetary Union. In a statement in London Daube warned, “If one member were to go bankrupt this would mean, after 10 years, the euro experiment is at its end.” Most economists expect the EU to eventually come to the aid of Greece especially if a default threatens the integrity of the multi nation currency.
