EU Summit on Thursday
The euro gained slightly against the US dollar but remained near an eight month low pressured by concerns about the fiscal health of some EU nations. Persistent worries about Greece’s debt crisis have pressured the euro in currency markets. Investors are waiting for the results of a special European Union summit on Thursday. Many investors are concerned that the EU summit will not address the ongoing Greek crisis. After EU President Herman Van Rompuy said that the summit will focus on long term economic strategy for the EU the euro fell to an 11 month low against the yen. Van Rompuy made no direct references to Greece in his statements. Masahide Tanaka of Mizuho Trust & Banking Co. stated, “Investors won’t be willing to take the risk to buy higher-yielding currencies unless organizations such as the European Central Bank and EU speak up to rescue Greece. If investors switch their attention to the fragility of Europe’s economy, euro weakness may accelerate.”
European Governments to Help Greece German Source Says
Greek Finance Minister George Papaconstantinou told Bloomberg television, “We are trying to implement a very difficult stability and growth program to which we are fully committed. The worst possible signal which we could be sending out is one calling for outside help.” A German source said that European governments have agreed to help Greece address its debt crisis. The unnamed source stated, “The decision on help for Greece has been taken in principle within the euro zone.” The comments prompted speculation that Germany may be preparing to step in to boost confidence in the EU and the euro. Outgoing EU Monetary Affairs Commissioner Joaquin Almunia urged EU leaders to help Greece in exchange for severe reforms. Almunia told the European Parliament, “I would like the leaders of Europe to say to the Greek authorities that in exchange for the efforts you are making, you are going to get support from us. You don’t get support for free. That would simply lay the foundations for further imbalances and crisis. We have got instruments to provide that in exchange for clear commitments that they will meet their responsibilities.”
Fitch Ratings Warns Greece
Greece, Portugal and Spain are under pressure to address massive budget deficits which have been aggravated by the ongoing recession and billions in stimulus spending. Fitch Ratings warned that markets may not wait very long for Greece to address the sustainability of the nation’s finances. Fitch analyst Chris Price said, “They need to address those concerns now because ultimately the market won’t wait until it becomes blatantly obvious that the situation is unsustainable.” To add to Greece’s troubles Greek public sector workers say they will stage a one day strike on Wednesday. In Portugal the nation’s public administration workers union plan a one day strike on March 4th to protest a wage freeze. Some sources say austerity measures could prompt social unrest in Greece, Portugal and Spain.
