Greek deal will help calm markets
By Elena Becatoros |
March 27, 2010, Saturday
|
Print Edition
Print Edition
EUROPEAN leaders yesterday said their hard-won deal to rescue debt-ridden Greece after months of bitter wrangling will help calm jittery markets and stabilize the euro, which has been rocked by the fiscal crisis.
The initial evidence was mixed, however -- the euro recovered and Greek borrowing rates eased but European stock markets, with the exception of Athens' index, fell.
The bailout plan, hammered out on late Thursday by eurozone nations, sets out a system to rescue Greece if it finds itself unable to borrow. It would provide individual loans from other eurozone countries and funding from the International Monetary Fund.
But it sets out strict conditions for activating the mechanism, saying it could only be used as a last resort, and requires unanimous agreement of all 16 countries that use the euro.
German Chancellor Angela Merkel, who had vociferously opposed an immediate bailout for Greece, said she was "very satisfied" with the outcome.
"I think that it demonstrated Europe's capability to handle things and at the same time did something for the stability of the euro and for solidarity with a country that is in difficulty," Merkel said as she arrived in Brussels for the second day of the EU leaders' summit.
"For us, it is also important in the long term that the euro, which is such a success for peace and unity, remains stable. Yesterday was an important day for the euro," she said.
Although designed for Greece, the bailout program could also be used to help other vulnerable eurozone nations, such as Portugal and Spain. Both nations have seen debt soar after the global economic turmoil of the past several years plunged their economies into recession.
Initial market reaction was cautiously positive, with the euro rebounding from 10-month lows against the US dollar to US$1.3377 yesterday morning trading in Europe from below US$1.33 on Thursday.
The spread between Greek 10-year bonds and equivalent German issues -- a key indicator of market trust -- narrowed to 305 basis points yesterday, down from about 330 on Thursday morning. But the level remains high, translating to roughly twice Germany's borrowing rate.
Jean Claude Juncker, head of the eurozone finance ministers, said governments need to keep watching how currency and financial markets react.
"I personally think we took a good decision... and that the financial markets will be reassured," he said.
He said no amount of a possible bailout for Greece was agreed upon, but two diplomats said on Thursday that the total loans would be some 22 billion euros (US$29 billion).
The initial evidence was mixed, however -- the euro recovered and Greek borrowing rates eased but European stock markets, with the exception of Athens' index, fell.
The bailout plan, hammered out on late Thursday by eurozone nations, sets out a system to rescue Greece if it finds itself unable to borrow. It would provide individual loans from other eurozone countries and funding from the International Monetary Fund.
But it sets out strict conditions for activating the mechanism, saying it could only be used as a last resort, and requires unanimous agreement of all 16 countries that use the euro.
German Chancellor Angela Merkel, who had vociferously opposed an immediate bailout for Greece, said she was "very satisfied" with the outcome.
"I think that it demonstrated Europe's capability to handle things and at the same time did something for the stability of the euro and for solidarity with a country that is in difficulty," Merkel said as she arrived in Brussels for the second day of the EU leaders' summit.
"For us, it is also important in the long term that the euro, which is such a success for peace and unity, remains stable. Yesterday was an important day for the euro," she said.
Although designed for Greece, the bailout program could also be used to help other vulnerable eurozone nations, such as Portugal and Spain. Both nations have seen debt soar after the global economic turmoil of the past several years plunged their economies into recession.
Initial market reaction was cautiously positive, with the euro rebounding from 10-month lows against the US dollar to US$1.3377 yesterday morning trading in Europe from below US$1.33 on Thursday.
The spread between Greek 10-year bonds and equivalent German issues -- a key indicator of market trust -- narrowed to 305 basis points yesterday, down from about 330 on Thursday morning. But the level remains high, translating to roughly twice Germany's borrowing rate.
Jean Claude Juncker, head of the eurozone finance ministers, said governments need to keep watching how currency and financial markets react.
"I personally think we took a good decision... and that the financial markets will be reassured," he said.
He said no amount of a possible bailout for Greece was agreed upon, but two diplomats said on Thursday that the total loans would be some 22 billion euros (US$29 billion).
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