As many had anticipated, the EU finance ministers approved today the second bailout of €130 billion for Greece. This bailout came after many hours of deliberations and after the EU finance ministers impeded their approval since last week. What does it mean for Greece?
The Good; Greece received the seconds bailout package; this shows that the EU leaders still have some faith in the Greek parliament and Papandreou to maintain the agreed upon austerity plan and implement the budget cuts.
The Bad; the austerity plan is directed towards making cuts such as raising the retirement age, firing government employees etc. but ECB and IMF don’t seem to acknowledge that there are two sides to this equation of pulling Greece out of its huge debt: cutting the fat and bulking up – the latter means spending money so that Greece will stop it’s economic slowdown. The problem is that EU leaders don’t seem to trust Greece to invest their money wisely; after all they barely trust the Greeks to implement the austerity plan. Therefore Greece will still face dire times in the years to come with no light at the end of the tunnel.
The Ugly; the Greek nation isn’t too happy with the recently approved austerity plan. There are still protests calling against it. After all nearly half of all young people are unemployed and the Greek GDP contracted by 7% in annul terms during the fourth quarter of 2011. The country is due to hold an election in April; this might jeopardize the commitment of many public officials to follow through on their promise. If eventually Greece won’t maintain the austerity plan it could erase the little trust left the EU has for Greece.
A Chain is only as strong as its weakest link – for the Euro Zone to continue at it’s current state with Greece as part of it, the EU leaders will eventually have to make the decision whether they will be able to trust the Greek nation to pull out of its recession and allow it’s Greek leaders to make monetary and fiscal expansions. Otherwise Greece will continue to dwindle and will pull along with it the EU. In that case EU leaders might as well make the hard decision of cutting their losses and pulling Greece out of the EU.
Currently major commodities prices are rising; the Euro to US dollar is also traded up:
Euros to USD exchange rate is currently traded up at 1.3249 a 0.05% increase as of 07:32*.
Nymex (WTI) crude oil price, short term futures (March 2012 delivery) is increasing by 1.53%, at $104.82 per barrel as of 06:11*.
Gold price, short term futures (March 2012 delivery) is traded at $1,743.70 per t oz. a $17.8 increase or 1.03%, as of 06:57*.
(* GMT)
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