Greek's Bailout Saga - To Be or Not To Be

Deliberations about Greece’s next round of possible bailout tranche will conclude today- 20th November, 2012; wherein possible ease on pressure could be found in EUR/USD as topics on lowering the debt-ratio (amount of debt held on GDP by the economy…where lower debt is positive for the currency) or extending the dates on debts that is to be re-paid by Greece.

This meeting is fairly important as Eurozone Finance Ministers are meeting up determined in extending the amount of time that is required for bridging the gap of the deficits, which would help the reduction of these deficits by EUR 32.6 Billion till 2016; moreover delaying the decision of Greece bailout of EUR 31.5 Billion.

So why is there a high uncertainty in the market today…awaiting for results on the meeting?

Yes, out of the total EUR 164.5 Billion the IMF contribution is only just above 1/6^th of the total which is about EUR 28 Billion…however what’s important is that its not the meeting that the market is concerned about but the clash with the IMF Chief who is reluctant in extending the loan repayment deadline by 2 years. Earlier it was agreed that Greece would re-pay the debt with 4.5% as surplus on its GDP by 2014; however Euro Zone is reluctant on rigidity of IMF and it would not accept the 2014 deadline.

The Saga of trouble in Greece…

It has been confirmed by the Greek Prime Minister Antonis Samaras where he stated that his government will run out of money by mid-November if it fails to secure the loan installment. Now Two things remain that would result in either the EUR/USD run-up on the upside or another falter towards 1.2650 levels.

   1)  The amount of loan is required by Greece and that is for sure and therefore a positive vibe by allowing another tranche of aid by the Euro Zone could be provided there shall be no restrain by Germany which all-in-all is reluctant to provide more amounts towards its bailout program. So another round of bailout package “Which we are highly expecting” should boost EUR/USD higher.

   2)  The extension: Even though IMF maybe reluctant in extending the deadline, the EURO Zone could intervene by providing more loans (but again Germany would be reluctant in the same as it contributes the highest). So what one can expect from IMF Chief is that even though “IF” and that a BIG “if” it supports in extending the loan repayment it shall ask for additional surplus in its deficit on GDP from current 4.50%.)

   On one end IMF is unlikely for an extension with Germany and even UK reluctant in further amount of spending by the Euro Zone members…But what we anticipate is that an Extension could be achieved with a certain amount of bailout to be awarded by the Euro Zone with revised terms and conditions and thus possibly should drive the market higher…wherein they may overlook on the terms and conditions laid on it.
     




 Report By
xDirect India
www.xdirect.in