Eurogroup gives green light on greek bailout extension
Syriza celebrating its election victory on Sunday 25th January Photo: Syriza (Facebook)
Greece currently has more than €300 billion of debt, but the recent election of anti-austerity party Syriza left its bailout in doubt, as the ruling party pledged to end its cuts and stand up to the ECB, European Commission and IMF.
A letter last week from the Greek financial minister, though, proposing an extension of their bailout while a new agreement was reached, was rejected by Germany. With the country's bailout set to expire this coming Saturday, the exit of Greece from the euro sparked uncertainty for the global economy. Indeed, there is no current plan of what to do when a country exits from the Eurozone.
A deadline of yesterday was given for revised reform proposals to be submitted by Greece. The proposals were ultimately submitted today, including plans to combat tax evasion and reform the public sector to generate cash. Now, they have been show the initial green light.
Parliamentary votes will now be conducted to officially approve the deal. While the head of the IMF said the proposals lacked "clear assurances" in certain areas, the stock market in Athens responded positively to the news, rising almost 10 per cent to a three-month high.
The agreement had "averted an immediate crisis," European Commissioner for Economic Affairs Pierre Moscovici told the BBC.
The crisis, though, is far from over. "It does not mean we approve those reforms, it means the approach is serious enough for further discussion," added Moscovici.
"The Eurogroup today discussed the first list of reform measures presented by the Greek authorities, based on the current arrangement, which will be further specified and then agreed with the institutions at the latest by the end of April," said the Eurogroup in a statement.
"The institutions provided us with their first view that they consider this list of measures to be sufficiently comprehensive to be a valid starting point for a successful conclusion of the review.
"We therefore agreed to proceed with the national procedures with a view to reaching the final decision on the extension by up to four months of the current Master Financial Assistance Facility Agreement."
Charles Purdy, CEO of Smart Currency Exchange, tells TheMoveChannel.com that the ongoing bailout discussions will overshadow the single currency.
“The euro’s future still seems gloomy, as the currency reached new lows again towards the end of last week. Despite positive data coming out of the Eurozone, the euro fell to a one-week low against the US dollar on Friday, as concerns over the Greek debt crisis continued to dampen demand."
Indeed, Monday saw the Swiss franc drop over 1 per cent against the US dollar, he notes.
"We are expecting key data from Europe in the week ahead, particularly from Germany, which includes consumer confidence, consumer price index and growth figures. All this should have some effect on the single currency. However, any impact from this data will surely be overshadowed by the ongoing bailout discussions between the Eurozone and Greece."
"If [politicans] are able to move forward in the latest set of discussions," he adds, "this should help the euro. If this comes in combination with positive data to suggest that the Eurozone economy is starting to recover, then this could be a welcome boost for the currency."