The Greek Parliament did its role by passing the second round of austerity measures demanded of them by the troika, and the ball now moves back into the court of the European finance ministers who are set to meet on February 15th.
From Bloomberg: “A total of 199 lawmakers voted in favor and 74 against, Parliament Speaker Filippos Petsalnikos said in remarks carried live on state-run Vouli TV. When, on Nov. 16, Papademos won a mandate from the Parliament to implement budget measures and secure the bailout of 130 billion euros ($172 billion) he received the support of 255 lawmakers in the 300-strong chamber.”
The austerity measures include about €300 million in cuts to pensions and a 22% reduction in the miniminum wage to €560 a month. Also around 150,000 government jobs will have to be sacked.
The austerity vote was accompanied by rioting with places of business around downtown Athens set on fire.
The problem from the financial markets point of view is the concern that Greece like the various times before that it pledged to carry out austerity programs will fall short and miss its budget deficit targets.
From Financial Times: “Yet almost 40 legislators from the socialist and conservative parties, the two remaining partners in his national unity government, were absent or voted against the measures, indicating strong opposition to structural reforms and cuts in wages and pensions.”
Again from FT: Now the package has been approved, the leaders of Greece’s two main parties, the PanHellenic Socialist Movement and conservative New Democracy party, have to make a written commitment to implement the programme fully, regardless of who wins a snap general election expected in April.”Euro-zone finance ministers need to have written guarantee’s from the 2 main parties that they will stick to the austerity measures after general elections.
Germany’s position has hardened of late, with Finance Minister Wolfgan Shäuble, saying that “promises are no longer enough.” Implementation is key. Therefore we must pay attention closely to the statement coming out of Germany in the next few days as we await the Feb 15th euro-zone finance minister meeting.
The news caused a gap higher in equities and in the EUR/USD as well as among higher yielding commodity currencies against safe haven rivals. That shows that the market is pricing in a positive resolution come Wednesday’s ecofin meeting.
For a technical analysis look at the EUR/USD see today’s technical update: EUR/USD Starts Week with 61.8% Retracement Pullback
Nick Nasad is an analyst, educator, and trader; and one of the main contributors to FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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