EU IMF Deal Gives Greece Little Respite
The EU IMF deal reached at last week’s EU summit gave debt ridden Greece little respite from high borrowing costs and exposed weakness in the EU. Greece will test financial markets with a 5 billion euro ($6.72 billion USD) bond issue. The bond issue fell short of previous Greek bond issues due to thin pre Easter trading and shorter bond maturity. The bond has a coupon of 5.9% which is twice of what Germany pays on a 7 year bond. Greece has been struggling with high borrowing costs which are making it difficult for the Athens government to finance its debts. Most analysts say that borrowing costs would be higher if last week’s agreement had not been reached. Despite the opaque agreement Fitch said its outlook on Greece remains negative. In a statement Fitch’s said “The (euro zone) statement was positive for Greece’ credit profile by enhancing its near-term financing options and flexibility as well as reaffirming the support of euro area member states for economic and fiscal reform in Greece. Nonetheless, the rating outlook remains negative because of continued uncertainty over the medium-term economic and fiscal adjustment, as well as the continuing lack of clarity over the fiscal financing strategy.”
Euro Zone Debt a Concern
Debt remains a concern throughout the euro zone. Many experts remain concerned about other eu nations in similar straits including Portugal, Italy, Ireland, and Spain.The euro zone’s fourth largest economy, Spain, could face a similar crisis soon. Unemployment in Spain is currently above 20% and Spain’s deficit accounts for 9% of the nation’s GDP. Many economists say that a crisis in Spain similar to the one in Greece could have a more devastating effect on the euro. Economist Simon Tilford of the Centre for European Reform stated; “Any economy regarded as having poor growth prospects is going to struggle to borrow at affordable levels.” Some experts warn that a breakup of the EU is possible. In some quarters the idea of forming a new currency bloc is gaining ground. The new currency bloc would be formed by Germany and northern European nations.
US Jobs Report Due Friday
Investors are waiting for Friday’s US Non Farm Payrolls report which is expected to show increased job growth in the US. The report is expected to show that US employers added 190,000 jobs this month. This would be the second time US employment figures have increased since the recession began in December 2007. Most currency experts expect the dollar hold recent gains.
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