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EU Unable to Work Out A Deal on Greece- Euro Under Pressure

Last updated 3/18/2010 2:19 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Euro tumbled more than 50 points in late Asian trade today after Greek officials stated that they were not hopeful about obtaining aid at the March 25 ^th EU summit and may have to turn to the IMF over the long Easter weekend in April. Premier George Papandreou told reporters in Brussels that he had not ruled out turning  to the IMF to help with financing needs. Up to now Greece has been able to roll over its debt through market means alone but it has had to pay punitive interest rates that are fully 300 basis points above German bunds. 

Greek government officials feel that Greece has already made considerable sacrifices by enacting a broad set of austerity measures and are not willing to incur a heavy debt service burden as a result of these higher interest rates. “Nothing is excluded,” said  Greek Premier George Papandreou when asked about IMF involvement. “If we realise that we will be borrowing at extremely high rates, there are other options. But we would certainly prefer a European solution.”

EU officials appear split over the matter with Germany the most resistant to a Greek bailout plan. Some German officials have even suggested that the IMF may be a preferred solution because it avoids the breach of EU’s no bailout clause. An IMF solution however would be viewed as a blow to European monetary sovereignty. Jean Claude Junker, the head of Eurofin group,, said, “If California had a refinancing problem, the US wouldn’t go to the IMF.”

The Greek issue continues to hover over the EUR/USD like a dark cloud. If the EU is unable to find a pan-European solution to resolve the crisis, the currency could weaken further on fears that many of the other Southern European economies may  be next as risk of fragmentation increases exponentially.   The pair broke the 1.3700 figure in pre-European trade and may test 1.3650 as the day progresses if the markets receive no reassurance from EU officials that a deal is being worked out.   

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.