BarroMetrics Views: The Greek Bailout
The immediate reaction to the plans for Greek Bailout was a weakening of the US$. But just what did the plan say? It provided for:
- Greece is to borrow from the markets what it needs to pay its debts.
- If Greece is unable to do this, the EU and the IMF will provide what is needed.
- This advance is to be used only ‘as a last resort’ and requires the unanimous agreement of all euro-zone members.
The text did not elaborate on what event would qualify as a ‘last resort event’.
For me, the text represented a victory to the pro-German camp which did not want to come to the rescue. The French camp wanted a definitive bailout package and non-involvement by the IMF. They clearly lost on the IMF issue and in my view, lost on the bailout. There is nothing in the text to suggest that Germany must agree to a bailout should the need arise.
The text was little more than a spin document whose effect was aimed at lifting the EUR.
The immediate effect on the EUR was positive. But the real test will come on Monday. My weekly video outlines some technical levels that can serve as benchmark in Monday’s price action.