Accord Reached Over Greek Bailout Package

Accord Reached Over Greek Bailout Package

An accord over a financial assistance package for Greece has been reached, according to European Commission President Jose Manuel Barosso, exiting from meetings this morning.

He nevertheless declined to detail the program to help the beleaguered nation, adding that the official announcement will come later in the day.

In the aftermath of the news, European Union President Herman Van Rompuy said that the EC will closely monitor the implementation of the Greece debt reduction plan, along with regular consultations from the European Central Bank and the IMF.

This morning’s EU Summit began several hours late after top euro area leaders insist on holding talks ahead of the meeting. The unveiling of a comprehensive assistance package to Greece is expected later today, at an 11 a.m. EST press conference.

Market participants expect leaders to take this opportunity to lay out an assistance package for Greek and other heavily indebted euro zone nations.

On a side note, German Vice-Chancellor Westerwelle said that the Greek assistance package was a certainty. He added that German taxpayers will not provide the country with a blank check.

Also, in an interview with Bloomberg News, Austrian government spokesperson Szemeliker said that an IMF assistance package is one of the options being considered for Greece although a final decision has not yet been made.

While it appears likely that an assistance plan will help the euro against major currencies in the short run, the long term repercussions on the currency are dire. Indeed a bailout of a euro zone nation constitutes a moral hazard to the European currency, and this stigma will likely take decades to erase.

The announcement from Barosso sent the euro higher by 28 pips to 1.3752 before heading back below pre-announcement levels. So far today, the cross has traded in a range of 1.3708 to 1.3801. Support lies at 1.3676 followed by 1.3586. Key resistance comes in at 1.3812 followed by 1.40.