Good morning. The latest relief over the complex EU deal on increasing the EFSF firepower and 50 per cent write-off on Greek debts took a turn for the worst. No, this time the guilty party is not the much stronger economies of the eurozone objecting to near-endless cash supply to Greece, but by the bankrupt state itself. Greek Prime Minister George Papandreou has called for a referendum on the new EU bailout package. Unexpected move from a state that is at the centre of the present eurozone crisis.
If the Greek people do not want the latest round of measures, decided at last Wednesday’s meeting, to be implemented targeted at slashing the country’s debt-mountain, it will not be implemented, said the Prime Minister. “This will be the referendum: the citizen will be called upon to say a big ‘yes’ or a big ‘no’ to the new loan arrangement. This is a supreme act of democracy and of patriotism for the people to make their own decision … we have a duty to promote the role and the responsibility of the citizen,” he said while addressing the parliament. He would also seek a vote of confidence to seek support for further austerity measures. Greek media has already termed it as a huge gamble.
Nobel Prize-winning economist Professor Christopher Pissarides said if the parliament rejects the new deal, voting for which is due to be held in January, it’ll be disaster for Greece. A ‘No’ vote would mean Greece removed from EU and Papandreou stepping down he told Sky TV.
Papandreou’s socialist party is already under pressure domestically and he needs wider political backing for implementing the fiscal measures and structural reforms demanded by funding agencies. EU leaders had agreed to a second bail-out package of €130 billion and 50 per cent write-down on its enormous debt-burden last week to allow the country float through the present crisis.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1620
GBP/US$ – 1.6017
GBP/CHF – 1.4136
GBP/CAN$ – 1.6090
GBP/AUS$ – 1.5425
GBP/ZAR – 12.8424
GBP/JPY – 125.18
GBP/HKD – 12.4534
GBP/NZD – 1.9972
GBP/SEK – 10.5162
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EURO: Greece’s announcement took its toll on the common currency with the EUR/USD down 4.5 cents already. The GBP/EUR pair is nearing the four week high level and is trading over 1.16. UK GDP numbers are due today morning and all eyes will be on the latest economic data. Also UK PMI figures are expected today. Although the reading had hit 51.1 in September, analysts expect it to fall to 50 in October.
USD: Sterling came under pressure against the greenback, but managed to hold its Friday level and finished the day flat yesterday. UK housing price data is due today. Euro continues to slide against the greenback today over Greek PM’s announcement of referendum.
Elsewhere, US-China conflict broke out after the US blamed China of not opening up its financial services market. China had committed to open up the sector in order to gain access to the WTO.
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Have a great day
