Good morning. As Greek PM George Papandreou’s gamble continues to puzzle and annoy the global economy, the man has managed to win the confidence of his cabinet on the proposed referendum on a €130 billion bailout package. Next, the ruling party will face a confidence vote on the floor of the parliament Friday, debate for which is due to start from today. It remains a surprise as to how Papandreou managed to convince his cabinet since many of the ministers have openly criticised his gamble. “I think this was the wrong decision and we must take it back. We must not risk our position in the euro,” one minister was quoted as saying.
In the interim, one lawmaker from the ruling PASOK party quit, further slimming Papandreou’s majority to 152. He would require 151 votes in the 300 member parliament to go ahead with the proposed referendum on the bailout package. “We believe the government will once again win a vote of confidence in order to proceed with its plans. We will not back down on anything we have to do to save the country,” said Angelos Tolkas, a government spokesman. Did Samuel Johnson say “Patriotism is the last refuge of a scoundrel”?
Questions are being raised over Germany’s role as well. Germany is said to have benefitted most by raking up trade surpluses with Greece. It shouldn’t have let Greece borrow so heavily in the first place, and then squeeze it by proposing drastic austerity measures that has caused widespread unrest in the country. However, the fact remains that Greece didn’t qualify to join the EU in the first place in 2003 and fudged data to gain entry.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1617
GBP/US$ – 1.5972
GBP/CHF – 1.4135
GBP/CAN$ – 1.6245
GBP/AUS$ – 1.5372
GBP/ZAR – 12.8252
GBP/JPY – 124.91
GBP/HKD – 12.4261
GBP/NZD – 2.0068
GBP/SEK – 10.5402
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EURO: The common currency continued to take the battering yesterday as expected. The GBP/EUR pair was close to the 1.17 mark and the better than expected 0.5% economic growth helped the cable further. However, the UK manufacturing PMI data fell below the 50.0 reading, indicating a contraction. However, the euro made some gains against the greenback later in the day after Serkozy and Markel said they remain committed to the bail-out deal finalised last week.
USD: Sterling slid against the greenback yesterday over Papandreou’s referendum announcement. The US stock market plummeted as investors ran for safer assets. The USD gained against major currencies, most against the Swiss Franc and the Japanese Yen.
Elsewhere, Reserve Bank of Australia’s 0.25% rate cut boosted the cable against the AUD. The South-African Rand and the NZD also lost ground against Sterling.
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Have a great day
