Euro: Will Optimism About Rescue Plan for Greece Persist?

The euro halted its downfall this week, which was caused by the concern about the Greece’s ability to deal with its budget deficit, amid the optimism caused by the announcement about the possible European Union government and the International Monetary Fund intervention to rescue Greece, but this optimistic outlook can be cut shot by the German resistance to the bailout plan.

Germany denies rationality to offer the loan at the below-market rates to Greece, insisting that the aid should be provided only at the market prices. As the market values are strongly influenced by the concern for the Greek debt, this demand may further worsen the market prices, which in turn will harm the prospect for Greece’s rescue even more etc., leading to the death circle and the collapse of the Greek economy. This news have put further strain on the confidence for the Greece’s ability to get out from the crisis, confidence which already has been shaken by the report that Greek debt rating, given by Fitch Ratings, tumbled to BBB-.

The reason for such pessimistic outlook may be the fact that the rescue plan by EU and IMF wasn’t clear enough to substantially support the optimism for the bailout. The Greek Prime Minister has admitted that Greece wouldn’t be able to deal with the budget deficit without the outside help.

EUR/USD closed this week at 1.3360 after it opened at 1.3493 and reached its weekly lowest level of 1.3282. EUR/JPY closed at 125.72, rising from the opening level of 124.73. EUR/GBP closed at 0.8733.

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