EU Summit to Take Place Next Week
Investors are waiting for the Upcoming EU summit next week and will be looking for signs that could signal the establishment of an EU based lending mechanism that would aid Greece’s troubled economy. Greece’s debt crisis has weighed heavily on the euro since 2009 and is causing a political rift in the Euro zone. Greek Prime Minister George Papandreou has indicated that Greece may seek aid from the International Monetary Fund if EU aid is not forthcoming. Michael Woolfolk of BNY Mellon in New York stated, “The tensions surrounding Greece are escalating. This whole IMF situation has become a game of brinkmanship and the whole uncertainty is undermining the euro.” . French President Nicolas Sarkozy and European Central Bank President Jean-Claude Trichet have warned that the EU may lose credibility unless European leaders agree on a lending solution for Greece. In Germany Chancellor Angela Merkel’s government is adamantly opposed to EU aid for Greece. Merkel told the German Parliament on March 17th that the IMF may be the sole solution to Greece’s debt crisis. Nobel Prize winning economist and Columbia University professor Robert Mundell said that the IMF should be a “lender of last resort” for Greece.
Papandreou Says Greece Will Not Default
Greek Prime Minister Papandreou has said that under no circumstanced will Greece default. Papandreou stated, “Let everyone be certain, Greece will not default, we will not let it default. Greece has a strong government and courageous people. We are returning to the road of economic stability.” Papandreou also warned that speculators are pushing up borrowing costs for the troubled nation and is seeking regulations to curb speculation. Papandreou said, “We are building alliances in and outside the EU. We are convincing our partners for changes to set limits to speculators. We are not asking anyone to pay our debts. We will do this by ourselves. We want to be able to implement all that we have announced and enacted calmly.” Experts predict that Greece’s debt to GDP ratio may hit 120% this year.
Kiwi Best Performer
In a rare piece of good news the Kiwi dollar hit its largest weekly gain on the Aussie dollar. According to Bloomberg the Kiwi has been the best performer last week against most major currencies. A report due next week is expected to show that New Zealand’s economy grew at its fastest pace in two years. Most experts believe that the Bank of New Zealand will raise rates sometime in June. Richard Grace of Commonwealth Bank of Australia. Stated, “Participants are starting to figure that, look, the Bank of New Zealand will raise interest rates in the middle of June according to their current policy guidance. This is why the New Zealand dollar is regaining some strength, because it was severely underperforming as the New Zealand economy went through a soft patch.”
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