Guest Commentary: ECB Member Doubts Greek Bailout Will See Light of Day
Ewald Nowotny of the ECB sees the Greek bailout deal as positive, but isn’t that certain that the deal will really happen.
Nowotny sees too much euphoria in the markets but points to the reasons it may fail. The euphoria in EUR/USD is settling. Will the losses accelerate?
As a member of the European Central Bank’s governing council, Nowotny was in the loop for the move to swap the ECB’s Greek bonds into ones that are immune to the Collective Action Clauses.
The current agreement is that the national central banks, such as Nowotny’s Austrian central bank, will transfer the profits to Greece, and help it reduce its debt. But, he doubted there will be a profit.
Greek Bailout Failure? The main reason that he saw as problematic for the deal to go through is the set of conditions awaiting approval in Athens.
“It has to be noted that there are still a lot of conditions that have to be fulfilled for it to become effective” … He noted that Greece is required to implement “this week” many of the actions it had promised in its first bailout package but not completed.
Greece must move fast, “if the rescue plan is to see the light of day” says Nowotny.
This doesn’t look good at all. The special report about the Greek endgame details many more reasons why this deal is bound to fail and it provides a guide to EUR/USD until the end of March.
Nowotny mentioned the forgotten Marshall Plan for Greece, which appeared in the July 21 summit but was buried since then. A Marshall Plan for growth is the only thing that can get Greece out of the big mess.
ECB President Mario Draghi has been quiet silent on the Greek bailout so far.
EUR/USD is dropping from the high levels it reached on Friday and is now back trading under 1.34, at a lower range.
For more on the pair, see the euro/dollar forecast.
By Yohay Elam, Forex Crunch
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