Weekend Developments
- Greek parliament has enough votes for passage of new austerity plans
- Major budget reductions including pension payments, reduction of minimum wage by 20%
- New plan designed to reduce budget deficit by 3%-6% in 2013
- PM Papademos: sees Greece exiting crisis in 2 years, plan will have short term impacts
Risk correlated currencies rallied this morning as Greek politicians passed a new austerity package that will clear one more obstacle to the next tranche of bailout payments from the EU and IMF. Although private sector involvement on older Greek debt has yet to be decided upon, markets are welcoming today’s vote as a step towards improvement in the Greek and European economies.
The Euro gained this morning versus the dollar and yen in low liquidity conditions before the Sydney markets opened. Passage of the austerity plan, although with longer term implications of bringing Greece back to financial stability by reducing spending on social welfare programs estimated to save around EUR 9 billion per year, Greece will also receive aid before its next EUR 14.5 billion bond payment on March 20th. At the time of writing, yield currencies New Zealand and Australian dollars led gainers on indications that Greece is taking steps away from a possible disorderly default.
--By David Liu, DailyFX Research
