By: Mike Campbell
No pressure. With the world’s largest economic block looking over their shoulder and the single European currency, of which it is a member, being forced lower, all eyes are on Greece.
The Greeks have recently come clean on the level of their deficit which is four times the permitted Eurozone level and public debt well in excess of the country’s GDP. The government of Prime Minister George Papandreou have inherited the problem and its cover-up from the previous administration, but it falls to them to resolve the problem and be seen to do so in a timely and credible manner.
The fact that the Greek government has just passed further austerity measures designed to €4.8bn has been credited with strengthening the Euro (or at least slowing its current decline) yesterday. Whilst the measures will be welcomed abroad, they may stir up further protests at home.
The new measures include a rises on taxes applied to fuel, cigarettes and alcohol; higher sales tax up 2% to 21%; and luxury goods. They also call for cuts in public sector pay; a pension freeze and a cut in holiday bonuses paid to civil servants. The Greek government has pledged to reduce the deficit by 4% this year to 8.7%. The move was enough to reduce the yield on Greek bonds slightly, meaning that the market has more confidence in Greece and its ability to manage its debt (the greater the perceived risk, the higher the bond yield and vice-versa).
No pressure. With the world’s largest economic block looking over their shoulder and the single European currency, of which it is a member, being forced lower, all eyes are on Greece.
The Greeks have recently come clean on the level of their deficit which is four times the permitted Eurozone level and public debt well in excess of the country’s GDP. The government of Prime Minister George Papandreou have inherited the problem and its cover-up from the previous administration, but it falls to them to resolve the problem and be seen to do so in a timely and credible manner.
The fact that the Greek government has just passed further austerity measures designed to €4.8bn has been credited with strengthening the Euro (or at least slowing its current decline) yesterday. Whilst the measures will be welcomed abroad, they may stir up further protests at home.
The new measures include a rises on taxes applied to fuel, cigarettes and alcohol; higher sales tax up 2% to 21%; and luxury goods. They also call for cuts in public sector pay; a pension freeze and a cut in holiday bonuses paid to civil servants. The Greek government has pledged to reduce the deficit by 4% this year to 8.7%. The move was enough to reduce the yield on Greek bonds slightly, meaning that the market has more confidence in Greece and its ability to manage its debt (the greater the perceived risk, the higher the bond yield and vice-versa).
The Euro rose by 0.6% against the Dollar, closing at 1.3698, but lost a little of its recent gains against Sterling to close at £0.907.