Euro falls due to Greek bailout concerns

first_img Facebook Twitter: @NeosKosmos Instagram The Greek government on Wednesday insisted that its goal is to continue borrowing from the open market “under the best possible conditions”. Government spokesman Giorgos Petalotis, speaking during his daily press briefing, said Athens continues to view the recently created eurozone support mechanism as a major success and a possible safety net. “If necessary we will, of course, activate the mechanism.” Regardless of Greek Government attempts to ease the fear, the euro fell against the dollar on Thursday as investors speculated that debt-saddled Greece ultimately be forced to seek a financial rescue from the European Union and the International Monetary Fund. The single European currency slid to 1.3574 dollars down from 1.3656 late Wednesday in New York. Greece on Thursday requested discussions with the European Commission, the European Central Bank (ECB) and the IMF to finalise details of a multi-year financial assistance program should the country request activation of a “support mechanism” formulated by Eurogroup ministers last Sunday. In a letter to EU Economic and Monetary Affairs Commissioner Olli Rehn, ECB President Jean-Claude Trichet and IMF Managing-Director Dominique Strauss-Kahn, Greek Finance Minister George Papaconstantinou said Athens was seeking the talks in accordance with a statement agreed by Eurozone finance ministers. Financial markets have been on edge this week in the face of growing doubts that an EU-IMF rescue mechanism for Greece, under which Athens would be eligible for eurozone loans totalling 30 billion euros this year, would be enough to forestall a sovereign debt default. “There were reports, later denied, that Greece was planning to scale back or cancel altogether its proposed dollar-denominated debt issue due to a lack of investor interest,” said Nick Bennenbroek head of currency strategy at Wells Fargo Bank. The Greek foreign ministry said the government wants discussions with the EU, the European Central Bank and the IMF on the potential aid package agreed on last Sunday. While Greece insisted it was not seeking to activate the assistance pact now, Citi European Economics analyst Giada Giani said the talks were nonetheless significant as a “formal starting point”. The IMF announced it was dispatching a team of experts to Greece next Monday at the request of authorities to discuss a possible loan, moving the country a step closer to becoming the first eurozone nation to get an IMF bailout. If the Greek government seeks aid, the lenders may require tough economic and fiscal reforms in exchange. “These probably will go well beyond the tightening measures that Greece has put in place up to now, which may help reduce the deficit for 2010 but do little to tackle Greece’s long-term solvency issues,” Citi’s Giani said.last_img read more