Tag Archive | "New Democracy"

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Greece Government Receives Threats

The leader of New Democracy, Greece’s conservative party, won Sunday’s election and was immediately charged to align a functional parliament that would support the party’s pro-bailout stance. The vote was interpreted as support from the populace for Greece remaining in the euro zone and operating under the single currency.

All the euro zone nations offered plenty of support prior to the election. The tone was conciliatory and suggested that the 17-member euro zone would work with Greece to ease the tight austerity and extend the terms of the bailout that has fueled Greece’s 5th recession and 22.5 percent unemployment.

Germany went as far as taking out a full page add in the nation’s most well read newspaper.  The ad was a plea to voters to support the New Democracy.  The voters were not pleased with the tone of the article but pushed New Democracy over the top.  The party expects to announce a controlling alliance with the Socialist Party, PASOK.  This is the same coalition that has controlled Greece for decades.

On Tuesday, New Democracy’s top gun, Antonis Samaras, is expected to announce the creation of a government that will be able to carry necessary parliamentary rule to support the bailout. World markets opened on the up and the euro had a short rally before the nations that had seemed amenable to modifying terms of the bailout began to renege on their pre-election overtures.  Germany’s Chancellor, Angela Merkel was quick to stress the need for Greece to strictly follow the terms of the original agreement. Jean-Claude Juncker, former head of the European Central Bank and current leader of Eurogroup, backed Merkel’s puzzling policy reversal.  Juncker said that some conditions might be eased but that there could be no major changes to the bailout package.

The euro zone and Germany in particular has been criticized for austerity cuts that make it impossible for Greece’s 219 billion GDP to grow. Unemployment for young workers exceeds 30 percent.  Pensions and wages have been trimmed significantly.  If the euro zone and Germany do no offer some easing, Greece is doomed.

Combining this bitter reality to the crisis in Spain turned global markets into a late day tailspin. The euro touched briefly at $1.2601, fell to $1.2580 before closing at $1.2591. US analysts were quick to note that Spanish 10-year bonds crossed the 7.00 percent yield mark. There is a lack of confidence in the economies of Spain, Greece and Italy and investors are finally sensing the dysfunctional theater of operations. At the G20 in Mexico City, President Obama is pressing Germany to develop a long-term solution for the region. Whatever appetite international investors may have had for euro zone investment is stalled. Several forex experts have predicted the euro will fall to par against the USD before the end of 2013. Most of these investors also believe the euro zone will continue to shed members very quickly if Spain does not stabilize. This is bad news for the USA whose biggest importer is Europe.

In addition to PASOK’s cooperation, a smaller, left wing party known as Democratic Left has thrown its support behind New Democracy. It appears that the euro zone is prepared to let Greece kick the can down the road until the economic powers in the region set a course that benefits them. This is not the long-term arrangement international investors hoped to see. Once again, the political instability in the region is playing against the welfare of the troubled economies. Without pressure from the international community, Disaster looms.

In a race that went down to the wire, the conservative New Democracy party finished just ahead of SYRIZA and has begun talks on a new government. It is expected to form a coalition with the Socialist PASOK party, meaning that Greece would continue to be governed by the two parties that have ruled for decades and led the country to economic disaster.

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Euro Zone At The Edge

The euro zone contagion is sweeping through the northern sector of the euro zone. The euro zone economy and especially the zone’s banks are under tremendous pressure.  Jittery investors have been listening to numerous optimistic plans but are tired of waiting. Media driven markets have been extremely volatile.

In the wake of monumental challenges and more surprising developments, the Euro Zone moved closer to collapse on Wednesday.  As the day unfolded, France received a warning from Fitch, one of the three major credit agencies, as Berlin was forced to retain half of its 6 billion euro bonds.

Below is a summary of Wednesday’s bone crushing events. 

  • German bond offering retains 50 percent of a 6 billion euro bond offering after investors turned away from the offering. 
  • German 10-year bonds averaged a yield of 1.98 percent. 
  • Several euro zone newspapers reported that Belgium was pressuring France for additional funds after the 90 billion euro bailout of Dexia, the failed Belgian bank.  
  • The role of the ECB continued to be a point of disagreement between France and Germany, the euro zone’s two largest economies. 
  • Luxembourg’s Prime Minister, Jean-Claude Juncker, voiced support for the sale of euro zone bonds. 
  • Angela Merkel, Germany’s Chancellor, sent a red flag warning to New Democracy, Greece’s conservative political wing that it was time to sign the austerity pledge or risk the next scheduled tranche. 
  • Merkel affirmed Germany’s position that the euro zone bailout find be leveraged. 
  • A leak from Germany’s second largest bank, Commerzbank, indicated that the bank needed capital. 
  • New industrial orders for the euro zone fell to their lowest level since December 2008. 
  • In September, orders for capital goods fell far short of projections.  Orders for new machinery fell by 6.4 percent in month over month sales.  Analysts had expected a 8.0 percent increase. 
  • All sectors of the Eurostat index were red.  In Italy, orders fell9.2 percent.  In Spain the decline was 5.3 percent.

By Wednesday morning, the euro turned sharply down, nearing the $1.33 mark.  Analysts projected the euro would bottom at $1.29 before the end of the year.

On Tuesday, the IMF reached out to countries with solid practices that may be caught up in the euro zone crisis.  This new lending instrument will be prepared to respond rapidly.

Germany And France At Odds

As Fitch reported that France’s AAA credit rating was in jeopardy unless banks raised their capital limits. Standard & Poor’s said that Germany may now finally understand the gravity of the situation. 

However, a CNBC report suggested the Germany may be looking to form its own union with other, select European Union members.  Merkel was forceful in denouncing the concept of the euro zone bonds.  She has also refused changes to the core principles of the European Central Bank (ECB).  Her resistance would eliminate any quantitative easing.

Quantitative easing is a position that Nicolas Sarkozy has pursued.  The difference in opinions has caused the two countries to break ranks.  On Wednesday morning, Sarkozy said the possibility that Germany would be forced to cross-collateralize euro zone debt.

Merkel’s support of the euro zone has backtracked.  If France’s credit rating declines, it could very well cause the breakup of the euro zone.




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