Another day, another dead end for Greece as a resolution looks like it will never happen. With the Troika’s plans on the table, the question of what to do to resolve the crisis seems to be taking a political stance than what the correct course of action should be. With impending qelections, Samaras’ New Democracy is looking for an April election whilst the previous premier’s PASOK party wants more time to allow reforms to take place and have the desired effect. Amongst this political backdrop, social and union unrest are never far away and Greece’s two largest unions have protests scheduled for today. All of this is clearly unwelcomed by the market who have effectively priced a lack of resolution in to the markets in the short term. Long term implications however are somewhat different. With the Greek recession moving in to its fifth year, disorderly default on its €14.4bn bond payment imminent and no credible resolution in sight, the macroeconomic consequences will be severe, not only to the Euro zone and it’s currency, but the wider global economy.
Another week and yet no clear resolution in how the challenge of Greece will be tackled. EU leaders EU gather in Brussels this afternoon to discuss once again, an accord to deal with the wider implications of the Euro zone crisis but the Greek tragedy is likely to take centre stage once more.
A relatively light day in terms of calendar releases helped to spur on the appetite of risk as the US Dollar lost more ground yesterday following the Fed’s announcement that interest rates would remain low until late 2014.
All focus was on the accompanying statement from the Fed’s policy meeting yesterday and it couldn’t have been more unambiguous. Interest rates are now likely to remain where they are until the latter part of 2014, pushing back the mid 2013 target that had been discussed for much of last year. Asset purchasing however was the hot topic in Bernanke address as he cited that action would be taken if unemployment remained ‘elevated’. Whilst the level has dropped to 8.5% recently, it still remains unsustainably high and as consumer spending accounts for approximately 70% of the economy, more will need to be done if this doesn’t show signs of improvement in the coming months.
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