Euro steadies as Greek euro exit fears calm
Originally published May 9, 2011 at 3 a.m., updated May 9, 2011 at 4:21 a.m.
LONDON (AP) — The euro steadied Monday as a string of official denials calmed investor fears of a Greek exit from the the common currency.
It became increasingly apparent, however, that Greece will need to ask for more money or easier terms for paying back a 110 billion ($159.51 billion) European Union and International Monetary Fund bailout package it was given in May.
“We think that Greece does need a further adjustment programme,” Eurogroup Chairman Jean-Claude Juncker said after a Friday evening meeting with the Greek, French, German, Italian and French finance ministers, along with the EU’s monetary affairs commissioner Olli Rehn and European Central Bank President Jean-Claude Trichet.
Officials vehemently rejected a report from German magazine Der Spiegel that the country was seeking to exit the eurozone and bring back the drachma. Greek Finance Minister George Papaconstantinou said Greece was working on what to do over the coming two years given that the markets appear closed.
“In essence this will surprise no one; it had already become apparent that Greece probably cannot meet its debt obligations over the next couple of years without further assistance,” said Jane Foley, senior currency strategist at Rabobank International.
“Rather than return to the market next year as the original bailout has assumed, is now seems fairly likely that Greece will instead ask for more funds from the EU,” Foley added.
There were concerns in the markets that the EU’s policymakers and institutions are once again struggling to keep up with broader market developments. The markets are clearly of the view that Greece will have to restructure its debts in some form or another, voluntarily or involuntarily.
At present, the eurozone rules don’t allow for a restructuring until 2013 at the earliest.
“The chain of events is increasingly proving the limits of the EU’s muddle-through strategy,” said Christian Carillo, an analyst at Societe Generale.
By early morning London time, the euro was up 0.3 percent on the day at $1.4416. In late European trading Friday, the single currency slid to a low of $1.4306 from around $1.45 before the euro exit speculation mushroomed.