A euro zone and IMF safety net extended to debt-laden Greece boosted the euro and commodities on Friday but broader market reaction was muted as longer-term worries about fiscally vulnerable European economies persisted.
The deal offers Athens loans and cash but only as a last resort and can only be disbursed with unanimous euro zone approval.
It did not spell out how Greece’s debt burden would be managed in practice and failed to alleviate longer-term worries about Greece and other fiscally vulnerable economies in Europe such as Portugal and Spain.
The premiums investors demand to buy these countries’ government debt over euro zone German benchmarks fell modestly in a guarded reaction to the deal.
“The fact that there will be a mechanism in place reduces the risk of the euro zone breaking up,” said Johan Javeus, currency strategist at SEB in Stockholm. “But going forward the market will be focusing more on whether Greece will be able to deliver the austerity measures it has promised.”
Meanwhile, EU leaders embraced a 10-year economic renewal drive on Friday, calling for painful reforms to reverse years of sluggish growth and prevent a repeat of Greece’s debt crisis. The “Europe 2020” economic strategy is meant to force all EU nations on the path of sound public finances, job creation and sustained growth.
{{/usCountry}}Meanwhile, EU leaders embraced a 10-year economic renewal drive on Friday, calling for painful reforms to reverse years of sluggish growth and prevent a repeat of Greece’s debt crisis. The “Europe 2020” economic strategy is meant to force all EU nations on the path of sound public finances, job creation and sustained growth.
{{/usCountry}}The euro rose as much as 0.9 per cent to $1.3402 by 1146 GMT, rallying off a 10-month low versus the dollar as the Greece deal eased immediate pressure on the single currency.
But dealers later began to close out some of the bets they had made against the euro, pushing the currency up.
Dollar weakness in turn helped lift oil prices toward $81 and boosted gold.