Bundestag Approves Greece Bailout, Euro Fails To Find Footing
- German parliament votes in favor of approved reforms for Greek bailout
- ESM agrees in principle to bailout, mandates formal negotiations begin on MoU
- European Council approves €7.16 Billion bridge financing – funds transferred Monday
The Bundestag cleared the final hurdle in beginning formal bailout negotiations by approving Greek reforms in exchange for an €86 Billion euro-members package. Lawmakers voted 439-119 in favor for the deal shaped at last Sunday’s EU delegates’ summit. German Chancellor Angela Merkel stated ahead of the vote, “The alternative to this agreement would not be a ‘time out’ from the euro… but rather predictable chaos.”
The Board of Governors of the European Stability Mechanism ratified a request to grant Greece aid. The country’s creditors will thereby begin discussing a Memorandum of Understanding (MoU) to outline macroeconomic reforms and policy conditionality on the reported €86 Billion loan. EC Vice President Valdis Dombrovskis said in his statement, bailout negotiations would be between Athens and the European Central Bank, International Monetary Fund, and Eurozone (collectively known as The Institutions).
As of yesterday morning, the EU agreed in principle to a bridge loan for Greece’s short-term financing. Dombrovskis confirmed the European Commission has agreed to send €7.16 Billion to Greece by Monday. The figure will allow Greece to make the critical ECB bond repayment of €3.5 Billion, and clear arrears with the International Monetary Fund on €2.01 Billion for two, separate missed payments.
As of Friday morning, EUR/USD set its second consecutive monthly low in two days. Through the day, the EUR/USD traded as low as 1.0830 – a new monthly low for a pair that is down significantly on the year and has fallen dramatically over the past 15 months. Even after encouraging news on a Greek bailout, fresh emergency liquidity for Greek banks, and a bridge loan, the euro fails to find solid footing.
EUR/USD Dollar Chart