Thursday saw further heated developments over the current situation in Greece, with the newly elected Prime Minister Alexis Tsipras rejecting the European Union’s policies of severe austerity, and the country’s finance minister entering a war of words with his German counterpart.
Currently, the situation in Athens is a dire one. The cost of borrowing has rocketed along with a sharp decline in the value of bank shares, following the European Central Bank’s decision to end its backing of Greek banking institutions. The prime minister has insisted that he will rectify the situation, but without direction from the EU, and without going back on previous agreements.
Tsipras’ plan involves ending the current bailout program when it finishes its course at the end of February, alongside a reversal of a variety of measures taken by the previous regime. These measures are mainly unpopular ones that should help win further support of the Greek people.
Clear Act of Coercion
Now that the ECB is no longer supporting the Greek banks, it is up to Greece’s own central bank to prop them up, but this is of course a major task, and the markets have quite clearly responded. One major index of Athens banks plunged by almost a quarter on the news, and hasn’t really recovered all that much.
There’s very little chance of lending from elsewhere, and the tone from government ministers suggest that they believe the decision is a clear act of coercion. There’s some serious friction between the new Greek government and the rest of the Eurozone.
Clash of Personalities
The initial meeting between new Greek finance minister Yanis Varoufakis, notable for his wearing of casual attire, and German minister Wolfgang Schaeuble was frosty at best. The two were split across all issues, and following Schaeuble’s resolution that the two had agreed to disagree, Varoufakis went on record to say that not even that happened. References to the Nazis certainly did not help proceedings.
In terms of the markets, these developments don’t appear to be having a major effect on the euro itself. For regular updates, make sure that you’re close to a broker like Think Forex, but the general long term fundamental outlook for the currency is weak against the dollar, but it seems as though Greece’s further turmoil is expected at this stage, and is unlikely to have any real influence.