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Monday's key developments in "As The Euro-Zone Turns":
In a surprise, both European Union and Greek officials are starting to sing a similar restructuring tune, as Greece's budget deficit crisis extended into its second month. The EU said it is ready to propose a "framework" to help Greece overcome its debt crisis, Bloomberg News reported Monday. However, an initial package is not likely to include cash assistance.
Meanwhile, a Greek official said, "We are not looking for money, but for some support so that the spreads on our bonds become more logical," The Wall Street Journal reported Monday (subscription required).
The currency market, at least initially, took a cautious stance regarding any potential agreement on how to stabilize Greece, with the euro weakening about 1 cent to $1.3668 versus the dollar on Monday afternoon.
Monetary Analysis: A surprising stance by Greece. Historically, the stressed nation seeks a bailout that includes at least some cash, but if key EU countries can arrange a partial debt guarantee that lowers Greece's interest rate, that's as good as cash. The question remains, however: will the EU plan significantly cut Greek's 10-year interest rate, presently around 6.20%? In comparison, Germany pays just 3.15% to borrow money for 10 years. At this juncture, that's an unresolved question, but investors should also keep in mind that there is no urgency for an agreement: the parties have time to experiment to determine which restructuring package would be the most effective and appropriate; the likelihood of a Greek default is low.
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