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Tuesday's key developments in "As The Euro-Zone Turns":European finance ministers adopted a bailout framework for debt-plagued Greece, Bloomberg News reported Tuesday.
The plan represents the first time since the euro's introduction in 1999 that euro-zone governments have prepared a back-up loan facility for a fiscally-strapped member state, and it occurs after Greek officials passed €4.8 billion, or $6.6 billion, in budget cuts.
Both the bond and currency markets cheered the news. The interest rate on Greece's 10-year bond fell 17 basis points to 6.16% and the euro strengthened one-half cent to $1.3730 versus the dollar on Tuesday afternoon.
Monetary/Economic Analysis: Two pertinent points. First, investors should keep in mind that no formal request for aid has been made by Greece. Second, the euro-zone loan facility could be withdrawn if Greece does not follow-through with austerity measures.
That said, investors also need to keep in mind that the European Union is a $15.2 trillion economy, with the euro-zone comprising more than half of that commerce, about $11.5 trillion. Hence, the policy imperative (in business it's called a 'cost-benefit analysis') has to lean toward actions that will lead to systemic stability, while simultaneously getting Greece to change its profligate spending ways. And so far, euro-zone policy makers appear to be on the road to achieving that goal, much to the chagrin of those who saw a collapse of the euro, or the an imminent break-up of the euro-zone.
Monetary/Economic Analysis: Two pertinent points. First, investors should keep in mind that no formal request for aid has been made by Greece. Second, the euro-zone loan facility could be withdrawn if Greece does not follow-through with austerity measures.
That said, investors also need to keep in mind that the European Union is a $15.2 trillion economy, with the euro-zone comprising more than half of that commerce, about $11.5 trillion. Hence, the policy imperative (in business it's called a 'cost-benefit analysis') has to lean toward actions that will lead to systemic stability, while simultaneously getting Greece to change its profligate spending ways. And so far, euro-zone policy makers appear to be on the road to achieving that goal, much to the chagrin of those who saw a collapse of the euro, or the an imminent break-up of the euro-zone.
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