Remember last week? The big test was two votes by the Greek Parliament on a new austerity package. Pass that, the Greeks had been told or we won’t give you the $17 billion you need to avoid defaulting on your government debt in August. So the Greek’s voted to cut their budget. But turns out that only moved the crisis from worry over a default in August to worry over a default in, well, July.
Today the Greek parliament passed legislation to implement the austerity package it approved yesterday. That means the Greek legislature has now passed both bills that the European Union, the European Central Bank, and the International Monetary Fund said were required before the troika would pay out the money Greece needs to avoid a default in August.
Today, June 29, Greek Prime Minister George Papandreou won the first vote on a new austerity package designed to 1) keep the cash flowing from the International Monetary Fund, the European Union, and the European Central Bank so Greece avoid a default in August, and 2) win European Union approval of a second rescue package designed to get Greece to 2013 or 2014.
As of 11:30 New York time on June 28 the euro was up 0.54% or 0.7 cents to $1.4365. The euro should be climbing if the market believes Greek lawmakers will pass the package of tax increases, budget cuts, and asset sales. But it would be up significantly more if the vote weren’t likely to be so close.
Members of the Greek parliament are to vote on June 29 on a five-year austerity plan that the European Union, the International Monetary Fund, and the European Central Bank have demanded before they will deliver the next $17 billion payment to Greece. To avoid default Greece needs $9.4 billion in August to pay off bonds that mature that month.
My suspicion is that stocks wouldn’t be down so much today if they hadn’t been up so much on June 21. So far, today’s 1.1% decline in the Standard & Poor’s 500 amounts to profit-taking on the June 21 move up to 1296 on the index. A 1% drop on today’s list of bad news is, well, actually rather modest.
The votes have been counted in Athens: The government of Prime Minister George Papandreou has won a vote of confidence with 155 votes in the 300-seat Greek Parliament. His prize? A chance to sell a deeply unpopular austerity package crucial to a second rescue package in a vote now scheduled for June 28.
If Friday was a day for EuroZone leaders to show that they weren’t willing to throw Greece and the euro to the wolves of political expediency, the weekend was a time for demonstrating how tough they would be on Greece.
German Chancellor Angela Merkel seems to have blinked. In a joint press conference with French President Nicolas Sarkozy in Berlin today she indicated that Germany would accept a deal on a new Greek rescue package along the lines of the 2009 Vienna Initiative.
