Euro Zone Debt Crisis Continues
The Euro has been the main focus within the Forex market for a couple weeks now. Because of the Euro zone’s debt crisis, the Euro’s fate has been hanging delicately in the balance. But, according to the looks of things now, the Euro’s problems are not unsolvable. More specifically, bond auctions in both Spain and France have met a good deal of success, thus showing the world that the Euro is not as weak as it was currently believed. In these auctions, Spain achieved 20 percent of their annual needs as far as fund raising goes. The Euro rose to about $1.30 on January 19th against the United States’ dollar as a result of this.
The biggest worry of the Forex market is now Greece. Talks in Greece have been met with skepticism of whether or not the nation can repair its economic situation. The country is looking for a second bailout, but no decision has been officially reached that can grant Greece this privilege. Greece officials are scheduled to meet with the Institute of International Finance on January 23rd in order to help the beleaguered nation avoid defaulting on their promises. With the proposed bailout, Greece would receive funds from fellow Euro zone members as well as the International Monetary Fund and would escape from the immediate looming default.
Across Europe, the toll of debt is ringing loudly. While Greece might be the main problem, there are several other smaller situations that need to be taken care of in order to return the Euro to a higher level. Talks amongst finance ministers will be trying to increase investor confidence, both institutional and private. Without investments in the Euro zone community, defaulting on loans might become a very real situation. This is why the success of the bond auctions in Spain and France has been such good news.
Some of the biggest problems have been making absolute decisions over the correction mechanism that would help countries that strayed from their economic goals. While the talks have signaled long term improvements in the Euro, if a decision is not reached soon, those steps in the right direction will be erased and long term positive consumer sentiment will disappear.
By Friday, January 20th, the Euro had already given up some of the gains that it had made earlier in the week by falling down to $1.29. This might change drastically as the Euro zone nears a decision on the Greece situation.