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European financial markets have given a muted reaction to the announcement of a second rescue package for Greece, with European shares edging lower on Tuesday and the euro little changed from Monday’s closing price.
Europe’s financial markets have given a cautious welcome to the announcement of a second bailout package for Greece, with European shares edging lower on Tuesday and the euro little changed from Monday’s closing price.
The euro stood at $1.3185 immediately before euro zone finance ministers secured an unprecedented $310 billion bailout deal for Greece early Tuesday, and soared as high as $1.3293 within minutes of the announcement from Brussels, according to the Agence France Presse.
However, it pulled back to stand at $1.3275 in London morning deals.
Meanwhile, leading European stock markets edged lower in early trading, with London’s FTSE, the Paris Cac and Frankfurt’s Dax index all down between 0.1 percent and 0.2 percent, according to the BBC.
Shares across Europe had risen on Monday in anticipation of an agreement on a bailout being reached. However many investors remain concerned that a Greek general election expected to take place in April will bring in a government unwilling or unable to implement tough austerity measures, according to The Wall Street Journal.
There are also reports that Greece may still require a third rescue package, as the forced austerity could result in debt levels rising, and the country’s debt restructuring could prevent it from ever returning to financial markets.
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Under the deal agreed in Brussels early Tuesday morning, Greece will receive loans worth more than $170 billion, money it desperately needs to avoid a chaotic default on March 20 when maturing loans must be repaid.
In return, Greece will undertake to get its debts down to 120.5 percent of GDP by 2020, and agree to an “enhanced and permanent” presence of EU monitors to oversee economic management.
And, while private holders of Greek debt have already agreed to a haircut of 50 percent in the face value of their bonds, they will now take losses of 53.5 percent, with a real loss of as much as 70 percent, The Financial Times reported.
Louise Cooper, a market analyst at BGC Partners quoted by the BBC, said few in the markets thought the latest package was a serious answer to Greece’s woes:
“This just puts off the inevitable. It’s the second deal in two years. You’re talking almost 20,000 euros per person [in Greece] in total bailout funds and even that amount has not solved Greece’s problems. That suggests the money has not been well spent.”
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