Binary Corner
As Lithuanian president Prime Minister Algirdas Butkevicius withdrew a crisp new 10 euro note just after midnight on 1st January, fireworks erupted and people reportedly cheered. You have to wonder why. There is an undeniable excitement with new beginnings and few will begrudge Lithuania’s enthusiasm as they become the 19th nation to adopt the euro.
Still, with the Eurozone still lagging its principle trading partners and political uncertainty in Greece, it will be interesting to gauge the mood of the people in 18 months’ time. If the first two trading days of 2015 are anything to go by, the euro could be in for a rough ride, it dropping in value by 1.5% in just 48 hours.
EUR/ USD As Lithuania enters the euro, so Greece may be heading to an exit.
“There has been speculation that German Chancellor Angela Merkel is now more relaxed about the prospect of a Greek exit.” There has been speculation that German Chancellor Angela Merkel is now more relaxed about the prospect of a Greek exit. Such thoughts have been denied in public - they have to be after all to maintain European ‘solidarity’ – but the prospect of a ‘Grexit’ does seem to be inching closer to reality.
Greece should never have entered the euro. This much is well documented and evidenced by the country’s problems since the eruption of the euro crisis. Using complex financial arrangements and sky high projections, Greece was able to bluff its way into the euro club. The country was “gilding the lily” on a massive scale and is still now paying the price for its excesses. Except it hasn’t technically paid the full price and here we get to the heart of the argument. Greek debt has taken many ‘haircuts’ and been provided with many extensions by the Troika (ECB, IMF & EU). Incredibly, Greece is currently paying 2.4% on its debt, while Germany is paying 2.7%. Yet even with these conditions, the impact on the Greek population has been particularly hard, with a number of brutal cuts made to the social fabric.
74 | www.financial-spread-betting.com | January 2015