The Euro’s fate now depends on the upcoming Greek parliamentary vote on Wednesday when lawmakers will vote on a five-year austerity plan put together by the EU-IMF-ECB as a condition for Greece receiving further financial aid. Greek Prime Minister George Papandreou survived last week’s confidence vote but the question now arises whether he and is newly formed government will be able to pass this next hurdle.
If Papandreou fails in passing through these austerity measures, Greece is in danger of defaulting on its debt as the government will be unable to cover 6.6 billion euros ($9.4 billion) of maturing bonds in August.
The unpopular austerity measures include imposing higher taxes, spending cuts and privatization such as government assets sales, before the country can receive its fifth tranche of aid totalling 78 billion-euro from last year’s rescue package consisting of 110 billion-euro.
Concerns are growing that the Greek sovereign debt crisis will linger longer and risk contagion, to affect other debt ridden peripheral nations such as Portugal and Ireland, and this makes market jittery. Last week the Euro plunged to a record low against the Swiss franc. German bonds rose for a third consecutive week and European stocks fell for an eighth, the longest stretch of losses since 1998.
“We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread,” billionaire investor George Soros, said this weekend in Vienna. “The financial system remains extremely vulnerable.”