EURUSD extended its fall half-way into the European trading session on Monday to touch a new four-month low of 1.2860, the lowest since January 19, weighed down by concerns over instability in Greece.
A German magazine wrote a story on Greece, with the headline “Akropolis Adieu, Why Greece Must Leave the Euro”, also used as the magazine’s front page cover.
The article was prompted by recent reports of increasing political instability in Greece, arising from their failure to form a coalition government after the May 6 elections. Greek citizens showed their disgust at tight austerity measures installed y the European Union and voted for parties that were anti-austerity measures.
However, this resulted in no one party winning a majority to head a government and so Greek leaders of the three parties that are in talks to come to try settle their differences on the issue of austerity measures.
A last ditch attempt on Friday failed and this increases the likelihood of another round of elections and putting Greece’s future in the euro zone at risk as stalemate on talks to form a coalition government raises the prospect that Greece will renege on the terms of its EU/IMF bailout. Many wonder whether Europe would be able to contain the negative effects of the split, and how average Greeks would fare on their own.
“I would be very careful in speculating that it would be a painless process without complications,” the head of Sweden’s central bank commented.
What was once an “avoid at all costs” scenario is quickly becoming an real possibility, as euro zone central bankers are starting to openly discuss the idea of “managing an exit” of Greece from the Euro.