Euro Exchange Rate is Safe For Now as Greece Secures 2nd Bailout

April 30th, 2012

The euro exchange rate is safe for now, as Greek Prime Minister Lucas Papademos wins parliamentary approval for yet another international bailout, which will keep Greece from collapse for the time being. The foreign currency market had better not hold its breath; however as the first bailout was just a chip in the iceberg for Greece’s debt troubles. The deal is to the tune of nearly 130 billion euros (over $170 billion is US dollars).

The vote came as 213 representatives expressed favour for the bail out, versus 79 against the move. The legislation will move the country that little bit closer to its general elections, which could happen as early as April 2012. In order to get even close to this bailout,Greecehad some serious financial restructuring to sort out, by negotiating the wiping of a 100 billion euro investor slate – the biggest in history. This was one of the many conditions of the bail out terms.

The first bailout was granted in 2009 and was closely followed by bailout requests from Ireland and Portugal, many political and financial leaders believe it will give fresh hope for the euro exchange rate and potential for overall euro recovery.

Other demands made on the Greek Prime Minister were steeper spending cuts, including pay cuts and pension reductions. The decision caused public outrage and culminated in riots in the countries capital city Athens on February 12th  when the agreement was passed in parliament.

The first aid package granted to Greece was during May 2010, not even 2 years ago, the figure was a staggering 110 billion euros, at a time when getting the best exchange rate for euros was at an all time low. Many ask why this bailout was not enough to secure economic recovery, one of the simple answers is that the then Prime Minister George Papandreou, failed to adhere to the requirements and terms of the bail out that were put in place to policeGreecein its economic recovery. The situation got worse as a result of the Prime Ministers failure to adhere to ‘the rules’ and the country simply sank further into recession which has ultimately led to the second bailout.

If Greece is to avoid further debt restructuring and additional funding from other euro countries, who are getting fed up with Greece’s accident prone behaviour, it will find itself struggling to get a third bail out. It seems the euro exchange rate is safe from Greek destruction for now.