Lawmakers in Greece approved a deal for the country’s third bailout, which could unlock the country to receive new loans worth billions of Euros. The Eurozone finance ministers approved the first tranche of 26 billion Euros as part of the new bailout package which will enable to country to repay some of its debts and avoid a disorderly default. Eurogroup Chairman Jeroen Dijsselbloem, on Friday noted that the Eurogroup managed to resolve the differences in order to pave way to unlock the bailout funds to Greece. While this might seem good news for Greece, it could come at a considerable political cost for Alexis Tsipras and his SYRIZA party.
The total bailout funds amounts to close to $93 billion and comes after an all night debate by Athens where Tsipras had to rely on the opposition parties to garner the votes for the bailout package approval which comes under harsh austerity measures including spending cuts and raising taxes. Many politicians within the SYRIZA party have accused Alexis Tsipras of giving in to the creditor’s demands easily.
Most of the Eurozone national parliaments have voted for the bailout for Greece. Germany is expected to vote on the Greek bailout terms on Wednesday next week just a day ahead of the repayment to the ECB.
Certain sections of the Greek media are speculating that Tsipras could call for a vote of confidence on his government as early as August 20th, the same day when the Greece is expected to repay $3.6 billion to the European Central Bank. The new bailout funds will be disbursed over a three year period as the Greek government enforces the austerity measures outlined as part of the deal.
The Euro, single currency was largely boosted by the positive news from Greece last week as Greece and its creditors edged along with the negotiations. EURUSD gained 1.3% over last week despite the Greenback’s strength due to the Chinese Yuan devaluation earlier in the week.
Looking forward, the week ahead in the Eurozone is relatively quiet as far as economic data is concerned. Last week’s inflation and GDP numbers did not sway the markets much as data either largely fell in line with expectations or missed expectations by a small margin. However, there could be some volatility in the markets ahead or during the German vote on the Greek bailout.
For the EURUSD, the most important economic data will be from the US FOMC meeting minutes for July followed by the monthly consumer inflation data, which could see some positioning take place. For the FOMC minutes, investors will be looking forward to the meeting minutes in order to anticipate any potential signals from the Federal Reserve in regards to the timing of the rate hike. The consumer inflation data could however change the short term investor sentiment as inflation has remained stubbornly low and one that was also acknowledged by the Fed Vice-chairman Stanley Fischer in his comments early last week.