Greece Gets Bailout, Oil Prices Rise and US Jobs Progress
by Hiland Doolittle
After three days of intense meetings, European leaders have reached an agreement to provide aid to debt-ridden Greece. European Union President Herman Von Rumpuy announced that an agreement had been reached but offered no details. World market reaction was mixed as uneasiness loomed over the future of other euro zone members.
Von Rumpuy added that provisions of the plan would be released early next week. The aid targeted for Greece would be the first bailout of a Euro zone member since the currency was introduced 11 years ago.
The key players in the agreement were Von Rumpuy, European Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet, France’s Nicolas Sarkozy and German Chancellor Angela Markel. First reports indicated that member nations would make voluntary contributions to aid the troubled nation.
Following Von Rumpuy’s announcement, the euro rallied against the dollar, but almost immediately began to retreat as other factors evolved. Market analysts fear Greece may be the tip of the iceberg in the Euro zone. Italy, Spain and Portugal may well be the next countries in need of assistance. The stakes are high as the value of the euro rests on the stabilization of these stressed economies.
The EU has pressured Greece to enact austerity measures that would lower the country’s deficit, which is currently 12.7% of gross domestic product. That ratio is four times the limits accepted by the EU. The country is now in the midst of a national strike in protest of the Prime Minister’s new austerity measures.
Greece needs to find 53 billion euros, about $75 billion, to cover its deficit and refinance debts. National debt is expected to grow by more than 290 billion euros this year alone.
Oil Turns Up
The announcement of a Greek rescue plan from Brussels led to a rapid increase in oil prices, settling on $75 per barrel. As the euro gained on the dollar, the International Energy Agency released a report saying that oil demand would grow by 120,000 per day creating an average output of 86.5 millions barrels per day.
This announcement confirmed U.S. forecasts calling for an increase of 1.2 million barrels per day in 2010. The U.S. Energy Information Administration projects that oil prices will top out at $81.00 per barrel before year’s end.
The bailout of Greece impacts risk markets by steadying the euro zone. Commodities markets, like oil, all rose sharply on the news. Demand for oil has received a boost with the two-week long blizzards and record snowfall experienced throughout the eastern seaboard of the U.S.
The American Petroleum Institute said crude oil inventories rose by 7.2 million barrels last week. Gasoline inventories also rose b 1.6 million barrels.
Despite Job Progress, U.S. Equities Continue Slide
Despite progress in Greece and a surprisingly improved jobs report, U.S. equity markets headed lower at opening. Skepticism still prevailed over Greece and the overall stability of the euro zone.
New unemployment applications decreased by 15,000 last week, but even that news could not stop the recent slide. 465,000 Americans filed new claims last week. President Obama did not accept the unemployment numbers well, saying that American recovery is predicated on substantial job progress.
The market reacted strongly to Federal Reserve Chairman Ben Bernanke’s announcement that the Fed would begin tightening the country monetary policy by removing cash from the financial system. Bernanke further added that the discount rate charged to banks for emergency loans will rise. The Federal Reserve’s pullback from support made for a jittery marketplace.
Tags: Euro, greece, oil, unemployment
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
