Greece is going to dominate world markets this week, making for some nervy trading on sharemarkets and in currencies and commodities.
After its worst weekly performance against the dollar since late January last week, the euro faces another five days of being rattled as traders try and assess if the lingering doubts over Greece and the European Union’s attitude to an assistance package, will be ongoing.
Greek prime minister Papandreou said on Saturday that "Greece will not default; we will not let it default. Greece has a strong government and courageous people. We are returning to the road of economic stability."
The market will be wanting to see Greece finally get a financial assistance package from fellow eurozone members at a European Union summit on Thursday and Friday.
The euro had its worst week against the greenback since January.
The euro fell about 1.2% against the greenback last week, helping push the US dollar index up by 0.9%.
The Australian dollar eased to around 91.509 USc after hitting 92 USc earlier in the day in Asian trading.
Gold, oil and other commodities were weak on Friday.
The US dollar will be a major beneficiary this week, as it was on Friday.
A factor to watch out for will be the impact of the healthcare vote in the US Congress overnight.
It will be the make or break moment for President Obama.
But should a credible package be hammered out then the greenback might come in for some market scepticism of its own and end the rally that started late last year.
Greece has said that it might have to turn to the International Monetary Fund for help.
After opposing the notion, Germany is leaning towards involving the International Monetary Fund for domestic political reasons (getting the IMF involved will mean no formal, direct German financial aid for Greece, which would violate the ‘no bail-out’ clause of the European monetary system agreement).
If Germany maintains this stance this week, or makes the hints into actual policy, this could signal that a mechanism has been created to help Greece (and then other troubled eurozone members in Portugal, Spain and Italy).
Germany had been strongly opposed to IMF involvement (the French do not like it either).
IMF involvement will confirm that Europe is unable to regulate its own economic and monetary union, but it would reassure financial markets because the Fund has a higher credibility than the EU or European Commission does in organising financial assistance to countries.
German Finance Minister Wolfgang Schaeuble said in a weekend newspaper inquiry that Germany will agree to European countries providing bilateral assistance to debt-stricken Greece.
And he also said Greece has the legal right to seek IMF assistance.
That sounds conflicting, but it’s an impression Germany has been projecting since Thursday of last week, for domestic political reasons.
France is still dismissive of IMF involvement.
Other reports said Europe remained split over aiding greece and a role for the IMF.
In London this week, the last budget before the national poll is now expected in early May.
Chancellor Alistair Darling is expected to use the Budget to signal the government’s support for a global bank tax, although only as part of an international agreement.
London papers said Mr Darling will detail options in Wednesday’s statement but will insist money raised should go into Treasury coffers and not be used for an insurance fund against future collapse.
The leader of the opposition conservatives, David Cameron, committed his party to a bank tax (like President Obama’s proposed tax) if his party wins the poll.
