28th May 2023

Muted market response to EU Greek pledge

Market reactions were mixed on Thursday (11 February) after the EU issued a political pledge to bail out Greece if needed.

Spreads between Greek bonds and the benchmark German Bund narrowed, European shares ended mostly lower, and the euro slid against the dollar in afternoon trading.

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Earlier in the day, EU permanent president Herman Van Rompuy read out a statement on the steps of the Bibliotheque Solvay library in central Brussels after a two hour meeting with an inner core of EU leader policy makers.

"Euro area member states will take determined and co-ordinated action if needed to safeguard financial stability in the euro area as a whole," said the former Belgian prime minister.

With daily proceedings for the 27 leaders originally scheduled to take place at 10am, but later postponed 12 noon, insiders suggested snow had been used as an excuse to free up a morning slot for emergency talks on Greece.

Mr Van Rompuy, European commission chief Jose Manuel Barroso, French President Nicolas Sarkozy, German Chancellor Angela Merkel, European Central Bank president Jean-Claude Trichet and Greek Prime Minister George Papandreou met in private to agree the statement's wording, before later presenting it to remaining EU leaders for approval.

But analysts said markets were waiting for clearer details of the bailout plan before reacting. "All they've done is throw verbal political support behind Greek efforts," said Brian Dolan, chief currency strategist at, reports AP.

Diplomats also suggested greater details would not be immediately forthcoming as there was still some disagreement over the best way to funnel support towards Athens, with the EU statement making clear the Aegean state had yet to request any aid.

As the largest EU economy, Germany would be expected to stump up the greatest slice of any emergency funding, but Berlin's hand has been restricted by domestic constitutional requirements. Additionally, there is a problem of perception. Countries such as Ireland, which have implemented a series of tough austerity measures, could take issue if Greece were suddenly handed an easier passage.

EU 2020 Strategy

With Greece taking up much of the allotted time, leaders were restricted to under two hours discussion on the EU's 2020 economic strategy over an extended lunch.

Commission president Jose Manuel Barroso achieved broad support for a paper outlining three EU objectives that should be agreed, he said, if Europe is to return to sufficient and sustainable growth.

These include the need to boost research and development in order to step up the bloc's productivity, educational reform to help citizens find jobs, and measures to promote greener growth.

Mr Van Rompuy produced a paper on the governance aspects of the proposed 10-year plan, also calling for a limited number of objectives, which should then be transferred into differentiated national targets.

EU leaders appear to be shying away from the idea of possible sanctions for those member states that fail to live up to their agreed targets, instead moving in the direction of financial rewards for high achievers.

More detailed conclusions on EU objectives are expected at the regular March European summit.

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