Euro Steady Near $1.27 Ahead of ECB Meeting
The euro dropped slightly to 1.2767 on Thursday morning, despite good news from Greece on Wednesday afternoon. The country's coalition voted to pass a bundle of spending cuts in order to unlock its next installment of bailout money. Worth 31 billion euros, the bailout has kept the country from running out of cash.
On Thursday, the European Central Bank is set to have its monthly meeting to decide on interest rates. With data showing a massive slowdown throughout the region, many are anticipating the ECB to cut its already record low rates from 0.75 to 0.5. However, the cut isn't expected in November but rather in the coming months.
The ECB's bond buying plan and bank restructuring are under scrutiny at the moment, as investors wonder if either tactic will actually be implemented. The bond buying plan, announced in September, has calmed the markets, though it hasn't been enacted. Struggling economies like Spain and Italy were expected to take advantage of the plan, but have yet to show any signs of asking for aid.
Spanish Prime Minister Mariano Rajoy has said he will not ask for aid until he is sure it will benefit his country. Though there has been much speculation about if and when the country will request aid, there has been no movement toward a bailout.
A recent agreement by the eurozone finance ministers and officials set a bank restructuring plan into motion, said to materialize in January 2013. Under this new structure, banks within the eurozone would be overseen by the ECB and a supervisory board would oversee lending decisions and give non-euro zone members a say in the transactions.
Reuters reported on Thursday that a document has been circulated by some of the stronger economies in the eurozone, Germany, Finland, the Netherlands, and Luxembourg, calling for more local power within the banks. Though these stronger countries have always been vocal about their concerns with the banking scheme, the document shows their opposition to being constantly controlled by a larger entity.
The eurozone leaders are set to meet again in December to finalize plans for the new banking structure, but the document has many investors believing the new bank structure will be put on hold while the officials iron out these concerns.
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