Euro Hits Seven Week High as Doubts are Eased
The euro continued to climb on Wednesday morning, trading at 1.3113. The gains shot the currency to a new seven week high and reflected the market's optimism about the Greek bond buyback structure.
Greece announced that it would spend 10 billion euros to buy back investors' bonds at a higher price than what was expected. The buyback is a part of Greece's new agreement with its lenders in order to receive bailout funds. The International Monetary Fund, which is lending roughly one third of the aid, has declared that it will not release funds until it has reviewed the results of the buyback.
Originally, the prospect of a buyback made investors nervous, as the terms were not clear and many believed the price range would not be high enough to attract investors. However, Greek Finance Minister Yannis Stournaras explained the country's buyback plan at a finance minister's meeting on Monday and eased doubts that the IMF would withhold their portion of the aid.
Spain also helped lift the euro, as it began to recapitalize its banks. The country formally asked for a full banking sector bailout and has begun the process of injecting funds into its banks.
While confidence in the eurozone has greatly improved, there are some who believe the financial crisis is far from over. Reuters reported that some analysts are saying that the euro will eventually falter as 2013 is not expected to be a good year for the eurozone. The greater financial crisis across the region is likely to eventually overshadow small steps toward progress in Greece and Spain.
According to Businessweek, the financial crisis is aiding in a larger problem across the continent; corruption. An annual ranking performed by Transparency International showed that struggling countries like Greece and Italy were becoming even more corrupt as their problems worsened.
Greece, found to be the most corrupt in Europe, has fallen to 94th place in the rankings. This puts it just below countries like Colombia and Liberia. With problems like tax evasion and broken politics, many think Greece must clean up its political system in order fully recover.
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