The euro declined against its US counterpart Monday after Greek and Eurozone finance ministers were unable to reach an agreement about Greece’s bailout program, fuelling concerns the Hellenic republic was edging closer to exiting the currency zone.
The EUR/USD tumbled nearly 80 pips to an intraday low of 1.1319. It would subsequently consolidate at 1.1342, declining 0.45 percent. The pair is testing the initial support at 1.1344. A break below that level would send the pair below the 1.13 mark. On the upside, initial resistance is likely found at 1.1435.
European finance ministers met in Brussels on Monday to negotiate Greece’s debt obligations. Negotiations fell through last week after both sides failed to reach common ground. Under the authority of newly elected Prime Minister Alexis Tsipras, Athens is seeking to restructure its massive €240 billion bailout package, which includes a bridging loan to fund the cash-strapped government over the next six months. Greek finance minister Yanis Varoufakis has stated that, unlike the existing bailout program, Greece would not accept demands for economic reforms attached to any bridging loan, and would only negotiate these terms after Greece’s public finances got some relief.
Monday’s meetings were unsuccessful, according to a Greek government official. Athens reportedly has only three weeks of cash left, placing added pressure on the country’s cash-strapped banks. Additionally, the European Central Bank will continue to offer emergency assistance only if it is tied to the existing bailout deal, which expires at the end of the month.
Varoufakis has remained defiant throughout the negotiations, having recently published a scathing op-ed in The New York Times titled “No Time for Games in Europe.”
“The lines that we have presented as red will not be crossed. Otherwise, they would not be truly red, but merely a bluff,” Varoufakis wrote in an op-ed that was published on February 16.
He added, “No more loans – not until we have a credible plan for growing the economy in order to repay those loans, help the middle class get back on its feet and address the hideous humanitarian crisis.”
Greece’s GDP has declined 25 percent since the Great Recession. The economy contracted in the fourth quarter of last year after posting three consecutive quarters of growth. The unemployment rate remained at 25.8 percent in November, Elstat reported last week. That’s a slight improvement over November 2013 levels, when unemployment was 27.7 percent.