Instant view: Greek parliament votes for austerity plan

Reuters News
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Posted: Jun 29, 2011 9:34 AM
Instant view: Greek parliament votes for austerity plan

ATHENS (Reuters) - Greek Prime Minister George Papandreou won a parliamentary majority in favor of a five-year austerity plan on Wednesday, clearing a major hurdle in Greece's bid to win access to international funding to avoid default.

Following are analysts' comments on the vote:

Cary Leahey, economist and managing director at Decision Economics in New York:

"It's a positive development for the equity market and for the euro, particularly since it passed relatively handily. It might be a little negative for bonds because there probably was a little flight-to-safety trade going on.

"The next hurdle is the July 3 finance ministers meeting. The European leaders and the IMF have to decide to give the 15 billion euros, part of a larger package.

"Ultimately there's going to be an orderly restructuring where Europe will issue a certain number of Brady-like bonds. There will be some 'haircuts.'

VASSILI SEREBRIAKOV, CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:

"The decision was widely anticipated. But the price action in the euro seems to be a 'buy the rumor, sell the fact' kind of market reaction. It removes the worst-case scenario for the euro, although it's highly unlikely Greece will fall off the radar.

We still have Thursday's vote on specific legislation to implement the plan. Today's news sends a strong signal the Greek parliament will also vote yes tomorrow."

KIM RUPERT, MANAGING DIRECTOR OF GLOBAL FIXED INCOME ANALYSIS, ACTION ECONOMICS, SAN FRANCISCO:

"It is significant but it has been pretty much priced in (to Treasuries). We have been trading off of a passage for a couple of days now. It has provided more of a risk-on type of trade. We have seen equities make some pretty decent gains and bond yields rise. Risk aversion has diminished."

JURGEN ODENIUS, PRINCIPAL - INTERNATIONAL ECONOMICS AND INVESTMENT STRATEGY, PRUDENTIAL FIXED INCOME, NEWARK, NEW JERSEY

"The vote itself is a necessary for everything else. We now need to see the approval for the implementation tomorrow. We would expect to see more support for the opposition on some of the smaller measures. The vote tomorrow would be equally important, but it's harder to predict. All in all, there should be enough votes for tomorrow."

KOEN DE LEUS, STRATEGIST AT KBC SECURITIES, BRUSSELS

"I don't see how the current government can implement the required measures to meet the bailout conditionalities. So additional measures will have to be taken again, which creates a vicious circle for growth and an ever rising debt.

"At the end everybody will be fed up, the protests of the population will even go louder, there will be a change of government and Greece will default and restructure. But in the short term, a default has been avoided."

CHRIS TURNER, HEAD OF FX STRATEGY AT ING

"The markets were positioned for this, so on an intra-day basis, we will see some profit taking in the euro/dollar and the euro/Swiss franc. These are baby steps in the right direction."

CARSTEN FRITSCH, COMMODITIES ANALYST, COMMERZBANK,FRANKFURT:

"Something of a 'Buy the rumor, sell the fact' correction could emerge now. Commodity markets have fully expected and discounted approval by the Greek parliament of these austerity measures and this has been behind a rise in oil prices today.

"So we could see profit-taking. But I don't think it will be dramatic."

"If the vote had gone the other way, I would have expected a steep drop in prices. With approval, there could be a more gentle decline."

"The markets are still very wary over the outlook for Greece. Some more tough decisions need to be taken and the problems are far from solved."