Greek Bailout: End of the Euro’s Forex Troubles?

Revised economic reform proposal? Check!
Thumbs up from Greece’s creditors? Check!
Greek parliament approval? Check!

Now that Greece is moving closer to securing a new set of bailout funds, does this mean that the euro can recover against its forex rivals? Are there any more roadblocks left for Greece and the shared currency? First off, here’s the timeline for the next few days:

  • July 17: German parliament to vote on bailout deal
  • July 17: EU states to vote on 7 billion EUR bridging loan for Greece
  • July 20: Payment deadline to ECB (4.2 billion EUR) and IMF
  • July 20: Greek banks to reopen
  • July 22: Greek parliament to pass further economic reforms

So, you see, a lot of things can still happen in the coming week, which just means that Greece ain’t out of the woods yet. In fact, the bailout still isn’t a done deal since euro zone leaders will begin their lengthy discussions on whether or not to release further aid only after the Greek parliament gives the green light for reforms concerning privatization, collective bargaining, industrial action, and the civil justice system. Now I won’t get into the nitty-gritty of all these but I’ll tell ya that the vote might still come down to the wire!

The Greek parliament’s huddle earlier this week was already a pretty tense one, as it revealed that Prime Minister Alex Tsipras is losing support from his own Syriza party. Nonetheless, after more than four hours of debates, 229 members out of the 300-seat parliament voted to accept the austerity measures required to secure around 86 billion EUR in bailout funds.

When it comes to the Greek population, it’s pretty evident that Tsipras has already lost his fan base. After all, the Greek government had asked the public to vote on further spending cuts, and when the referendum resulted in a resounding “Hell no!” Tsipras came back a few days later to serve up an even harsher austerity program. Cue widespread riots, distrust in the government, and calls for new elections.

With that, Greece could continue to deal with a lot of uncertainty in the coming week and might be in for a whole lot of economic trouble in the coming years. Heck, their economy has been contracting for nearly a decade already and another batch of spending cuts could push Greece much deeper in its rut. Bear in mind that this is Greece’s third bailout since 2010 yet the debt crisis seems far from over.

For now, the bailout could be enough to keep Greece in the euro zone and calm fears that the entire region might break up sooner or later. This could restore confidence in the stability of the euro and allow the currency to focus on the region’s fundamentals, which happen to be seeing gradual improvements in the past months.

EUR/USD Weekly Forex Chart

EUR/USD Weekly Forex Chart

Looking at the long-term forex chart of EUR/USD reveals that the pair regains ground a few weeks after Greece is granted a fresh batch of bailout funds, only to give all these up when debt troubles worsen again in a few years. Do you think we’ll see a repeat performance?