June 22, 2011
The Greek Parliament’s vote of confidence in Prime Minister George Papandreou shifts the spotlight back to Germany and the European Central Bank as key to Greece’s quest for further international financial aid.
Lawmakers in Athens supported Papandreou in a 155-143 vote after the prime minister shuffled his Cabinet and sought the chamber’s approval. The vote may bolster Greece’s chances of securing a 12 billion-euro ($17 billion) loan payment, which hinges on support from European leaders and on Greece’s ability to push through 78 billion euros in additional budget cuts next week.
“The question that’s still lingering is the old cage match between the ECB and Germany, and who’s going to give and who’s going to blink, and how much,” said Ilan Solot, currency strategist at Brown Brothers Harriman in London.
The Frankfurt-based central bank and German Chancellor Angela Merkel’s government have clashed over the role of private creditors in the Greek rescue, with the ECB resisting Germany’s calls to require investor participation.
European leaders will discuss Greece’s needs at a two-day summit in Brussels starting tomorrow and finance chiefs will decide on July 3 whether Greece has met conditions for the next aid payment. Investors are watching to see if the ministers will clear the payment, which is contingent the Greek Parliament approving the extra budget cuts, or prolong the uncertainty in a bid to increase pressure on the lawmakers.
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