Time appears to be running out as fears of a Greek financial collapse continue to mount in Europe. Without a strong government capable of implementing new reforms, Greece will not be able to get new financial aid and the country will be forced to leave the eurozone.
The scenario that Greece could leave the euro is not new. The Europeans have been dealing with this option for two years now. Reports show that many Greeks have apparently quit paying their taxes in fear of a possible Greek exit from the eurozone.
The Greek Finance Ministry said it expects to collect 10% less tax revenue in May due to the ongoing recession. After the elections in Greece and France, it became clear that austerity alone is not enough to solve the euro crisis.
European leaders failed to calm the markets as they did not announce any new measures to solve the ongoing crisis. They are underestimating the collateral damages and the risk of contagion. If Greece defaults and leave the euro zone, this will reduce the trust and confidence in the euro. French President François Hollande is suggesting that the euro-zone countries should collectively borrow money and take joint responsibility for servicing their debt. That means that the countries who enjoy the trust of the markets will pay more than they do today.
When we look at the forex market today we see that EUR/USD bounced from lows as surveys showing a lead in opinion polls for Greece’s pro-bailout camps helped ease risk aversion and calm fears of a disorderly exit from the euro bloc. The Asian stock markets are mixed today. NIKKEI started the day at 8,604.99, previous close was 8,580.39. HANG SENG opened at 18,672.32, previous close was 18,713.41.
Data released by the Commodity Futures Trading Commission showed that speculative traders increased their bet on the EUR’s fall to record high. CFTC’s data also showed that speculative traders increased their open short CHF position by 30% from a week earlier to reach a net of $4.6 billion. They also decreased their open short JPY position by 47% to reach a net of $2.8 billion, the data showed.