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Austria refuses to transfer its portion in the bailout package to Greece. Why? Greece didn’t meet the conditions it made to the EU about cutting its deficit. No austerity – no payment. As simple as that. Add a refusal from Finland to aid Ireland, and you have a very vulnerable Euro.

With focus on Ireland, it’s easy to forget about the previous European debt crisis – Greece. Back in the spring, the European members committed to bailing out Greece if it made austerity measures – very accurate ones. The next payment is due at the end of November.

It’s already known that the deficit of the Greek government is far bigger than desired – 15.4% of GDP in fiscal 2009. This is an official figure from Eurostat. Greece also falls short in tax collection.

So Austria, a rich country in the Euro-zone, is the first country to say No to Greece.  If other countries join, Greece could go bankrupt. Maybe Germany will agree to pay instead of Austria… probably not.

Another option is to modify the conditions, make a new plan, and hope that Greece will make it this time. Yet again, passing the hot potato instead of cooling it down.

Finland Says No To Ireland

Returning to Ireland, the EU wants it to accept a bailout package quickly. Well, not everybody. Finland, also a rich country, strongly opposes this bailout. Finland is approaching an election, and the public is already upset with Finnish support to Iceland, Latvia and Greece, yet again.

Also the Germans, who carry the biggest burden, are becoming upset with all these bailouts. Angela Merkel faces stronger opposition for more bailout moves that German taxpayers pay.

While the ZEW Economic Sentiment improved in Germany and became positive again, many other Euro-zone members are deeply troubled. When the EU, led by Germany deals with Ireland and Greece, the real fear is about Italy and Spain. They want to stop the domino effect.

EUR/USD is still in the same 1.3530 to 1.3640 range. After rising on the long awaited QE2 program in the US, it fell about 700 pips, mostly on the contagious debt issues.

Levels above are 1.37, 1.3830 and 1.3950. Below, 1.3430, 1.3334 and 1.3267 will cushion a fall. More technical levels and analysis can be found in the EUR/USD outlook.

What do you think? Are we in the middle of a domino effect that will crush the Euro? Or can this be stopped?

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