It’s a done deal. In the wee hours of the morning Thursday, the Greek Parliament passed the austerity measures. European Union members still have to complete a few items on the agenda before we can truly put Greece on the shelf, but those should come.
This is one strange deal, though. No one inside or outside the EU believes it will do more than delay the next crisis, and Greece’s economy will still struggle more than ever to rebound. Only a true Pollyanna would believe Greece will ever be strong enough to handle its debt level as it stands now, but at least this chapter is over. On the upside, the Greek crises basically killed half the summer for traders.
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Mario Draghi, president of the European Central Bank, will now step up and take an active role in getting the Greek banking system back to some level of functionality. The banks have been closed for almost three weeks, but traders are more interested in hearing if Draghi believes this interruption will have an economic impact on the entire EU. The EU economic numbers, including inflation, have been turning quite positive — traders will want to know if he downplays that.
If the passage of the bailout was not a surprise, the actual outcome is the epitome of anti-climatic. Traders are shrugging. Dow futures were up approximately 45 points in pre-opening trading, and bond prices were slightly lower.
Tomorrow’s economic calendar looks promising, with housing starts, the Consumer Price Index, and the University of Michigan Consumer Sentiment Index all due. This will be our first non-Greek Friday in quite a long time, and traders will be forced to at least notice the numbers. Opa!
Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.