A new economic week with many major events has passed; starting with U.S. presidential election and victory of President Barack Obama. In Europe, Greece was the center stage, passing a new round of austerity measures needed to secure a second tranche of bailout, while ECB and BOE did not change their monetary policy for this month.
Fears dominated the market despite the protests that swept Athens before the Greek parliament passed more austerity measures which guarantee the countrys access to the next payment of bailout worth 31.5 billion euros.
153 deputies of parliament members approved the fiscal belt-tightening measures last Thursday, including tax increases, reduction in pension funds and increasing age retirement for two years, alongside labor market reforms. This new law led the New Democracy and PASOK party to eliminate seven deputies from their ranks because of they refused these new measures.
Violent demonstrations came out in Greece to denounce the new austerity measures, as protesters battled with police by throwing stones at police fencing the parliament building, from the other side riot police threw tear gas bombs and water cannons, which led to chaos.
After a tight vote over the new round of austerity measures, eyes turned for European finance ministers meeting November 12, as the new tranche will not be obtained by Greece until the Troika of international creditors report is finalized, according to a European Official on Thursday.
November 26 could be the day when European ministers will approve the second installment. German finance Minister Wolfgang Schaeuble confirmed when he said “I do not see how we can take the decision about Greece during the next week”.
Last week, the rate decision of ECB did not affect the market because the interest rate met expectations at 0.75% for the fifth time in a row, the ECB decision main objective is to control economic conditions and support the pace of economic growth in the euro area, which contracted in the second quarter amid downside risks from Europes sovereign debt crisis.
ECB also decided to monitor the economic situation after the submission of Outright Monetary Transactions (OMT) last September to control the dramatic rise in European bond yields, thus policymakers must wait until you Spain request bailout plan to activate the program.
This was confirmed by ECB President Mario Draghi at the conference press after the rate decision when he talked about the OMTs, saying "conditions are clear and the bank is ready, and the decision to request the Spanish rescue plan is linked to Spain alone."
BOE also maintained the interest rates at “0.5%”, as well as the asset purchase facility with a bulk of 375 billion pounds. The decision came out as expected by the market and with the support of the positive growth data during the second quarter and the weaker expectations of additional monetary easing in the near term.