After last Friday’s announcement that the Euro zone’s leaders had agreed to take decisive action over the spiralling debt costs of Spain and Italy, the single currency saw a huge surge against its peers. The Euro saw gains against a basket of currencies as it rode the wave of optimism and hope. Now however that hope is set to fade after the government s of Finland and Holland revealed yesterday that they plan to oppose the plans that allow the European Stability Mechanism (ESM) to buy government bonds.
“Finland finds it an inefficient way to stabilise markets,” said a senior Finnish government official told reporters.
A spokesman for the Dutch finance ministry said: “The Prime Minister said on June 29 he is not in favour of buying up bonds. Using the existing instruments to buy up bonds will be expensive and can only be done if there is unanimity between member states. That means the Netherlands would need to vote in favour.”
The doubts come after the European Central Bank spent some 210 billion Euros ($265 billion) in the last two years to buy Greek, Irish, Portuguese, Spanish and Italian bonds without achieving any lasting improvement.
Brussels had wanted to show the world that the Eurozone stood united over the future of the troubled region but Finland and Holland’s stance is sure to damage that image. Under the current rules Finland is too small to prevent the deployment of the bailout funds but if it strikes a united front with Holland, a much bigger player then the entire plan could be in jeopardy.
The threat of opposition has caused some doubt over whether the Euro can maintain its current position against its peers. If the deal is successfully blocked by the Dutch and Fins then we can expect there to be some significant fallout and the Euro is sure to weaken once more.
The Pound to Euro exchange rate is currently trading at 1.246
The Pound to US Dollar exchange rate is currently trading at 1.567
The Euro to Australian Dollar exchange rate is currently trading at 1.226
The Euro to US Dollar exchange rate is currently trading at 1.258
The Euro to Pound exchange rate is currently trading at 0.802
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