Greece Earns a Time-Out and a Spanking from Mother Europe

Tired of seeing Greece weasel of out its previous commitments, Europe today took Greece behind the woodshed for a well-deserved spanking. Boy, did they leave a mark. You can see the red mark on Greece's Athens from Sarah Palin's house. The problem, as explained by Estonian Central Bank Chief Andres Lipstock, is not even necessarily financial. It can't be measured in numbers or dollars or euros. Instead, the problem right now is that Greece simply cannot be trusted. So far, Greece has reneged on plans to cut its spending, privatize certain functions, and in other ways raise revenues and reduce costs for the struggling government and its overdrawn budget. Greece has continually made promises in exchange for monetary concessions, but has not lived up to its end of the bargain. The spanking seems to have worked. Greece's Finance Minister announced, once again, that the government is committed to the budget cuts and tax increases comprising the fiscal reform package. The government also claims that the government is aiming to reduce the deficit to a mere 1% of GDP by 2015. Greece comes to the table looking for what is almost certainly another bailout, this time scheduled for next year. The Greeks are still behind on their reforms and there is no way they'll be able to go back to the bond market for additional funding. The cost, based on the risk of bond default at this point, would be far too high for Greece to go after. This stronger line with Greece may explain why the euro was able to hold on to some gains from overnight, and emerge stronger today. As of 3:30 EST, EUR/USD is trading up 0.5% on the day, and EUR/GBP is down just a hair, holding on despite what seemed like bad European news early today. This Greece spanking might make sense of why the euro managed to take care of business despite some bad news across the board. It could also point to future gains on better news tomorrow. Watch the Crude Oil report Wednesday morning at 10:30 AM EST to get an idea on how to play the EUR/USD pairing.