[SaintessHeart]

Originally Posted by mg1942

Large Hedge Funds Shorting Euro


LOS ANGELES (MarketWatch) -- Large hedge funds are betting on a drop in the euro, expecting that the European currency will fall to parity with the U.S. dollar, according to a Wall Street Journal report late Thursday. The report cited unidentified people quoting comments from "all-star hedge-fund managers" representing the likes of SAC Capital Advisors LP and Soros Fund Management LLC at a recent New York gathering. Some of those managers said the euro, which traded at $1.51 in December but was at $1.36 Thursday amid concerns about Greek sovereign debt and other issues, could soon fall to $1.00. However, the report added that "few traders expect the value of the euro to totally collapse, the way the British pound did in 1992."

I doubt the Euro would collapse. If it did, the whole world would be in for another recession. Hopefully all the punters who hedged for Euro's collapse will drive it value down low enough for others to make large amounts of currency purchases over the forex.

Here is a good write-up about what would exactly happen.

Well, it looks like Greece is in for the Battle Of Thermopylae : Economy Version...

EU Tells Greece Austerity Plan Isn't Enough

ATHENS—The European Union is pushing Greece to urgently adopt new measures amounting to an extra €4 billion ($5.42 billion) if it is to achieve its goal of slashing its staggering budget deficit by four percentage points this year, a senior government official said Friday.

"They [the EU] are telling us the current measures will only cut two percentage points. They are pushing very hard for another package of around €4 billion," the official, who asked not to be identified. "Greece thinks a package of €2 billion to €2.5 billion will be enough to achieve the targets," he said.

Officials from the EU, the International Monetary Fund and the European Central Bank had been in Athens since the start of the week to evaluate Greece's progress in cutting its budget deficit—an issue that has hit the euro and financial markets across the world because of fears that Greece could become the first euro-zone country to default on its debt payments.

"The inspectors flew out Thursday night. The final package will be discussed with [European Economic Affairs Commissioner] Olli Rehn who will be here on Monday. It will most likely be announced within the same week," the official said.

Greece is under intense pressure from the EU and financial markets to bring down its budget gap, which hit an estimated 12.7% of gross domestic product last year, four times above EU limits. The Socialist government has pledged to cut that deficit to 8.7% of GDP this year, and below the EU's 3% limit by 2012.

In order to meet those goals, the government has announced a series of spending cuts and tax increases that it believes will produce a combined €8 billion to €10 billion in savings and additional revenue.

So far, those measures include a freeze on civil service wages, cutting public-sector entitlements by 10% on average, a fuel tax increase, and closing dozens of tax loopholes for certain professions—including some civil servants—who now pay less than their fair share in taxes.

But Greece's European partners remain unconvinced. Since the EU issued its rhetorical support for Greece on Feb. 12, EU members including Germany and France have demanded that Greece take further steps to close its budget gap before they commit to any specific financial support for the country. The new measures are likely to include an increase in the current value-added tax rate of 19%, more cuts in civil service entitlements, and higher duties on luxury items, like boats and expensive cars.

Greece is also mulling a further increase in fuel taxes, while the EU has also asked Athens to cut one of two extra months of pay that public-sector workers now get over and above their normal 12-month salary—a move the government is resisting.

EU finance ministers, who have ultimate authority over the EU's budget rules, told Greece that its planned austerity measures, including a public-sector wage freeze, a cut in bonus pay, and pledges to fight tax evasion, aren't sufficient for a budget cut worth 4% of GDP this year.

EU officials privately say Greece seems to be dragging its heels, hoping to improve its public finances with only a bare minimum of effort. The officials also fear that the Greek Parliament could block the administration's planned cutbacks.

European Commissioner for Economic and Monetary Affairs Olli Rehn Thursday said he hopes to see a report from the commission delegation by the end of the week.

"Commissioner Rehn will be in Athens Monday and will pursue discussions at the highest political level on the measures Greece needs to meet its ambitious budget targets," said Mr. Rehn's spokesman, Amadeu Altafaj. Mr. Rehn earlier this month said Greece's planned budget cuts "go in the right direction," but noted that further measures are needed.