The once outperforming Greece exchange traded fund has quickly lost its momentum after the Eurozone and the International Monetary Fund suspended proposed debt-relief measures for the emerging economy.
The Global X MSCI Greece ETF (NYSEArca: GREK) was once one of the better performing emerging market country-specific exchange trade funds in recent weeks, but the Greece ETF declined 1.6% Thursday following a 5.8% plunge Wednesday. GREK is now testing its short- and long-term support at the 50- and 200-day simple moving averages.
European creditors suspended proposed debt-relief measures for Greece after the Greek government announced it would boost welfare benefits for low-income pensioners, going against the wishes of creditors, reports Viktoria Dendrinou for the Wall Street Journal.
The move comes amidst a review of the country’s rescue plan of as much as €86 billion, or $92 billion, in loans from the Eurozone and the IMF.
“The institutions have concluded that the actions of the Greek government appear to not be in line with our agreements,” a spokesman for Jeroen Dijsselbloem, the Dutch finance minister who presides over the group of his eurozone counterparts, said in a statement. “No unanimity now for implementing short-term debt measures.”
Creditors have provided relief for Greece on the premise that the country would impose austerity measures to rein its finances.
However, Greek Prime Minister Alexis Tsipras surprised the country and creditors last week with handouts that his government had not previously discussed – Tsipras pledged 1.6 million pensioners a Christmas bonus of between €300 and €800 and suspended a planned increase in sales tax for Aegean islands. The handouts come as Greece’s government is considering a snap election in 2017.
“In order to turn the bailout program into a success, it is imperative that measures should not be unilaterally decided or reversed without notice,” Germany’s finance ministry said in response to the unexpected new spending.
Greece has registered a primary budget surplus of €7.4 billion in the year ended November, or nearly €4 billion over its target due to lower spending and higher revenues. The IMF has pressured Europe to cut Greece’s budget target to a primary surplus of 1.5% of gross domestic product instead of its current goal of 3.5%.
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