German parliament supports Greece bailout

As international auditors arrive in Greece to assess the extent of the country’s debt problems, Germany’s parliament has this morning approved new powers for the Eurozone’s crisis fund.

It is not yet clear whether Chancellor Merkel will be undermined by the breakdown of votes from her own coalition partners, with political instability in Germany a distinct possibility over opposing views on the crisis. “We’re borrowing money from our children to put in a showcase and it is money that we don’t have,” said one rebel in Merkel’s Christian Democratic Union.

For Euro exchange rates, we have today seen Euro strength against the US Dollar, but against the Pound rates are relatively stable, which is perhaps not surprising given the exposure to the crisis faced by UK banks and our reliance on trading with the Eurozone. Our view remains that any Euro weakness in the coming days is likely to be matched by Sterling weakness, with no improvement generally expected in rates for buying Euros.