Germany Throws Greece and the Eurozone Another Lifeline

blr-editor | September 29, 2011 | Comments (0)

Merkel may have been seeking help from above in this vote

Greece got a dose of hope today as German lawmakers sided with Chancellor Angela Merkel and backed coming to Greece’s aid via an expansion of the euro-area rescue fund.

Members of the Bundestag also voted to proceed with supporting Irish and Belgian debt by passing a measure granting the fund powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines.

Global markets were cheered by the news, meaning that bad news on Greece would wait for another day. The overall consensus of the market is that Greece will see at least an orderly default, given the magnitude of their debt and no real means to pay.

The German action is mostly designed to preserve the Eurozone for now at least, by building a firewall around Greece and preventing contagion in other countries such as Portugal, Italy, Ireland, and Spain.

The vote in the Bundestag was 523 in favor of the legislation and 85 against, while three abstained. It will now be debated and put to a non-binding vote in the upper house tomorrow.

The Dow Jones industrial average gained 143.08 points, or 1.30%, to 11,153.98. The S&P 500 gained 9.34 points, or 0.81%, to 1,160.40. However, the Nasdaq dropped 10.82 points, or 0.43%, to 2,480.76.