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By FXCompass — Monday, 26 April 2010

Greek finance minister George Papaconstantinou officially requested the use of the joint EU/IMF bailout package last Friday. Germany reluctantly agreed to contribute, but wants a more vigorous budget plan and further austerity measures before lending its €8.4 billion share.

EU finance leaders, which meet on Monday in Athens, seem determined to avoid a Greek debt default in order to prevent further pressure on the euro and ensure the economical stability in the eurozone.

"It is important that the German government, as well as other euro-zone governments, stabilize the euro," German Chancellor Angela Merkel said. "This means that, first, a credible austerity program between Greece, the European Commission and the International Monetary Fund must be negotiated."

The same opinion was expressed by French Finance Minister Christine Lagarde who suggests cutting civil servant salaries by a “significant amount”. Lagarde also confirmed that Greece's austerity plan will be monitored by the IMF.

According to IMF Managing Director Dominique Strauss- Kahn, details and conditions about the rescue package should be set by the beginning of May, right on time for Greece to pay off €8.5billion in maturing bonds, which are due before May 19.

The EUR/USD remains stable around 1.3340 as investors wait new developments. Pressure could ease quickly as soon as official lending terms are announced. The short term response could be a rebound to the 1.4000 territory, but uncertainty remains in the long term as the credit situation in other fragile EU economies such as Portugal and Spain is assessed.