The EU agreed to set up a foreign exchange stabilization fund to help defend the Euro on foreign exchange markets. While it remains unclear whether speculation, more than uncertainty, had been driving the Euro lower, there have been cases in the past where explicit or implicit currency guarantees have been attacked by speculators to test the credibility of such guarantees. It remains to be seen whether some could test the EU's resolve.
At the same time, the decision signals that the European Union is determined to preserve the common currency. IMO, this decision undermines arguments made by some that the Greek debt crisis would shatter the European Union.
EU to Set Up Fund to Prevent Spread of Greek Crisis (Update1) - Bloomberg.comEuropean leaders agreed to set up an emergency fund to halt the spread of Greece’s fiscal woes, seeking to prevent a sovereign debt crisis from shattering confidence in the 11-year-old euro...
European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the European Union’s central authorities with guarantees by national governments. Finance ministers will meet at 4 p.m. tomorrow in Brussels to flesh out the details.