Currency watch: Greek D-day on the horizon

A Greek referendum on the terms of the EU/IMF bailout, and by extension the country’s membership of the EU and the euro, is set to become the big economic showdown of the year.

It’s a year which has been characterised by crisis meeting after crisis meeting.

The date has been set for 4-5 December and an emergency Euro-group meeting has also been scheduled for this Monday, to accelerate the key decision as to how to ring-fence other peripheral nations and avoid more problems in that area.

Talk between European leaders has taken on a new tone this week, with the Greeks now feeling the full indignation of Merkel, Sarkozy et al.

Greek prime minister Papandreou is looking likely to fall on his own sword at the time of writing, as cracks in the Greek government have been laid bare for all to see.

Sarkozy has said this week that the EU is still ready to aid Greece but they will not receive ”one cent more in rescue loans” until the plans from last week’s meeting are adopted.

Merkel added that she would prefer that Greece stayed part of the Eurozone, but that they must adopt the plan in its entirety in order to get their hands on what will be their sixth aid tranche, the payment of which will now be withheld until after the referendum. She also made it clear that euro stability must be placed above the interests of Greece.

Whatever the outcome of the crisis in Greece, what is for sure is that the country and the region is set for a period of serious instability.

The decision to put the bailout deal out to vote has caused consternation in the markets, and that anxiety is set to continue until a legitimate agreement is set in stone.

Jeremy Cook is chief economist at World First foreign exchange