Greece Secures A Second Bailout As Creditors Bare Losses And ECB Participates While Greece Cuts Spending Further

After the approval of Greece's second bailout by euro area finance ministers yesterday, eyes are on fundamentals from the euro area to see the economic status in the first quarter after the slowdown seen in the end of 2011.

Manufacturing and services sectors are expected to show some advance in February as the advanced reading is expected to show a narrowing in contraction to 49.4 from January's reading of 48.8 in the manufacturing while the services sector will show a widening expansion to 53.9 from 53.7 a month earlier. The composite index, accordingly, is estimated to rise to 50.5 from the previous 50.4.

Regarding euro area outlook, Draghi sees "tentative signs of stabilization," despite some survey data showing low level of stabilization. He expects growth to recover gradually in the course of the current year, where domestic demand and growth in general may be hurt by bond markets tensions.

However, he revealed that the euro area still has sustainable downside risks, where he still sees clear downside risks to the outlook which remains clouded with uncertainty due to the European debt crisis which is affecting euro area economies.

Although Greece managed to secure a second bailout worth 130 billion euros that would prevent Greece from relapsing into default next month after reaching a deal with private sector bondholders and ECB accepted to distribute its profits from bond purchasing, still there are doubts that Greece will not be able to commit to spending cuts, especially as the austerity measures passed by the Parliament were met by a wide rage of protests from Greek citizens, noting that elections are due in April.

In addition, the severe spending reductions would force the debt stricken economy into several years of recession; the thing that raise doubts that Greece will need more bailouts in the coming years, otherwise it will not be able to meet its debt target.

In the U.K., eyes will be on the BoE minutes which is predicted to show a unanimous vote to expanding the APF by 50 billion pounds to 325 billion pounds, while keeping interest rate steady at 0.50%, this month as the declaration in prices and high risks posed from euro area debt crisis probably prompted policy makers to add to stimulus to bolster the economy.