Category: Greece

Greece Exit (GREXIT) – A Boon or a Bane?

Greece joined the Eurozone as its 12th member in 2001 but was the first to be bailed out in 2010 ever since the Eurozone crisis in 2009. After government borrowing rates soared, Greece secured another bailout in 2010 of $142 billion following a second package earlier in 2012. Both were in return for promises of tough austerity cuts. By the end of 2014, Greece owed “troika”(European Central Bank, the International Monetary Fund and the European Commission) €253.3bn. In 2014, many talks were doing the rounds of a possible exit of Greece from the Eurozone. 

The Greek Election is Closer and so is a Possible Syriza Victory

The European Central Bank’s decision to spend 60 billion euro a month to buy sovereign debt in order to fight deflation and revive the crumbling Eurozone coincides with a snap Greek parliamentary election on January 25.

If Syriza wins, as all polls indicate they will, this might be a serious setback for Greece, just at the time when the Greek economy was emerging out of a five-year deep recession.

Economic turmoil is expected, primarily because Syriza insists on achieving a cut to Greek sovereign debt. Germany and other Eurozone countries consider this unacceptable.

Is a Greek Exit from the EMU Still Possible?

The Greek election is on January 25.  Syriza, the leftist party that seeks to negotiate more aggressively with the Troika and roll-back some of the austerity imposed appears to be maintaining its lead of 2-3 percentage points.  Even though it may win a plurality, heading up the next government is a different story.  That requires a majority of parliament. 

It may not be able to achieve this even with the 50 bonus seats given to the party that receives the most votes.  This warns of the risk of extended political uncertainty after the election.  

Investor’s Political Blind Spot on Greece

The Greek political drama is overshadowing the Russian crisis and the plunge the price of oil.  A review of old and new media coverage suggests that many observers are repeating the same mistake they made 2-3 years ago. We were one of the few analysts that did not expect Greece to leave the monetary union then, and we expect it to remain in the union now.  

Implications of a Syriza Win in Greece

The Greek economy, after five years of recession, has nearly reached the top of the hill it has been climbing. But there is a real threat that in just a few months it will roll back down again.

Will Greek Politics Trump Principles in Upcoming Elections?

Many global investors limited to investment grade markets or developed markets, as defined by MSCI have no direct exposure to Greece.  Nevertheless, recent developments in Greece are worrisome to investors.  Many fear that the political challenges in Greece could lead to its ultimate exit from the monetary union and default.    

This concern has led to dramatic losses in Greek bonds and stocks.  Today’s decline in Greek stocks (10.2%) is the largest since 1987.  The 70 bp rise in the benchmark 10-year yield is among the largest of the year.