Articles - Greece update: Another crisis averted, at least for now


 By Azad Zangana
 European Economist at Schroders
  
 After weeks of uncertainty and political turmoil, Greece's Prime Minister George Papandreaou has won two important victories in the space of a week. These may have secured the next instalment of a bail-out for the embattled country.
  
 Despite violent protests on the streets, the Greek legislative passed the austerity package on Wednesday, causing a collective sigh of relief to sweep through European markets.
  
 The news comes a week after Prime Minister George Papandreaou's government won its crucial vote of confidence. Though most had predicted a victory for Papandreaou in these crucial votes, the risk of serious tail-risk materialising was very real.
  
 The opposition continues to protest against austerity measures, but curiously not against the notion of deficit reduction. But the opposition can afford to be vocal as ultimately it is aware that its credibility is badly damaged due to the previous mis-management of Greece's public finances. If the opposition actually had a real chance to return to power, it would have taken a more responsible approach, in the same way oppositions have behaved in Portugal in this year's election, or in Spain with the next election due within the next year.
 As for the dissenting members of Papandreaou's ruling PASOK party, in the end, they all pulled together, with the knowledge that failure would have been catastrophic.
  
 Looking ahead, Greece still has to pass a vote on its new privatisation plans and agree the new package with the Troika, which may still involve some kind of voluntary debt re-profiling. Nevertheless, this latest episode highlights the high degree of political uncertainty that is present, and the potential volatility that we should continue to expect.
  
 Looking ahead in European equities
 We feel that the recent outperformance of core equity markets versus peripheral markets could become a new medium to long-term trend. The need for difficult fiscal tightening will hurt growth and earnings in the periphery for some time, and in our view, the market has not yet come to this conclusion.
 However, in the near term, we could expect some pull back in the core versus periphery trade, purely in reaction to Greece not blowing up this month, and the expected new bailout which should follow in July. We suggest there may be better entry points in the future.
  
  

Back to Index


Similar News to this Story

It aint what you do its the way that you do it
....that’s what gets results…. I may be showing my age with this Bananarama song but it’s really appropriate now we’ve started to see the first DC C
One more year so can we stop thinking about IFRS17 for now
On 14 November 2018, the IASB announced a deferment of the IFRS17 implementation date by a year, with some still calling for a two year delay.You coul
Allowing for climate related risks
Allowing for climate related risks when setting long term financial assumptions

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.