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Greece on the brink

Published Tuesday, May 19th, 2015

Fears of a Greek default got the week off to a choppy start as global stock markets had the first chance to react to a letter sent by PM Alex Tsipras to the nation’s creditors which revealed how close Athens came to falling into arrears on its IMF loan repayments. Calls for an urgent injection of fresh financial aid grew louder as the perilous state of its finances was once again highlighted with warnings that its funds will run out by the end of the month. The increasing doubts over Greece’s ability to meet its debt obligations come as IMF repayments totalling €1.5 billion fall in next few weeks where it will be unable to rely on having emergency reserves held with the international lender from which it can draw on.

Officials in the embattled eurozone country did their best to moderate debt concerns by dismissing rumours of a Cyprus-style bail-in and continued to express optimism of a bailout deal come the end of May. However, this sanguine outlook was not mirrored by Athens’ implied borrowing cost which bucked an overall trend of stabilisation across government debt markets after the yield on its 2-year paper surged by more than 300 basis points to 24% while 10-year bonds topped 11%. The sour mood was tracked by bloc’s equity indices which fell into the red only to make a surprising lurch upwards late in the day to end the session in positive territory following unconfirmed reports that the President of the European Commission, Jean-Claude Juncker, had put forward a deal to break the Greek impasse.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.