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Last chance saloon

Published Tuesday, July 7th, 2015

Sunday’s empathic result in Greece’s bailout referendum saw global equity markets start the week on a soft note but fears of pandemonium and market turmoil turned out to be overblown. Although sentiment was weighed down by an uptick in the likelihood of a Grexit, concerns of contagion were played down by several credit-rating agencies. Moreover, investors clutching at straws for a debt deal would have been buoyed by news of Yanis Varoufakis’ unexpected resignation, which came despite the NO vote prevailing, as did claims by the IMF that it was still prepared to help Greece if required. The fallout saw the European bourses ease by just over 1% while sovereign debt markets shrugged off a spike in Greek borrowing costs as periphery bond yields ended the day only marginally higher.

The relatively muted response may have turned out to be the calm before the storm as investors await the outcome from today’s crucial meeting of eurozone finance ministers. The gathering in which Greek PM Alex Tsipras is expected to present a fresh list of proposals represents Athens’ last chance to secure its future in the currency-bloc. Whether these mooted economic reforms will go beyond previous attempts remains to be seen but tough rhetoric from France and Germany was a reminder that the ball remains firmly in Greece’s court. Meanwhile, as efforts to bring the crisis to an agreeable conclusion draw to a close, the state of the country’s embattled banking sector continues to deteriorate with banks remaining shut as cash reserves plummet. The prospect of a shortage of basic goods is inching closer and the ECB’s decision to increase the haircut placed on collateral provided by Greek banks will further squeeze a sector already struggling for funding.      

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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.