St. James's Place News
Greece and the future of the single currency
Equity markets around the world, most notably Europe, suffered sharp falls last week with the Financial sector bearing the brunt of the selling pressure. The trigger for the latest sell-off was the news that the European Central Bank had suspended its lending to Greek banks at the same time as many depositors were looking to withdraw their money.
While long-term investors focus on the underlying corporate strength and see opportunity in market falls, many others become understandably concerned over the immediate impact of these macro-geopolitical manoeuvres.
It’s been a long two years since 25 March 2010 when Greece received the first bailout package from the European Union and the International Monetary Fund. Much has happened yet little achieved since, but the coming months look crucial for Europe and the future of the single currency. Many member states are in recession and facing strict austerity measures and recently we have seen governments fall as the people voiced their discontent, adding to the uncertainty of the region’s future.
A Greek exit from the single currency would severely test the firewalls erected by policymakers and put the region’s banking system under extreme stress. The concern for many is the example Greece would set for other struggling nations, creating a precedent should other countries get into such severe trouble.
View the latest Special Investment Bulletin (PDF), which looks at the implications and potential outcomes for what is becoming an even more complicated situation and explains why investor sentiment is being driven by the fallout from European politics, rather than the fundamentals of European equity markets.
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