Monday, 12 March 2012

A chapter ends but the bigger drama continues...

...oh and mind the positive news elsewhere.  

European Union finance ministers meet today to approve the second bailout for Greece and to discuss how the European Stability Mechanism might be strengthened. A week today, the auction of ‘Hellenic’ bonds will determine the payout on credit default swaps. The day after (20 March), Greece will be able to meet its big bond redemption. So an eventful chapter is closing on the sovereign debt crisis.

This is not to say the story, or in Greece’s case, the odyssey, is far from over. Debt sustainability in the eurozone is a long way off and for some the reality is it may not be achieved. Greece’s forthcoming election will likely bring uncertainty, especially as the markets know where the opposition leader’s sympathies lie in connection with the terms and conditions applying to Greece’s bailout. Also, who knows if Portugal is next in line for a debt restructuring? Moreover, for a good part of the eurozone, economic hardship will prevail in the indefinite future. No contribution to global growth is expected from the eurozone this year and it is doubtful it will make any material contribution to global growth over the medium term. That’s not a great story.   More >

Mike Lenhoff - Chief Strategist

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