Monday, 18 June 2012

Mike Lenhoff: A Greek moment, a eurozone moment or a market moment?

Financial markets were right not to welcome the result of Greece’s election with elation but are they right in giving it the thumbs down? The initial and more cautious welcome seemed more appropriate. The election of New Democracy and what is set to be a pro-bailout government is a favourable outcome of sorts for the eurozone though the hardship is far from over. 

Mr. Samaras and the government he will try to form intend to renegotiate the terms of Greece’s bailout. Unlike SYRIZA though, the starting point is not a hostile rejection of them. A government led by New Democracy intends to work together with Greece’s eurozone partners in the hope of easing the harshness and pace of fiscal adjustment that have left Greece in depression. You might have thought that the risk of a Grexit and contagion has diminished but, judging by their action, the markets are not for buying it – just yet.    

Germany of course lost no time in welcoming the victor of Greece’s election with a reminder of its hard line on fiscal austerity. That said, Mrs. Merkel’s government recently indicated a readiness to make limited concessions on Greece’s austerity programme, conditional, that is, on a new government’s commitment to the substance of the bailout programme. More>

Mike Lenhoff
Chief Strategist

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