Markets Slide Again on Greece
Published / Last Updated on 25/06/2015
Markets Slide Again on Greece.
Negotiations between Greece, the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) are still in deadlock with failure to reach an agreement yesterday and talks ongoing, with last ditch talks planned for Saturday.
At the time of writing (noon Friday), FTSE 100 Index was down 0.83% on the day at 6,751, with other EU markets also showing similar falls.
The time is now! Greece must repay €1.6bn off its latest loan instalment to the International Monetary Fund on Tuesday 30th June. This means that if a deal is not struck, even if it is struck at the last ditch meetings on Saturday, there will not be enough time to arrange funds via the complex mechanisms that are required to inject money into the Greek banking system.
European Banks are already planning capital restrictions on the Greece banking system with effect from Monday. In short, there will be no money left to distribute to the Greek population from Monday.
As before, market instability is not a surprise and we remain negative in our outlook staying at “amber” in the cash park as far as investment money back into equities.
The Greeks maintain that this is politically motivated to force an emergency election as the recently elected government was done so on the back of a “no more austerity” no more spending cuts mandate, whereas the IMF (Greece’s biggest creditor) and the EU want reform in Greece for tax collection and changes to State pensions, where staggeringly, the average state retirement age is 58, compare that to the UK, where state pension ages from next year start at age 67! No wonder, Greece is in financial difficulty.
We still expect a tough, face saving, last breath, deal for both sides, but this will not be agreed in time for Monday and we expect Greek banks to be closed on Monday. That said, emergency funds may be available by Tuesday to prevent a full default. Who knows? We are not in those meetings so we cannot confidently invest back in Equities.