Deja Vu All Over Again (2015 Edition)
With Greece back in the headlines, bringing with it a fresh bout of market volatility, we thought it might be time to touch base and offer a little history and a quick forecast. We first wrote about the sad state of Greek finances back in October of 2011 and the situation has changed little since then. You can find that summary here.
The emergency financing provided back then by the “troika” of the European Commission (EC), International Monetary Fund (IMF), and European Central Bank (ECB) has come due but the newly-elected Greek government wants more concessions than the troika is willing to give. Whether or not this leads to a “Grexit,” with Greece exiting the monetary union is far from certain but for reasons detailed in our 2011 piece mentioned above, this is far from the worst possible outcome.
Markets hate uncertainty and we’re likely to see more turmoil until the Greek situation is resolved one way or another. Not, by the way, because the Greek economy is particularly large or important to the rest of the world but because of fears that a Grexit would cast doubt on the stability and viability of monetary union in the rest of the Euro Zone, collectively the third largest economy in the world.
The quick forecast we promised is this: even if the current crisis results in the worst-case scenario of a Greek exit from the Euro, current volatility in the markets will quickly dissipate as the realization takes root that the rest of the Euro Zone remains as stable and viable as it ever was.
And we hope you’re gearing up for a fun Fourth of July weekend!