Investment Clock insights

ECB Greece Negotiations

Trevor Greetham

18 June 2015

The negotiations seem to be coming to a head this week. Market stress could get worse before it gets better but a resolution of any kind is likely to lead to a bounce in the equity markets given the depressed level of investor sentiment. Even if it comes to a default the broader market impact should be limited. Most Greek government debt is held by official institutions and it is the ECB that is providing liquidity to the banks.

Longer term, whatever the outcome of the current episode, the Greek experience says the euro area will remain prone to shocks as it is an economic construct. In a political union there would be fiscal transfers that would pass largely unnoticed from one region to another, as remains the case from West to East Germany. The euro crisis has left us further away from that state of affairs than ever.

The value of your investment and the income from it is not guaranteed and can fall as well as rise. This article is for professional customers only. The views expressed are the author’s own and do not constitute investment advice.