Investment Clock insights

Greece bailout deal

Trevor Greetham

14 July 2015

Subject to a vote in Parliament, the agreement between Greece and its creditors should take the heat out of the situation, at least in the short term.  A new Memorandum of Understanding (MoU) will instigate negotiations on yet another multi-year bailout, while defaults on the two European Central Bank (ECB) payments, due in July and August, will be avoided.  Of course, doubts remain on the longer term viability of any programme, given the serial disappointments of the past, especially on the implementation of reforms.

Longer-term questions about the future of Europe remain unresolved. It is hard for a monetary union to exist without full democratic accountability. The Greek people will be forgiven for thinking they have just been forced into a tougher austerity package than the one they rejected in the referendum. Meanwhile, public opinion in Germany will rail against what is seen as never ending hand outs.

Still, for now, the situation is defused, and “Grexit” should fall down the list of pressing market concerns. Instead, investors are likely to turn their attention to the prospects for strong economic growth in Europe in the second half of the year.

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.