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Thursday, December 11, 2014

Bloomberg Sees Danger of Grexit

The nightmarish Grexit scenarios of 2010 and 2011 are back, after the recent political turmoil in Greece, said Bloomberg. As international investors analyze the options, they see that Greece’s status in the Eurozone is in question again. The 12.78-point record plunge of the Athens Stock Exchange on Monday and the 8.18% yield on ten-year bonds on Tuesday, triggered the worst-case scenarios among investors. The Bloomberg report said that the drop in the stock market is the worst since 1987 and sovereign bond yields are at the 2010 level, when Greece was still negotiating the first bailout program. Investors see a chain of events following the presidential election. The inability of the Greek coalition government to elect a President will probably lead to national elections in which leftist opposition party SYRIZA has a strong lead in opinion polls. With SYRIZA openly opposing the present bailout program and declaring policy change, investors show a certain amount of worry. “A standoff between a rudderless or Tsipras-led government and European creditors would catapult Greece through a number of tripwires. Casualties would include Greece’s commercial banks, relying as of late October on 44 billion euros of life-support money from the European Central Bank,” the Bloomberg report noted. Financial Times: Greece no longer a threat to the Eurozone  According to a new Financial Times report, Greece is no longer a threat to the Eurozone because it is a marginalized economy that cannot affect the rest of the Eurozone countries. The report said that despite the Athens Stock Exchange plunge and the high sovereign bond yields of recent days, the cost of borrowing for other Eurozone countries remained the same. Therefore, the possible domino effect of 2011 is no longer a possibility. The report also mentioned that a chain reaction that may affect the rest of the Eurozone will be limited since European Central Bank head Mario Draghi has promised to protect the euro by any means necessary.