Bailout package has been given to Greece and now the talks are on for the extension of the country’s bailout program. New bailout package needs to be provided to Greece that will give time for Greece to amend its economic problems till March 2016.
In spite of growth concerns in the leading European markets, Major Global Equity Markets have delivered satisfactory performance YTD (2015). However current issues faced by Greece are dominating market concerns and trends in European markets, atleast.
Major European market indices like FTSE 100, CAC 40, DAX, SWISS SMI and Italian MIB have delivered positive returns YTD in 2015 so far. However if we have a look at the past month performance of these markets, all of these markets have fallen sharply. Maximum damage is witnessed by German markets within the leading European indices. German markets gave negative returns of 5.51 percent for past 1 month followed by French market index which delivered a negative 4.57 percent return. FTSE 100 was not far behind as it delivered negative 3.41 percent retuns. Italian markets fared relatively well by clocking a negative return of 2.75 per cent. Switzerland equity market fared the best amongst the European indices on the basis of past one month’s performance. However YTD performance of Swiss equity markets has been subdued when compared to the other leading European equity indices. Whereas strengthening Euro may be a concern for German markets as its exports get hurt Greece issue is affecting all of the European markets in similar fashion.
What’s latest in Greece that is poking global markets?
Bailout package has been given to Greece and now the talks are on for the extension of the country’s bailout program. New bailout package needs to be provided to Greece that will give time for Greece to amend its economic problems till March 2016.
The euro zone’s rescue effort in which 245 billion ($ 276 billion) where offered to Greece runs out at the end of June this year. This timing constraint raises questions over how Athens will pay off its debt beyond this month i.e June of 2015 and more importantly remain in Europe’s currency Union. Greece’s debt load is close to 180 pe cent of its gross domestic product. Greece is already in recessionary environment. This difficult economic condition makes it unable for Greece to raise money from International Bond Markets. Hence Greece has been depending on rescue loans from euro zone and IMF for more than five years now.
New offer from IMF is to fully finance Greece for next nine months which will run till March 2016. But the offer comes with certain undertakings to be given by Greece government. Mr. Tsipras, who is the Prime Minister of troubled Greece, wants the funds but is not ready to accept the conditions imposed by the creditors. Mr. Tsipras rejected the creditors terms for more aid, which include policy overhauls, such as making it easier to hire and fire workers, pensions cuts and sales-tax increases. In a speech to Parliament on last Friday, he called the conditions irrational and pledged to present creditors with an alternative plan.
Here is the deadlock as Greece is not willing to accept tougher conditions asked by creditors. Berlin has rejected calls to discuss debt relief before Greece commits to stronger economic overhauls. President Obama said in the global summit that Greece government will have to take tough political decisions to keep afloat the Greece economy.
We can expect much more volatility in European markets with news coming from the Greece economy.