By ROBERT HARLEY 10/02/2012
Hopes that we were moving closer to a resolution on the Greek debt crisis were dashed once again on Thursday, as European finance ministers sought further commitments from Greek politicians to extend and endorse austerity measures before they would release additional funds as part of the bailout package.
The new deadline for an agreement has now been pushed back to Wednesday 15 February. In the meantime Greek unions are planning a wave of national strikes in protest.
Equity and credit markets rebound
Equity and credit markets have rebounded strongly since December 2011, partly on account of more positive news from the US economy, and also in response to measures announced by the ECB to support the European banking system through its Long Term Refinancing Operation (LTRO). As a result, there is undeniably less of a risk premium in the price of these ‘risk’ assets that might act as a cushion in response to any negative resolution to the Greek debt crisis.
A disorderly default by Greece would be in no one’s interest, least of all their own; confidence and prices across stock markets would inevitably take a knock as a result. However, our core scenario is that either a deal will be achieved or, failing that, some sort of orderly exit for Greece from the Eurozone will be accommodated.
That said, even in the event of the former option, we remain of the view that the authorities will strive to act quickly to ring fence Greece to prevent a domino effect of sovereign defaults across Europe, thereby averting the risk of a collapse in the European banking system; consequently, any fall back in prices should present a buying opportunity.
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The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.