Greece adds to toxic mix of global risks - CNBC Comment

There are plenty more jellyfish swimming in the global economy’s waters
Grexit, Grexident and now Greferendum – the debt crisis in Greece has thrown up plenty of new portmanteaux, as linguistics professors would call these often tortuous combinations of words.

And owing to the Greferendum becoming a reality this weekend, it now looks increasingly likely that the others may also move from concept to execution. Greek Prime Minister Alexis Tsipras’s Mr Smith Goes to Brussels act doesn’t seem to have achieved as much as those who voted for him hoped. They might have been better off with a Frank Underwood: less idealistic, but better at negotiating back room deals.

History may prove Tsipras right, but it would be a pretty bittersweet victory to a leader who looks likely to soon be either out on his ear, or governing a country that has gone from developed to emerging or even frontier market in five years.

The Greek leadership’s hopes, that fears of the consequences elsewhere if Greece leaves the euro would help get them greater concessions, seem to have been dashed, with precious little hope remaining (at the time of writing) of a last-minute solution to the apparent impasse between lenders and debtors.

Eurozone leaders may have underestimated investors’ complacency about Grexit contagion, judging from the reaction of stock markets to the weekend’s newsflow. Yet Greece is far from the only jellyfish lurking in the water this summer for investors.

Greece may have a “toxic mix of private and public debt”, as the Bank for International Settlements, the central banks’ central bank which was one of the few bodies to predict the credit crisis, warned this weekend. But it’s not exactly the only country to be over-reliant on monetary policy and, essentially, central banks to get it right.

The addition of the “Zhou put” – a reference to People’s Bank of China governor Zhou Xiaochuan’s actions to ease China’s monetary policy – to the list of terms economics students of the future will be studying shows how even the economy expected to overtake the US as the world’s biggest cannot rely on growth any more. The cut in policy rates and selected bank reserve requirements over the weekend was reminiscent of the era of former Federal Reserve chairman Alan Greenspan.

Chinese equities, emerging markets, Iran’s nuclear talks, and let’s not forget the continuing lack of resolution of the Ukrainian conflict, these are all potentially big negatives for markets in the next few months.

This could be the year where the old stock market adage “sell in May and go away” is more accurate than ever.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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