Greek debt crisis: European markets robust after referendum “no” vote
European markets were relatively sanguine yesterday in the wake of Sunday’s referendum result in Greece, which many viewed as increasing the chances of a crash out of the Eurozone.
Some feared that if Greece defaulted on its debt and left the euro it might have big impacts on other European economies.
The interest on the Spanish government’s 10 year debt climbed, but only marginally, to 2.375 per cent from 2.224 per cent. Small increases in borrowing costs were also seen in Portugal and Italy.
Stock markets were also resilient with the German Dax dropping, but only by 1.36 per cent, and the French Cac40 by 1.83 per cent.
“It hasn’t been as bad as people expected,” Marchel Alexandrovich, a senior vice president at investment bank Jefferies, told City A.M..
But that does not necessarily mean markets are not concerned about possible contagion from a Grexit.
Firebrand finance minister Yanis Varoufakis resigned yesterday morning, a move that was interpreted as a commitment to greater cooperation with the rest of the Eurozone.
French President Francois Hollande said he would bend over backwards to keep Greece in the euro following the no vote.
“Those headlines were quite reassuring for the markets,” Alexandrovich said.
Owen Callan, an analyst at Cantor Fitzgerald, said: “With Varoufakis stepping down, it does give the sense that a deal could be done, or even is already being worked on.”
While some analysts view the prospect of a deal as being highly uncertain, the ability for the European Central Bank (ECB) to react and boost the economy is offering reassurance.
“Our feeling is that somehow there will be a compromise that will allow Greece to stay in the euro,” said Jim Kochan, chief fixed income strategist at Wells Fargo Asset Management.
“Second, if there is some contagion, one would think the ECB would react aggressively.”
Yet, not all government debt interest rates climbed. Germany’s 10 year borrowing costs dropped to 0.764 per cent from 0.771 per cent. It was due to an influx to “safe haven” German debt.
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MEET GREECE’S NEW FINANCE MINISTER, EUCLID TSAKALOTOS |
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He is a close confidante of Prime Minister Alexis Tsipras. Like his predecessor, who was at University of Texas in Austin before being thrust onto the international stage, his background is largely in academia, and both have held roles at the University of Athens.
Greece’s chief economics spokesman and deputy foreign minister has been described as the country’s “secret weapon” in negotiations with its lenders.
Tsakalotos, who speaks with an English accent, studied politics, philosophy and economics at the universities of Oxford, and then Sussex, before completing his PhD in 1989 at Oxford.
He taught at the University of Kent between October 1990 and June 1993, as well as the Athens University of Economics and Business between October 1994 and September 2010.
Authored books include Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis, and he has edited other volumes, as well as producing a smattering of academic papers.
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