The risk of a new Greek crisis is turning into a warning to Europe. On Monday, the markets began to show signs of risk aversion reminiscent of the crisis of European sovereign debt.
In recent months, almost every idea of bullish investment in Europe has come with a warning: the risk of a new Greek crisis. This notice has become the protagonist after talks between Greece and its European creditors, who failed during the weekend.
Greece is running out of time to reach agreement with Europe. The current bailout agreement expires at the end of June. Greece must 1,500 million euros to the International Monetary Fund (IMF) and 3,500 million euros to the European Central Bank (ECB), which expire on 20 July. The finance ministers of the euro zone are due to meet on Thursday, ahead of a summit of European leaders on June 25. Evidence exists that the crisis reflected in the eurozone only get solutions at the last minute. Still, the risk of a default by Greece that threatens the country’s membership of the eurozone is increasing.
On Monday, markets began to show clear signs of risk aversion reminiscent the European sovereign debt crisis. The short-term bonds of countries in Southern Europe, normally subject to the ECB’s policy are under pressure: the gap between two-year bonds of Italy and Germany grew to 0.66 percentage points, as last week was 0.36. The corporate credit markets begin to feel it, with the cost of insuring European debt investment grade and high yield businesses through CDS is increasing. Stock markets are going through a bad time.
Some believe that the eurozone should not face the same kind of infection that led to the crisis in 2010-2012. Europe needs stronger institutions and firewalls at that time; other euro zone countries have carried out reforms; the ECB is buying debt under its quantitative easing program. For Greece, more than ever, seems exceptional.
But the markets are at a critical point. The worsening of the Greek crisis comes after two turbulent months have seen increase the profitability of German bonds and concerns over market liquidity. ECB willingness to tolerate the volatility has dented confidence on the idea that central banks will take the reins in the rescue of investors. Technically, the public debt of the countries of southern Europe may be at a sensitive time. For some investors, it has proved a lucrative foreign challenge to their main function. But if the losses begin to accumulate in the Italian, Spanish and Portuguese debt, these managers can quickly withdraw funds to safer areas.
It may be difficult to find coverage for Greek risk. German bonds are the subject of a tug of war between fear of a new crisis in the Eurozone and the US economy which results in the first quarter they have not exceeded expectations. The market volatility has increased, more expensive protection.
All this suggests that investors may be more willing to sell first and ask questions later. Until there is a resolution in Greece, caution is advisable departure.
Content of the Latin American Economic News Network 
fondos@eleconomista.com.mx
No comments:
Post a Comment