Time to stay calm on Greece, say experts

The latest events in Greece have increased the risk of a ‘Grexit’, but experts say Greece will probably stay in the eurozone, adding that the Greek crisis is not a financial market crisis.

Greece is set to miss the deadline tomorrow for its €1.5bn repayment due to the IMF, but this will not be a ‘default event’ according to ratings agencies and will not trigger cross-default clauses on Greece’s other debts, says Pictet Wealth Management economist Jean-Pierre Durante. 

On Friday, Greek prime minister Alexis Tsipras held a comprehensive offer from lenders to release €15.7bn (£11bn) in a 5-month extension of the second bailout starting on 1 July.

However, Saturday’s Eurogroup meeting resulted in the decision to reject the offer, calling for a referendum of the Greek people to vote on Sunday 5 July.

“The possibility therefore remains, following the referendum, of a negotiated solution that would keep Greece in the eurozone,” Durante says.

“We expect that bank holidays and capital controls in Greece will be enough to contain the situation until the likely referendum on Sunday,” he adds.

Miton multi asset fund range co-manager Anthony Rayner also keeps the mood positive as prospects for the Eurozone improve despite the Greek crisis.

He says: “The Greek crisis is not a financial market crisis. For example, the economic environment in the Eurozone has been improving, with the situation helped by a weaker oil price, the European Central Bank Quantitative Easing programme and the related weaker euro.

“Along with the better data, we also know that the ECB intends to be a powerful force in markets for some time, through its QE programme.”

As a result, Rayner says eurozone equity is an attractive place to be.

He adds: “Unsurprisingly, our portfolios don’t reflect a view on whether or when Greece will leave the Eurozone, so there is no exposure to Greece directly or to European banks, which might be more indirectly exposed. We also maintain a zero exposure to Eurozone government bonds.” 

Cityindex research director Kathleen Brooks believes that so far it has not been Greece’s “Lehman’s moment”, and “although markets are rattled, they are not in panic mode right now.”

However, she says market volatility remains high with market contagion moving towards Eastern Europe.

“Although Spain, Italy and the rest of Europe’s periphery are looking relatively unscathed by this, there are some real problems in parts of Eastern Europe including Bulgaria, Serbia and Macedonia, countries with ties to the Greek banking sector. Thus, we may need to look East to see how Greece’s footprint is damaging other countries’ bond markets.”