Greece is on the verge of leaving the Euro. Whilst Eurozone capital markets are likely to deliver an initially muted response, we will see a long-term re-valuation of the price of peripheral Eurozone bonds and stock markets as investors price in the risk that other countries may, in time, follow Greece.
The comments from Tom Elliott, International Investment Strategist at deVere Group, one of the world’s largest independent financial advisory organizations, come as the Greek debt crisis is reaching a climax following Thursday’s failed crunch talks with the Eurogroup finance ministers.
It is becoming increasingly clear that the Greek saga is coming to a head. The Greek government knows it. The IMF knows it. And the Eurogroup knows it. We’re moving into unchartered waters. We’re about to witness the fragmentation of the single currency and witness the return of the drachma.
How are Eurozone capital markets likely to immediately respond?
Not with a bang but with a whimper.
The ECB is able to limit contagion to other Eurozone bond markets through its Open Market Transaction