The ‘de rigueur’ expression used by the majority of pundits when discussing the tactics of Politicians and the various Sovereign debt problems is:
“They have kicked the can down the road”
They mean by this, “they have pushed the problem away, but fundamentally it still exists”.
The problem is that as you travel further down the road you reach the can again.
The Greek election on the 17th June is just such a moment.
The Greeks are in a που είναι επιζήμια και για τις δυο πλευρές (no win) situation. Vote to stay in the Euro = pain; vote to leave the Euro = pain.
Plainly their best case scenario is to stay in, and have the debt written off (officially, as they have no hope of repaying it as anyone who can count knows) gradually with an easing of the requirements for fiscal austerity.
It must be remembered that if Greece had a currency of its own, its value would have fallen a lot against the major currencies. So if a German Bank was holding Greek sovereign debt which was repaid at ‘par’ in Drachmas it would still have a significant loss when it converted the repayment back into Euros.
However the Greek cake is cut, it’s in a mess and money (lots of money) has been lost.
So what happens if the Greeks vote for anti-Euro parties in sufficient numbers?
BIG MARKET TURMOIL
The markets will panic because the can can’t be kicked; the problem has to be faced.
If the Greeks vote to stay in then markets will bounce higher; that can has been hoofed again.
NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.