Greeks were asked a question over the weekend, and unsurprisingly voted overwhelmingly no to further belt tightening. But really, who would vote yes to voluntarily accept an imposition of harsher financial conditions? Though the answer was loudly received in Bonn and Brussels, the only reality is now more questions than answers as to what happens next.
Global financial markets have hit a rough spot around the globe this morning as Greece appears as though it will default on tomorrow’s debt payment that is due. Money is flowing freely out of the PIGS (Portugal, Italy, Greece, Spain) and into Germany and Switzerland predominantly. Domestically, Greece has basically shut it’s banks and limited ATM withdrawals to prevent large scale emptying of Greek banks. The Euro currency, and global currencies for that matter, are not much changed over pre-weekend levels as the lead up to this event has basically been built in over the last few months. Unfortunately, this event will probably not be the culmination but perhaps just the beginning of a longer period of turmoil as this may just be the first domino to fall,
On Friday’s much anticipated deadline, Greece deferred a debt payment due that day, saying it would combine four payments due this month into a single lump sum to be paid on the 30th of June. I guess that means more back and forth for the Euro for the balance of this month. The shenanigans continue.
The Euro is gaining another 1% against the US$ today as Draghi talks up the latest European economic growth (is that an oxymoron these days?) reports in the form of GDP numbers just released. Ever the optimist, he seems to have convinced the currency markets that Euros are worthy of buying again today, continuing a 7% rally off of the March 1.05 low. The naysayers may have their turn in the days to come as Greece faces a deadline for a €300M IMF loan repayment on Friday. How that gets resolved (or not resolved) could set the tone for the Euro for the next little while.