Newspaper article The Chronicle (Toowoomba, Australia)

Few Economic Links to Greece; ACHIEVEIT Financial Planning's Naomi Alletson Provides Advice for People in Toowoomba Wondering How the Financial Situation in Greece Could Impact Us

Newspaper article The Chronicle (Toowoomba, Australia)

Few Economic Links to Greece; ACHIEVEIT Financial Planning's Naomi Alletson Provides Advice for People in Toowoomba Wondering How the Financial Situation in Greece Could Impact Us

Article excerpt

THE situation in Greece has escalated quickly in recent days and they have not made a required loan repayment.

Greece and its main creditors (the International Monetary Fund, European Central Bank and the rest of the Eurozone) have been negotiating since January on the current bailout agreement and the further need for austerity measures in Greece so that it may receive the next tranche of payment.

While there was a lot of optimism that a deal would occur, the Greek Prime Minister Alex Tsipras instead called a referendum for the Greek people to decide if they would accept these austerity measures.

This referendum has been called for Sunday, July 5. The referendum will not include a vote on whether Greece will stay in the Eurozone and keep the Euro.

With uncertainly running high in Greece, its citizens naturally fear they will wake up one day and their Euro bank deposits will have been redenominated into a new Drachma worth 50% less than the current value.

So they have been taking their money out in droves with the outflows escalating to around e1/41bn/day lately.

As a result of pressures already building on its banking system, a decision was made to close Greek banks, for the week beginning June 29, until after the referendum and a e1/460 limit was placed each day on ATM withdrawals.

The Greek share market is also closed.

While the consensus is that most Greek citizens want to stay in the Eurozone and keep the euro -- and therefore the result of the referendum will be ''yes'' to the creditor proposals -- financial markets have reacted to the uncertainty.

The current Greek government, led by Alex Tsipras, is campaigning for a ''no'' vote which has added to the uncertainty and volatility.

As a result, a ''yes'' vote would spell the end of the current government, while a ''no'' vote would leave the rest of the Europe to decide on future membership of Greece in the EU.

The worst case outcome would be for a Greek exit and for Greece to move to its own currency.

If Greece decides that it needs to start printing its own money to reduce the value of their debt, and since it can't do this in the euro, it would have to exit.

This may take several months to unfold and it could be very disorderly, which would be bad for financial markets in the interim, and be very bad for stability in Greece.

IMPACT ON THE SHARE MARKET

While uncertainty was expected because of Greece, the situation changed rapidly and surprised markets as a result.

This has led to financial market volatility and seen losses in share markets across the world on Monday, including Australia and the US, as well as Europe.

Bond yields have also fallen in the US, Australia and Germany as investors flocked to assets perceived to be less risky.

Bond yields have risen in Italy, Spain and Portugal on concerns the situation in Greece could spread to other peripheral countries, through concerns over the banking system and linkages to Greece through debt holdings. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.