Greece faces limbo in euro the twilight series zone
London statement an endgame in greece protracted crisis has flooded markets with euro exit scenarios this week, but investors reckon there still every chance that uncertainty only will drag on for months.
Seeking clear cut outcomes to the euro saga to date has proven fruitless for shareholders, who have instead been forced to tolerate the through of european politics.
And even more used to precedent, odds and precise numbers, asset managers are far from their comfort zone when interpretation the hyper politicized standoff over greece future membership of the single currency.
So rather than mapping binary outcomes, investment strategists are over again looking hard at the grey areas.But nothing so simple.Even though greek voters rejected austerity and is overtaken by anti bailout parties, opinion polls show more than 75% want in which to stay http://www.milagrofilms.ca/bracelets-pandora.html the euro.
When there is when the cash runs out is the crux question.Greece will in all probability need more outside funds from its bailout program before any new elections in june establishes a fresh mandate to secure further tranches of foreign money.
So what analysts are homing in on is whether greece can bridge any gap while still keeping the euro.
Many are looking at the chance that athens issues ious to meet salaries and key service bills for a fixed period, much in the way california did during its budget crunch in 2009 when it issued warrants with a coupon instead dollar salaries and which banks then accepted for cash.
Even so, strategists reckon any greek government ious would quickly act as a proxy for a new drachma and exchange values against the euro would mostly likely plummet used as people rushed to cash out offering greeks http://www.milagrofilms.ca/ a glimpse of the shock of devaluation in a euro ized economy with euro denominated debts.
Really not sure greece could survive for days on end if external money was cut off, suggested darren williams, economist at fund broker alliancebernstein.What an experience of ious may do so quickly is bring home to the average greek citizen just how much more difficult a place it is outside the bailout program and outside the euro.Said that such an unstable twilight zone within the euro but with a parallel proxy drachma could possibly last for almost a year as the euro policy machine churned.
It is something which lasts six to 12 months or some thing lasts longer term depends on how many ious they have to put out, celebrity fad erik neilsen, world chief economist at unicredit.Which is to be a function of how deeply the economy collapses.Limits of any half way system hinge on domestic depositors anxiety and the chance of accelerated capital flight from greek banks.Song would be hard to calm fears of capital controls and, as per argentina break features dollar peg in 2002, forced lead sales of euros in greek banks into new drachmas.
But it is the story changes.Depositor concerns in greece could well infect other periphery euro economies and cause consternation upping the ante for euro policymakers to react, most likely through fresh action from the european central bank to reliquify banks or open ended government bond buying.
Rbs analysts warned on monday that any time another hung parliament government ious could trade as proxy currency as early as july.This may then galvanize a large pro euro vote aim into accepting troika demands.Repetitive, withdraw looms.They added that only returns investors to guessing about wider policy side effects.
Up the pandora box of exit means deposit risk round the periphery.The future of the euro would then be dictated by the following policy response.Binary outcomes by fixed deadlines still seems a dangerous way to invest on this and daily scenario sketching is widely considered a safer option through a likely fraught summer period.
Jesse shairp, global strategist at jpmorgan asset care, said the case was fluid but one possibility was certainly prolonged stalemate, one that may get better because of world markets than a dramatic end game but carrying all the gnawing uncertainty along too.
We dealing in the realms of political economy rather than pure economy and that makes things so much tougher for multi asset investors.Thomson reuters 2012
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