Market commentary: Greece on the edge

The saga in Greece continues and so far a solution has not been found. The last few weeks have been very volatile and when one thinks that a solution is close there is always a news item to suggest the contrary and indicate that we are far from closing off the deal. One thing is for sure and that is the fact that patience is now being tested to its limit. 

Writing an article about Greece is challenging as you never know what to expect. I am writing this article fully knowledgeable of the fact that it may not be relevant by the time I finish writing it. At the time of writing talks are at a stalemate and Europe is waiting for Greece to come up with concrete proposals.

Tsipras wants to be viewed as a hero by his people. I am not a political scientist but this is not the time to win political points. It is the time to seal the future of Greece. Greece must show commitment that the country wants to change and must understand that they need to change. The calling of a referendum was part of a strategy and in my opinion and its only purpose was to serve Tsipras’ domestic agenda. 

Whichever way the negotiations will go, Tsipras can now go back to his people and tell them this is what you voted for and therefore don't blame me. Not very heroic, if you ask me. This saga is also proving to be a reminder to European countries of how strong Merkel is. Her negotiation skills and the way she kept her cool throughout the whole 5 months of negotiations is truly remarkable, to say the least.

The consensus in the market continues to be that Greece will remain in the Eurozone but many now acknowledge that a Greek exit is now not a farfetched reality. How the market will react in such eventuality is everyone's guess. It would definitely be easier for the market to move on than it will be for the Greek people to find their own way.

Trading these markets is by no means an easy task. Volatility is the order of the day and patience remains the most important skill. The jump in the German Bund (decline in yield) in recent days is a signal of flight to safety with many staying on the sidelines in a risk-off mode, with general liquidity being in a very dire state.

Really, the only positive I can think of in this Greece situation is the fact that the European Union is in a much stronger position than it was in 2011, and therefore the risk of contagion to peripheral countries is much lower. All this is more of a geopolitical issue than it is an economic one. And in fact, the ECB and European Commission have publicly stated that they are better equipped now than ever before to deal with a Greek exit from the single currency region and better withstand and limit any possible eventual contagion risks.

Parties remain open for discussions but the ball is now in Tsipras and newly elected Euclid Tsakalotos's court, Greece’s new Finance Minister who only a few days ago took over the highly controversial Yanis Varoufakis. For the sake of the Greek people let's hope that they do score a point and save them from the brink, because if they do not, it could get pretty rough for them from this point forth.

This article was issued by Darin Pace, Treasury Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.