Why the Eurozone May Need More Monetary Stimulus
GDP (gross domestic product) growth was expected to rise in Q2 on the back of the monetary stimulus from the ECB to boost economic activity.
We present to you an overview of what was relevant from the ECB’s September policy meeting on September 3 and Mario Draghi’s press conference.
In the coming week, Greece is due to present its next set of austerity measures, which it must implement in order to secure new financing.
On July 13, the Greek saga hit another milestone. Eurozone ministers reached a unanimous agreement to bail Greece out again.
The fallout from a Grexit could rise to mythic proportions, especially if it occurs simultaneously with the collapse of the Chinese bull market.
Crisis has embroiled Greece for more than half a decade. The once prosperous economy has been reduced to shambles and is teetering on the verge of bankruptcy. How did Greece get here?
Eurozone ministers gave Greece until yesterday to come up with a concrete bailout proposal. Greece submitted its plan two hours before Thursday’s midnight deadline. The plan will be discussed in an emergency Eurozone summit on Sunday.
On June 19, Russia and Greece signed a preliminary agreement for “cooperation on a pipeline that will bring Russian gas to Europe through Greece and Turkey.”
Greece’s debt-to GDP ratio stands at 177%. Currently, that’s what Greece (GREK) needs to unburden. It’s what caused the crisis.
The crisis in Greece has been weighing down European stocks over the past week. On Monday, July 6, Alcatel-Lucent (ALU) in Paris opened 1.8% lower.
On July 6, Greece’s finance minister, Yanis Varoufakis resigned. In the press, he has been accusing the European leaders of spreading terrorism in Greece (GREK).
The Greek referendum results are in—61.31% of Greece has voted “no,” while the remaining 38.69% voted “yes” in response to the possible bailout.
A Grexit—Greece exiting the Eurozone—could have a negative effect on Greece’s bordering countries. The rest of the Eurozone is also vulnerable.
On June 29, Standard & Poor’s downgraded Greece’s sovereign debt rating from CCC to CCC-. Currently, Greece has a massive debt load of over 300 billion euros.
As a result of its default, Greece has been cut off from any further IMF funding until the debt is repaid. It lost access to over 16 billion euros.
Uncertainty regarding whether Greece would default on its debt or accept the troika’s conditions lessened as Greece officially defaulted on its debt payment.
Macroeconomic indicators in Germany and France look to be strong, which could be a tailwind for equities. However, cautious investors should wait it out until some outcome is apparent for the Greek economy.
The Eurozone is much better prepared to tackle Grexit now than it was in 2012. Most countries have reduced their exposure to Greek debt.
Greek Prime Minister Alexis Tsipras walked away from negotiations this weekend and called for a referendum from his people on July 5. This surprising turn of events has sharply raised the probability of a Grexit.
Central bank actions have been driving markets in Japan, China, and India, among other economies. The fall in the prime lending rates in China lifted Chinese stocks.