Greece Crisis: No Need to Panic


Weekend Developments

  • Late on Friday, the Greek government, led by Prime Minister Alexis Tsipris, surprised their European counterparts and global markets by announcing that he would put the proposals put forth by the creditor institutions to a national referendum. The referendum is scheduled for July 5.
  • On Saturday afternoon, eurozone finance ministers refused to extend the existing bailout program beyond Tuesday, June 30.
  • On Sunday afternoon, the European Central Bank froze emergency liquidity assistance, or ELA, to Greek banks.
  • The Greek government has recommended a rejection of the proposals. This is not a referendum on Greece’s membership in the eurozone, but clearly risks of a messy exit have arisen.
  • Greek banks will remain closed until July 5 at the earliest (based on available information right now) and capital controls remain in place in the form of low limits on ATM withdrawals and cross-border transfers.

Newfleet’s View

  • Volatility will remain elevated in the near term. Our base case remains that Greece will not depart the eurozone despite the weekend developments.
  • This turn of events, while complicated, may be necessary given the limited political room the Greek government has to maneuver based on its recent electoral victory and its campaign pledges.
  • Greek government officials have suggested that the referendum will pass, but it is yet too early to tell.
  • Greece is likely to miss the June 30 payment to the International Monetary Fund and go into “arrears.”
  • We will be assessing the market reaction today and looking for investment opportunities.

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Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.