This is the question which looms on everyone’s minds at the moment from political leaders to global investors. Since it is evident that the political atmosphere in Greece is at an impasse and there is mounting ‘anti-austerity’ pressure in the upcoming election, it is looking more and more as if Greece will default and pull out of the EU. In addition, it has been reported that news is coming out of Brussels that there are talks about a possible end of the euro.
On Monday, financial markets were in turmoil as investors prepare for Greece’s imminent exit from the single currency and just the day before it was admitted that the ‘elite’ European policymakers were seriously considering the possibility that the single currency may be doomed. Markets were tumultuous as oil, shares and the euro were heavily unloaded by investors who fully expect Greece to depart the EU.
Again, Greece is stalling but EU leaders have only given President Karolos Papoulias until Thursday to join the continuing talks and broker a deal. Furthermore, Chancellor Osborne warns that even the thought of Greece exiting the euro is creating havoc in economies throughout all of Europe. He further believes that the crisis unfolding in the eurozone is significantly impacting growth in the region.
As a result of the uncertainty surrounding Greece’s departure, borrowing rates are skyrocketing for Italy and Spain because of the very real fear that they too will succumb to the contagion that very well may spread throughout all of southern Europe. On Monday, the FTSE 100 Index dropped more than 100 points, losing approximately two percent of its total value. As well, Madrid, Athens, Paris and Frankfurt saw huge falls in prices of shares.
At the end of the day, investors sought out safe havens in Germany (bonds) and the Great British Pound which benefited those two countries to some extent. Unfortunately, there is still a great deal of concern about the future of the EU.
