KNOWLEDGE CENTER

Knowledge Center Archive

May
29
2012

Greece vs. Eurozone: Game of Chicken Enters Round Three

By SEI Investment Management Unit

Greece’s experience as a member of the single-currency eurozone has hit yet another rough patch. Investor reaction to the current showdown—rushing out of risky assets and into perceived safe havens—is identical to the reaction seen in earlier episodes.

  • While SEI’s funds have little or no direct exposure to Greece, a disorderly breakup of the EMU would rile global markets.
  • Since its fiscal shortcomings came to light, Greece has engaged in two intensive rounds of negotiations with the troika of the European Commission, European Union (EU) and International Monetary Fund (IMF).
  • In return for accepting severe, depression-inducing austerity measures, Greece has received significant financial assistance and enjoyed a major restructuring of its debt.
  • However, Greece’s progress in implementing promised reforms has been slow, and recent national elections have thrown this fragile state of affairs into turmoil.
  • As a result, European leaders have finally started to publicly entertain the possibility of a Greek exit from the eurozone, which for some time we have viewed as inevitable.
  • When and how it occurs is still anyone’s guess, however we doubt it will occur prior to the June 17 election.
  • In the meantime, we expect the political drama in Europe to remain elevated.

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