Greece & The Euro

For the better part of a decade now, the world has been hearing stories about financial woes in Greece in addition toGreece_1 growing tension between the Greeks and other European countries taking part in the Euro system. For those who aren’t particularly attached to the Euro or major European industries for purposes of investment, it’s been easy to gloss over these stories; from afar, it’s simple to shrug off the news and assume everything will work out.

But who would have really thought that this far into the apparent success of the single currency system in Europe, Greece might actually be on its way out? According to some off the latest reports regarding current debt management negotiations and Greek impact on the Euro and European stocks, a departure from the Euro has become a real possibility for Athens.

Following the latest breakdown in debt negotiations between the International Monetary Fund and Greek officials this past week, Reuters made note of “another setback in Greek debt talks took their toll on European markets.” The article goes on to mention that “Greek assets bore the brunt of the pain,” and yet as negotiations with the potentially defaulting nation continue to go poorly, there’s a growing sense among some that the Euro as a whole will continue to be held down.

Measured against the U.S. Dollar, its most prominent international “competitor,” for lack of a better term, the Euro actually showed some resilience in the week directly surrounding the most recent negotiations, but it seems to have a value ceiling of late in a broader context. However, throughout 2015 thus far, the Euro seems to be capped at roughly a 1.4 Dollar valuation. It’s a strong position, to be sure, but one that doesn’t approach the Euro’s past dominance, and one that may be unlikely to improve further with ongoing turmoil in the situation with Greece.

But an actual exit from the single currency system by Greece would be an unprecedented situation for all involved. Opinions appear to differ around Europe as to whether or not it would have a significant adverse impact on the value of the Euro or European markets in general.

It does seem as if government officials around Europe are discussing the idea of Greece defaulting and/or exiting the Eurozone in whispers, as if the idea shouldn’t be talked about at all, but there’s no longer a choice. There appears to be a prevailing sense of optimism that some sort of deal will be worked out to allow Greece to take on more debt in exchange for immediate financial reforms. But the existence of a ‘Plan B’—essentially a contingency for negotiations with Greece not working out—proves that optimism is waning, and at least some European officials are uneasy about it.

On the other hand, there are some European powers more or less ready to move on. Recent polls showed that 70 percent of responders in Germany want no more concessions for Greeks in bailout talks, and 51 percent specifically want Greece out of the Euro. Germany, and by extension Chancellor Angela Merkel, have been more outspoken than other European countries about accepting a Greek exit from the single currency system, but this attitude suggests some in Europe would rather cut their losses regarding Greece.

How exactly all of this will impact European stocks and the Euro moving forward is difficult to determine. But for investors around the world who may have gotten into the habit of shrugging off headlines about Greek debts, it sounds as if things are coming to a climax. The impact of Greek negotiations, no matter which way they go, will soon be a major factor in European markets.

Guest Post : Submitted by Patti Conner   :

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