From the Portfolio Management Desk: The Recent News from Greece
There has been a lot of speculation over the past few years about Greece’s ability to pay its debt, and its future with respect to its membership in the European Union. The most recent news out of Greece has further fuelled the speculation. On July 5, Greek Prime Minister Alexis Tsipras held a referendum on the latest creditor proposal by the International Monetary Fund (IMF) and the European Commission (EC) - 61.3% of Greeks voted “No” to the proposal, increasing the likelihood of a Greek exit from the Eurozone, and a potential collapse of the Greek banking system. The Greek Finance Minister Yanis Varoufakis resigned on July 6, under pressure from the prime minister and other eurozone governments who viewed him as an obstacle to any future bailout deals. Earlier in the week, the Greek government imposed strict capital controls, closing banks and limiting ATM withdrawals to 60€ ($83 CAD) per day. The situation in Greece is changing daily, and will most likely change again.
Assuming Greece exits the Euro, the expectation is a 50% devaluation of its new currency. This will likely plunge the country into a severe recession, with spiraling inflation caused by increased prices for imported goods and services. ...Click here to read more!