Over the past few months there has been a constant stream of news stories and bulletins regarding the financial markets and the Eurozone crisis. As this has gone on we have tried to keep clients both informed and reassured. This article is much of the same.
The latest headline is the Greek referendum. In order to explain this think back to only a couple of weeks ago when the financial markets were in disarray as they waited for the 17 countries using the Euro to come to a consensus and start developing a meaningful plan for the future.
Last week the full Eurozone, including the 17 Euro based economies, finally came to some agreement which involved both recapitalising their banks and writing off some of the huge debts owed.
This plan was very well received. Whilst the plan is unlikely to be a permanent solution it demonstrates the leaders are looking to take control. As a result markets climbed as demonstrated by the FTSE rising more than 15%.
The news that the Greeks are to hold a referendum has shook the market confidence again. The referendum will effectively ask the Greek people whether they agree to the latest Eurozone plan.
It is a gamble from the Greek government to try and calm the civil unrest as they try to get the population to engage with the plan. The risks are that the Greek people decide they don’t want to have many of their countries debts halved as a protest to any form of bailout and the massive cuts their government have levied so far.
Whilst there is no doubt the Greeks would be worse of if they voted no to the latest plan, there is that possibility and by leaving any referendum until January it is likely the impact will have a drawn out effect on financial markets.
That said, ultimately the Greeks will have to resolve their debt issues as will the Eurozone. Whether the current plan is enforced in its current form it does mark a milestone in that all 17 Euro countries have agreed a way forward. For this reason I do feel there are positive reasons to look towards the longer term. If investors and savers keep that longer term focus they will benefit from the eventual recovery in Stockmarkets.