Taking A Look At Greece - Sidstone, Gray & Partners Market Outlook

By Author: Sidstone Gray
Total Articles: 7
Comment this article

The Greek situation remains in the eye of the storm, and has led to the decision to downgrade its debt to junk status despite a formal request for aid from the IMF and other member countries of the euro-zone to enable it to refinance its maturing debt and avoid a default. It is clear that the contagion is spreading to other members of the euro-zone, and so investors have continued to switch funds from the bond markets of the weaker countries and this has provided further support for the stronger markets. A significant development has been the strength of the US market.
Sidstone, Gray & Partners is a middle market Merger and Acquisition Advisory Firm focused on delivering successful results to our Clients. Our M&A professionals provide unbiased, qualified and technically sound advice to business owners on mergers, acquisitions and corporate finance matters.
The latest developments in Greece have shown that the warning is fully justified. Sovereign debt defaults may still occur, and the single currency system in Europe may not survive in its present form.

If the Greek authorities can implement the austerity ...
... measures that are being demanded before any loans are granted, then the threat of default on Greek bonds may be reduced, and there will be more time for other countries that are in similar difficulties, Portugal, Spain, Ireland, and even Italy, to take corrective action. But the situation clearly remains extremely uncertain, and this has persuaded investors to take evasive action, and to push yield spreads between stronger and weaker bonds to record levels. It was only after considerable hesitation that the Greek government made the formal request for aid. It was clearly concerned that the social unrest that has already occurred in the country would make it extremely difficult to implement even more extreme austerity measures; but in the end it had no choice. The request has produced a provisional agreement for the IMF to provide €15 billion in loans, and for the other member countries of the euro-zone to provide €30 billion, with the amounts varying according to the respective size of the lending country.

Taking A Look at Greece - Sidstone, Gray & Partners Market Outlook - The odds still seem to favour a successful completion of the loan agreement; but each country has still to obtain the necessary parliamentary approvals, and this is producing particular difficulties in Germany. In order to secure the necessary approvals, the German government is insisting that the Greek government produced detailed proposals to meet the budget deficit reductions that are required for 2011 and 2012, as well as for the current year, before it can qualify for the loans. This is not likely to be an easy task; but all the parties are aware of the possible consequences of failure, and so some kind of fudged agreement seems inevitable. This may provide a short-term respite in the markets; but the overall prospects remain unattractive. The gilt edged market has remained relatively stable over the past month, despite the uncertain situation in the UK. There has been evidence of a further modest improvement in the economic background, and the Bank of England is holding short-term interest rates at low levels. But the UK also has very serious fiscal problems, and there are doubts whether the new government formed after the forthcoming general election will be able to cope adequately with those problems. It is possible therefore that it has been the disaster in the bond markets in mainland Europe that has been the main reason why the gilt edged market has performed so well. The economy is clearly continuing to benefit from the monetary and fiscal policies that were introduced to counter the recession; and so although unemployment remains high and the housing market recovery is very fragile, the recovery in activity is continuing.

Sidstone, Gray & Partners strategic advisory process delivers tailored solutions and ensures that the right blend of expertise, resourcefulness and skillful execution are employed to exceed each Client's objectives. With experience in a broad range of industries, Sidstone, Gray & Partners are uniquely qualified to initiate, market, negotiate and execute successful transactions.