Two issues occupied the markets this week. One was the strength of the US economy, which unsettled equity markets as it boosted the dollar and made a June interest-rate hike by the US Federal Reserve more likely. The other, as so often, was Greece.
While another round of talks between Greece and its European creditors began mid-week, there were fears that the provisional agreement made last month, whereby Greece's bailout would be extended for four months in return for a series of reforms, could unravel.
In the run-up to talks, one European finance minister unimpressed with Greek efforts to flesh out the reform proposals Greece produced last month said they should "stop wasting time". In response, the Greek government raised the prospect of a referendum or another election if its creditors proved unwilling to yield to its demands to renegotiate its debts.
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Yanis Varoufakis, the finance minister, has said that there is cash for salaries and pensions of public employees, but there seems to be little else in the kitty. Austria's Der Standard noted that further deposit flight in the past few days has meant that Greek banks can no longer finance some companies' day-to-day activities, such as importing goods. It may not be long before gaps start appearing on supermarket shelves.
Alexis Tsipras, the head of Greece's populist, anti-reform and anti-austerity Greek government, is "in a bind", said Hugo Dixon on breakingviews.com. He has found last month's deal "difficult to sell to hardliners" in his party, as they accuse him of abandoning many of his election pledges. He is likely to have to abandon pretty much all of them if he is to secure the deal.
Yet the turbulence resulting from a default and euro exit could cause another depression. Hence investors should "expect another fudge", said Nils Pratley in The Guardian. Greece may secure "a few minor tweaks" to the reform programme and "the charade that all is well with Greek debt", which of course is impossible to repay, will be maintained.
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Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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