Global equity markets struggled to gain momentum last week as Greece continued to dominate the headlines, with the Greek banking system now on emergency life support from the ECB. There was no progress made at the Eurogroup meeting of finance ministers on Thursday, as the Greeks remained unwilling to give into demands for reform of the country’s pension system. The situation was summed up by Christine Lagarde, head of the International Monetary Fund (IMF): “For the moment we are short of a dialogue, the key emergency is to restore the dialogue with adults in the room”.
However, the Greek Prime Minister, Alex Tsiparis, let his feelings on the IMF be known, accusing them of “criminal responsibility” for his country’s debt crisis.In fairness to Tsiparis, organisations like the IMF and the World Bank have a despicable record of subjugating and impoverishing poorer countries with debt deals that are unsustainable from the outset. Greece will need to compromise in terms of public sector reform, but their creditors also have to face up to the fact that Greece cannot move forward under their current debt burden.
European equity markets have opened higher on the hope that a debt deal on Greece will be struck at the emergency summit of European leaders today. The bottom feeders have moved back into the Greek equity market with bank shares posting double digit gains. However, while we are seeing a relief rally in equity markets, an agreement is still yet to be reached. As well, unless there is a credible sustainable debt deal, and not just giving money with one hand of the troika to pay another, this crisis will continue to fester.