The agreement reached last night in Brussels between the Greek government and its creditors, most notably the European Union (EU), shows once again that when push comes to shove Europe's leaders will do whatever it takes to keep the single currency intact.
Of course this third bailout isn't a done deal – the Greek Parliament (along with some other EU legislatures) has to approve the agreement this week with conditions that are seemingly tougher than ones proposed only a few weeks ago – leaders such as Angela Merkel know that in order to sell the concept of lending yet more money they are going to have to get some guarantees that Greece will stick to its promises. On the other side of the argument, there seems to have been some compromise to the Greek demand that the conditions attached to the loans should be more related to promoting economic expansion – Prime Minster Alexis Tsiparas said he had secured a"growth package".
The main point we can take away from the last few weeks is that Europe can and does take us to the brink, only to reaffirm at the last possible minute that the euro is a key asset that it will do almost anything to defend. While we know that Europe may well take us to the precipice again, we believe the chance of a"Grexit" is highly unlikely, and even more remote today after the agreement. From an investment viewpoint, those who bet against Europe pulling through on these issues and eschew continental equities as a result may well be missing out on the considerable potential in European assets.
This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.