The impact of Greece leaving the eurozone – the chance of which has increased in recent weeks – while significant, is not nearly as dangerous now as it was in the early part of the European debt crisis when other countries were in dire straits, according to Chief Investment Officer Haig Bathgate.
The biggest risk from a"Grexit" is contagion – the knock-on effect on confidence in other parts of the eurozone. The improved finances of most other countries in the single currency means that any fallout from ejecting Greece would be more contained than would have been the case four or five years ago. Markets, which have been relatively muted since Greeks voted"No" to a bailout package at the weekend, are still trying to comprehend what is going on in any negotiations, a task that isn't helped by the fact that any statements in public from the likes of the Greek and German governments are aimed more at shoring up their political base at home rather than in calming markets.
Haig, speaking on BBC Radio's Good Morning Scotland, also commented on the prospects for British housebuilders.
Now, as we've been saying, there are more talks on the Greek debt crisis today, it seems like the markets stood up to that referendum result on Sunday better than expected - Jamie McIvor is here:
They certainly did, Gary. The Eurozone finance ministers say they expect to hear new proposals from Greece after the country voted on Sunday to reject the terms of a bail-out. The German Chancellor, Angela Merkel, and her French counterpart, Francois Hollande, also called on Greece to make serious proposals. The Greek Prime Minister, Alexis Tsipras, is due to address a summit of Eurozone leaders later today. Meanwhile Greek banks are to stay closed today and tomorrow. On the markets, as Gary was saying, the response was much more muted yesterday than some had predicted, the FTSE in London was down 50 points on the day at 6,535, Wall Street only slipped a little too and in Asia overnight shares have bounced back, the Nikkei in Japan up 1.5%. With me this morning is Haig Bathgate, the Chief Investment Officer of Turcan Connell Asset Management. Good morning, Haig.
HAIG BATHGATE, Turcan Connell Asset Management
So this time yesterday we were all predicting the big falls following on from the Far East overnight on Sunday night into Monday morning, instead it's safe to describe this as quite a muted response in London and Wall Street - why do you think that was?
Yes, I think so, I mean I think you can get a but fatigue about this whole Greece issue, it's been rumbling on for a number of number of years now and ultimately the vote was whether to accept austerity measures or not. It wasn't actually, as was portrayed in the press, a vote to stay within or move out of the Eurozone, so I think it's a combination of it being in the public domain, it being discussed a lot in the run-up and also actually the contagion effect - and I'm not underestimating the impact it would have if Greece did exit the Eurozone, but it's not nearly as significant as it would have been four or five years ago when you had other parts of peripheral Europe in dire straights.
And that is the key part, as far as the markets are concerned, they have factored in all the uncertainty and instability already, we still don't know whether a Greek exit is inevitable or not, it's simply this uncertainty we've already spoken about for sometime continuing, even if perhaps the odds are shortening on an exit.
Yes, that's right a the sort of Punch and Judy show continues and I think this the thing the markets are trying to comprehend, obviously this is all being fought on a public stage, each of the politicians are trying to appeal to their own electorates, so you've got the Germans who are trying to put up quite a hard front and you've got the Greeks who have obviously now been given the mandate by the populace to negotiate on lesser austerity, the reality behind the scenes is they are probably a bit closer to achieving some sort of negotiation and some sort of settlement, but the way it's portrayed and the way that they are covering things in the press is obviously to their electorate.
Will the markets be watching that meeting of the finance ministers closely, will they be actually hopefully of something solid coming out of it today?
Yes, they will be hopeful but I think it will be hopeful, I don't think there is going to be much agreed today. There is certainly a commitment on both sides to continue to talk, which in itself is quite encouraging. The one thing we do know from the Greek referendum as well and just the polls is that the Greek populace do want to stay within the Eurozone, and obviously if you are going to do that you have to accept austerity measures but there is a general commitment to try and hold the thing together, however what the markets are concerned about and what would cause a big sell-off in market is just the inexperience of the Syriza
Government and Alexis Tsipras to overplay their hand effectively and that risks, obviously, an untimely and quite rough exit from the Eurozone.
Indeed and very briefly, Haig, it's a big week for house builders.
Yes, that's right we've got Wimpey reporting and Galliford Try week, we've had results from Persimmon already and Bovis too, generally good to get an assessment of the state of the UK housing market. Effectively the continuation of a Conservative Government is deemed to be a good thing from an economic stability point of view and we've got the Budget statement tomorrow but it's a good barometer of what's going on in the UK and there's evidence that the...
JAMIE McIVOR (interrupts)
Indeed one for us all to be watching with interest as the week progress.
Haig, thanks very much indeed for joining us this morning. Haig Bathgate there of Turcan Connell Asset Management.
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