Why has the air gone out of markets quite so quickly after an election result which delivered what many people consider to have been the best result in the circumstances? Investors’ relief has quickly evaporated as they look beyond the election to the fundamental problems of the Greek economy and broader issues across the rest of the eurozone.
HSBC’s David Bloom, head of foreign exchange strategy; and Janet Henry, chief European economist, have written a note this morning which sets out the tasks facing a new government in Athens. It makes for sober reading (with my notes in square brackets):
In sum, Greece needs foreign bailout cash to function.
If it slips up in the commitments it has made to slash government budgets that cash may dry up. HSBC (and many others) think it’s a tall order and so a ‘Grexit’ is still on the cards.
That’s one reason why markets are looking so rocky even before a coalition is formed.