Greek debt crisis sends stocks to four-month lows

Markets across Europe have gone into danger mode on Tuesday June 16th, as both Greece and its European creditors dig in their heels over bailout negotiations. It seems that the decision on whether Greece will stay in the eurozone is nearing crunch time, which has sent stock markets deeper into negative territory.

City analysts are increasing their bets that Europe will now see Greece default and exit from the eurozone.

On the back of these latest developments, many European stock markets tumbled to near four-month lows. The German DAX index fell around 1.2 per cent, the French CAC 40 declined more than 0.8 per cent and the Euro Stoxx 50 lost nearly 1.0 per cent. 

Over in Greece, the main ATG index fell by 1.5 per cent at the start of trading, adding to yesterday’s (June 15th) slide of more than five per cent. 

Bonds were also feeling the effects of uncertainty, especially Greek sovereign debt which saw yields on it two-year bond surpass 30 per cent, while on ten-year bonds yields hit 13 per cent - which suggests the market is alarmed.

Connor Campbell, financial analyst at Spreadex, commented that: “Signs of progress are few and far between, leaving the markets to continue the negative performance that has been a regular feature of trading in the past month.

“Each side is firmly entrenched in their belief that their proposal is the only feasible option,” he added, before saying that it’s “not the kind of atmosphere that is going to yield a solution”. Mr Campbell then pointed out that the Eurogroup meeting is only days away and there’s still no sign of an agreement.

Yesterday, Greek prime minister Alexis Tsipras announced to the world that his government will “patiently wait for the institutions [to] adhere to realism”, which basically means he’s not backing down. While many analysts believe he’s trying to call the bluff of Greece’s European creditors, similar expressions of intent to not budge were uttered by European officials. 

Mario Draghi, European Central Bank president, spoke for many officials when he said: "The ball lies squarely in the camp of the Greek government to take the necessary steps.”

However, Greece was resolute in reiterating its position, saying that the ball has “always been on them” and that the “measures they are demanding are inapplicable”. 

It seems that the heavily indebted nation of Greece is closer to defaulting and exiting the euro than ever before and the possibility of this scenario occurring increases every day. 
“It could go either way,” said Raoul Ruparel, co-director of Open Europe. “It’s the closest we’ve been to Grexit since this all began.”

Eurozone finance ministers are due to meet on Thursday June 18th in Luxembourg, where the finale of the Greek debt saga might finally be seen.