The Next Bailout

Greek_FlagIt has been five years since the newspapers exploded with stories of the Greek debt crisis, which, we were told, threatened the very existence of the Eurozone. Eventually, a variety of bailout packages were negotiated, and things seemed to return to normal.

As it turns out, the current rescue package will run out at the end of June. The European Union finance ministers and leaders of the newly-elected Greek government appear to be far apart in their negotiations on extending the bailout. The European Central Bank, International Monetary Fund and the European Commission have demanded that Greece institute another round of economic reforms, meaning austerity in government spending and services, higher value-added taxes, pension cuts, and a continuing decline in the Greek GDP and standard of living for ordinary citizens. The citizens, naturally, have been reluctant to endure any more pain, and elected leaders from the Syriza Party who ran in opposition to any more austerity, promising instead to cut a better deal, spend more and generally use Keynesian economic theory to restart the economy.. The Greek government recently rehired 4,000 public sector workers in a clear display of independence from the creditor demands.

Greece’s finance minister has agreed to make the next 750 million euro loan repayment to the International Monetary Fund, which staves off immediate default. But there is no question that the country will have to refinance 172 billion euros of debt. No deal means default and, possibly, what people are calling a “Grexit” from the Eurozone. You can expect to suddenly see headlines about the looming “crisis” and once again hear intimate details about the financial situation in Greece. If the negotiations succeed, and Syriza officials win concessions, it could bolster the strong anti-austerity populist movements in Spain, Portugal and Ireland.

Should you be concerned? If you’re holding a private stash of Greek bonds, or are receiving a government pension from the nation, then you should be following these developments closely. If not, then there is nothing about the negotiations which will change the underlying value of European stocks and bonds in most American portfolios. The headlines could cause a selloff, particularly in the event of a Grexit, but corporate earnings and valuations will ultimately prevail, whether Greece is given a grace period, whether it remains part of the Eurozone—or not.

Sources:

http://www.ft.com/cms/s/2/7f31597a-f4cd-11e4-abb5-00144feab7de.html?ftcamp=published_links%2Frss%2Fhome_us%2Ffeed%2F%2Fproduct#axzz3ZV6PABAZ

http://www.huffingtonpost.com/rj-eskow/13-questions-about-greece_b_6621708.html

 

 

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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