Oh dear, another political crisis in Greece and an election due on January 25th. So far, markets are reasonably calm about the outcome. The question for WealthiFi readers might be “Will Greek bank deposits show similar inertia?”.
WealthiFi would make the following observations:
1. Current polls suggest the leftist debt-repudiation Syriza party is biggest party if not majority(on 29%).
2. Existing government will try to scare electorate with potential market response to Syriza seizing power.
3. However, how much fear mongering can one generate without causing a response from domestic bank depositors?
The key metric in next few weeks to watch is bank deposits. The experience of Cyprus(capital controls and depositor bail-in) won’t be lost on Greek depositors and does one risk waiting for the election results? The ECB and Germany must also weigh up the merits of alarming Greek depositors as to the risks of a Syriza-led debt stand off.
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