The probability that Greece will default on its June 30 debt payment to the International Monetary Fund (IMF) has increased significantly over the past several days. Negotiations broke-down on Friday when Prime Minister Alexis Tsipras announced he would seek a July 5 referendum vote from the Greek people on measures demanded by the country’s creditors. As of Tuesday, Greece will be cut loose from international rescue loans for the first time in more than five years and the country is expected to default on a €1.55 billion ($1.73 billion) payment to the IMF.
The fear from many economists and EU officials is that without further financial support Greece may have to abandon the Euro, leading to a very messy departure from the European Union (EU). The EU also hopes to avoid contagion from spreading to others in the 19-country Eurozone after Greece’s decision over the weekend to close its banks for at least a week to prevent money from flooding out of the country.
We’re very likely to see an increase in market volatility as this situation unfolds. However, it is also important to understand that the Greek economy only represents 0.39% of the global economy1, so it isn’t an important economic powerhouse. Its annual GDP is roughly equivalent to the economic output of the State of Connecticut.2 We would view a Greek default as being much more painful for the citizens of Greece than for the rest of the world.
To help you better understand the current situation we’ve provided several links to timely press releases.
“Greece is heading for a massive economic contraction and is likely to be forced out of the euro zone” according to Mohamed El-Erian, the former chief executive at Pacific Investment Management Co.
This chart helps explain why Greece and the EU can’t agree.
Will distance from Greece save U.S. markets?
These current events are complex and ever changing. You are wise to work with a team of experienced professionals to help you make wise decisions today and in the future.
Chad A. Sander, CFP®
Vice President, Director of Investments, Chief Compliance Officer
PAYNE WEALTH PARTNERS, INC.
601 N. Cross Pointe Blvd., Evansville, IN 47715
Direct (812) 602-6302 | Company (812) 477-6221
1Source: Trading Economics
The information in this material is only as current as the date indicted, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements.