Greece votes down austerity and aid
MONTHLY MARKET COMMENTARY |
Late in June, the Greek government and eurozone finance ministers failed to agree on the austerity measures Greece would need to comply with in order to receive additional bailout funds. As a result, Greece missed its scheduled payment and is now in arrears on $1.7 billion due to the International Monetary Fund (IMF). In response, Greece s government called for a July 5 public vote on whether to accept the austerity measures demanded by the country s creditors in exchange for further funding.
The Greek government called for citizens to vote against the terms in order to send a signal to Europe and the IMF that Greece wants a better deal for continued loans. At the same time, European leaders encouraged the Greek people to accept the measures in order to receive additional funds and avoid missing further payments. Some went so far as to say that a vote against accepting austerity would be considered a vote for a Greek exit from the eurozone (aka "Grexit").
In somewhat of a surprise margin, over 60 percent of Greek voters cast ballots against accepting the austerity measures necessary to receive additional bailout funds.
Despite the reappearance of Greece s debt crisis in headlines and Grexit seeming more likely than ever, reaction from the capital markets has been muted. Volatility picked up and equity markets pulled back, but modestly. The greatest impact on sovereign bonds outside of Greece was focused on highly indebted eurozone countries such as Italy, Portugal and Spain.