The world has seen how Greece struggled in the past weeks to avoid default on its debt to the International Monetary Fund and to keep its economic stability.
The country’s efforts to settle a bailout program appeared to be unsatisfactory for the European leaders as they ended the long weeks of negotiations without a deal. Because of this, Greece ultimately failed in repaying its 1.6 billion euro debt.
Moreover, the unfortunate events for Greece just kept on going, as the European Central Bank announced that it would not pursue its emergency loan program. This decision pushed the Greek government to make a counter action to close its banks and limit ATM machine withdrawals.
Still trying to avoid further damage in their country and their economy, Greek Prime Minister Alexis Tsipras called for a referendum to decide whether to accept or decline the creditors’ reform proposals. The Greek people then decided on the July 5 referendum that they don’t want to submit to the creditors’ demands, ending the session with a 61.3 percent of NO votes.
Greece declined the proposal even when the European leaders have already warned that without the deal, the country’s economy will melt down.
Greek Economy’s Effect on Global Markets
People may be curious how a small country like Greece make investors anxious with every update regarding its economic status. The global markets are greatly affected by the situation of the Greek economy.
When the people decided to turn down the proposal, the international market was wrapped with the investors’ growing fear for the security of their stakes.
Some of the countries that will be affected by the fall of Greece’s economy are Germany, France and England, which have been the country’s biggest lender. Greece has played a significant role in the global economy and its collapse would definitely influence the market.
Even the US economy could be affected in case of a breakdown, as many American banks provided default insurance to banks associated with Greece. In case the country failed to pay its debt, these American banks will have to compensate for the losses.
The unending possibility of a Greek exit from the euro zone also fuels concerns of investors and market watchers.
Greece Secured A Deal, How Will This Affect the Market?
Earlier on Monday, European Council President Donald Tusk announced that Greece finally settled an agreement with the European leaders after long overnight negotiations in Brussels. The deal includes a 50 billion euro fund to help Greece get back on its feet. In return, Athens will have to enforce solid reforms.
The effects of the deal have been evident in the markets on Monday, as European indices opened strongly in earlier trade. The euro was little changed at $1.11.
Positive reactions towards the deal continue on Friday, as the US stocks ended at over 1 percent higher. The dollar also gained on Monday against the yen at 123.44.
Now that Greece has entered a compromise with the European leaders, investors are closely observing the market and looking for signs of stability in the Greek economy.
The Greek government will play a big role for the country’s recovery and leaders from other countries are looking forward to the government’s actions, while they try to win back the trust of the creditors and investors.
Chinese Stock Market Recovers
While Greece has been the focus of investors in the past weeks, another significant market crisis has advanced in Asia, as China faced a devastating market crash.
The Beijing authorities did their best to avoid the sell-off by limiting interest rates and preventing major shareholders from liquidating their shares.
However, after a series of actions by the Chinese government on Friday, the Shanghai Composite Index gained 4.54 percent, to settle at 3,877.8 points, reaching its highest level for the week.
So far the Chinese stock market is showing signs of recovery and investors are looking forward for better results in the market.