Jun 13, 2012, 06.07 PM IST

Need another bailout to keep Greece in eurozone: SocGen

Claudia Panseri, Head - equity strategy, Societe Generale, says that Greece election on June 17 and Euro Summit on June 28-29 are two big upcoming events.

Midcap Radar at 01:30 pm

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Claudia Panseri, Head - equity strategy, Societe Generale, says that Greece election on June 17 and Euro Summit on June 28-29 are two big upcoming events to watch out for. She also says that a guarantee scheme will be a major support for both banking sector and overall euro equities. It will be very difficult to make a scheme which will guarantee deposit in all the euro area.

Below is the edited transcript of her interview to CNBC-TV18. Also watch the accompanying video.

Q: What are the big events that you are watching out for? Would it be how the Spanish bank bailout will pan out?

A: Greece election on June 17 and Euro Summit on June 28-29 are two big upcoming events to watch out for. In Spain, bond yields has increased and bank deposits have decrease but I think all possible steps will be taken to avoid bankruptcy and risking of overall banking sector.

We remain very cautious on the euro market, and for time being we have kept our target unchanged, which points to further decrease in indices in coming month.

Q: Yesterday, the ECB said that a banking union has acquired and the key step for that would be the deposit guarantee scheme. Do you think there could be any movement on that front? Is that keeping the market alive today and a key trigger in near-term?

A; A guarantee scheme will be a major support for both the banking sector and overall euro equities. It will be very difficult to make a scheme which will guarantee deposit in all the euro area. However, it will be a key message for overall equities.

Q: What is leading to a wild swing in the yields at the moment in Spain?

A: Interest rates at high level are a major risk for the banking sector. More than Spain, high yields on Italian bonds is a worrying factor.

Q: What factor is lifting the European markets? How are the markets shaping up for the Greek election result? If Posak New Democracy Union wins which is best case for the markets, how do you see markets panning? How will markets react if result deviate markets calculation?

A: The best case is not the base case. The best case will be to keep Greece in the euro zone. But, I don't think that investors will welcome Greece existence in euro zone because that will lead to another bailout and create short-term low visibility. Making the market trade in the same range for a while is not the ideal but the best case available.

The worst case will be, if on Sunday, Greek decides to make a vote for austerity and again the monetary union. In that case, a risk of contagion will be on the rise without a fire wall which means that market will again come down. The market is hoping for a best outcome so it’s in green today.