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Jun 25, 2011, 11.15 AM IST
Martial Godet, Head of Investment Management - New Markets at BNP Paribas said that it is difficult to forecast the outcome because of the political angle plaguing the eurozone.
At a European Union (EU) summit in Brussels, European leaders along with the European Central Bank (ECB) and the International Monetary Fund (IMF) promised more money for the debt-ridden nation.
The Catch-22 situation? Greece's parliament which meets on June 28 has to enforce strict austerity measures which include tax hikes and spending cuts. If the parliament does not agree, the EU and IMF have said they will not release the 12 billion euro funding.
Martial Godet, Head of Investment Management - New Markets at BNP Paribas said that it is difficult to forecast the outcome because of the political angle plaguing the eurozone. “Even if there was a solution for Greece it would not mean that the sovereign debt issue for developed countries would be solved.”
Below is a verbatim transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. For complete details watch the accompanying video.
Q: What is the sense that you are getting after that meeting between EU and Greece. Does it look like all problems are over and done with or do you think this is just a relief rally and next week you will be looking at what the Greek parliament is able to get through?
A: At the level of developed markets, it’s more a relief rally than anything else. It doesn’t mean that the solution cannot be found but it is so political that it’s very difficult to forecast the kind of outcome we will have on that and what the various steps that we will have to go through will be before we reach an end on that.
If ever we reach an end because even if there was a solution for Greece it would not mean that the sovereign debt issue for developed countries would be solved. This morning we had a combination of interesting developments mostly announced by the Greek authorities yesterday night and also some good news from Chinese authorities which announced this morning that they had the feeling that inflation was under control there.
Q: Next week would you watch out for what are the key news points, the Greek parliamentary meet, something in terms of the private debt rollover of those who hold Greek bonds? Which are the dates and events that would be important?
A: Its quite interesting to see that to some extent bank shares have been losing grounds in Europe over the past days because we now know that they are going to have to bear some part of the cost related to the Greek bailout which was something that was initially not fully considered. That will be a curse for those European financial institutions.
What is going to be interesting is to see to what extent they are going to have to contribute to the bailing out of Greece. We also now understand that the UK for example will not have to contribute to the second round of bailing out of Greece which is an important indication as the UK has been able to contribute to the bailout of the European countries within the eurozone.
So it means that its going to be now more eurozone and continue to be a Europe issue than a pure European issue as it was previously and its going to put more pressure on Germany to move ahead and also accept maybe more solidarity between the European countries and also face a greater part of the cost relating to the bailing out of Greece.
Q: While the minute details could be worked out and the eurozone might pressurize Greek to accept austerity measures so that it could be much harder for them to get a new bailout, do you think a Greece crisis has been averted at this point?
A: So far we can say that the crisis has been averted. In the scenario where Greece would stay in the Euro is going as good as it can. However, we all know that to some extent the austerity measures without having the freedom to evaluate external prices for Greece is going to be very painful and will take a long time for the Greek economy to recover. It is as good as it can be as long as we want Greece to remain within the eurozone.
Q: For the next two weeks can there be anything major that can upset the applecart and you once again begin to see both the euro and European indices losing or do you think the chances of that happening are very remote?
A: No, it’s not remote. We never know what the reaction of the Greek people on the ground can be and it was very unstable a couple of days ago. Thanks to some efforts at the level of building a coalition in Greece, it’s been doing better recently. The Baltic countries are a great example. They were on the verge of defaulting during the 2008-09 crises.
Those countries decide to go through very deep and sharp austerity measures rather than devaluing their currencies. We know that they had to suffer some decompression of 10-20%. Are Greek people ready to go through that? That is a tough question.
Tags: Greece debt crisis, dollar, eurozone, European Union, European Central Bank, International Monetary Fund, austerity measures, Martial Godet, BNP Paribas
Jun 17 2013, 22:16
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Jun 17 2013, 22:17
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