Igor de Maack, fund manager, DNCA Invest Convertibles, DNCA
Greece has finally capitulated and obtained an agreement very similar to the one offered prior to the referendum. In six months, Alexis Tsipras will have achieved only one thing: giving the illusion that his people had bargaining power whereas they actually had very little other than a weak economic recovery and a good primary budget balance before his election.
Since he came to power, Greeks have been withdrawing their money from banks and they have not been proven wrong since the banks have now closed and capital controls will shortly be introduced. In short, this agreement which has yet to be validated by various parliaments (although agreed in Greece) does not necessarily avoid the Grexit since political stability in Greece is far from assured (forthcoming strikes, a fragmented majority, new elections?).
Alexis Tsipras has failed since the new measures imposed by Europe mean being placed under constant supervision. For the financial markets, the prospect of a disorganized summer Grexit has been postponed indefinitely.
They have already welcomed this agreement and will quickly focus more on micro-economic topics (publication of the firms’ results) or more bond related topics (the forthcoming increase in US rates). This third aid plan may be the last. The terms are so constraining that one could even wonder whether it was drawn up with Greece’s future exist from the euro zone in mind.
If Alexis Tsipras has failed, Europe and countries such as France should not necessarily start singing the sweet melody of triumph. This agreement, no more historical than previous ones, has shown the glaring internal divide on the subject of the economic path to follow.