Bailout for Greece in jeopardy.

3rd November 2011

Ian Copelin, Investment Director, my wealth, comments “The strong rally in October came to an abrupt end at the start of the week after the Greek Prime Minister, George Papandreou, unexpectedly announced plans for a parliamentary confidence vote and referendum on the rescue pact.

Although Europe’s financial turmoil is dominating media headlines and the Group of 20 summit in France, equity markets have started to recover after yesterday’s statement from the US Federal Reserve saying that economic growth had strengthened and that it is prepared to take action to safeguard the recovery and today’s surprise cut in European interest rates by 25 basis points to 1.25%.

Although the European Central Bank (ECB) was under pressure to reverse this year’s two rate increases, only 4 out of 55 economists expected a rate cut.  This was seen as a very positive and bold move by Mario Draghi, in his first meeting in charge of the ECB.

European leaders last night raised the prospect of the 17 member area breaking apart, with France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its Euro membership – in addition, the German Chancellor, Angela Merkel, and French President Nicolas Sarkozy, said that they would withhold the €8 billion of European aid if it votes against the package agreed upon only last week.

Having fallen 4.92% over Monday & Tuesday, the FTSE-100 has recovered just over 2.5%.”