Markets have lost $2-trillion since Greek stalemate began

You'd be tempted to think that Europe's leaders have all but thrown in the towel when it comes to Greece.

EU leaders met in Brussels this week and said they want Athens to stay in the euro zone. But they did nothing aimed at making that happen, and many observers believe it's now only a matter of time before Greece exits the 17-member monetary union. Indeed, officials are talking openly about it now.

Markets are now closely watching the polls in the run-up to the second Greek election in mid-June. Anti-austerity forces made surprising gains in the last election, so much so that attempts to forge a coalition government failed, and a new vote had to be called.

This comes amid a sinking economic outlook for the euro zone.

"It’s been three weeks since the Greek elections produced a stalemate between pro- and anti-bailout parties, unleashing a wave of doubts about Greece’s future in the euro, and about the common currency itself," noted deputy chief economist Douglas Porter of BMO Nesbitt Burns.

"In that short span, the euro has dropped by more than 4 per cent to $1.251 (U.S.), 10-year Treasury yields have hit century-lows of 1.7 per cent, and global equity markets have dropped almost 5 per cent," he said in a report Friday.

The market capitalization of the MSCI World Index has lost about $2-trillion in value in that period, putting the benchmark just about back to early 2012 levels, Mr. Porter added in an interview, noting that while other factors have played into it, concern over Greece was the primary culprit.

"Putting the market cap loss of more than $2-trillion into some perspective, the value of Greece’s nominal GDP was $265-billion (and falling) over the past four quarters, or roughly three Facebooks," he said.

"True, this comparison mixes stocks (equity values) and flows (GDP), but it gives a sense of just how much havoc a grand total of 0.16 per cent of the world’s population can cause for financial markets."
The Globe and Mail