Europe After The Greek “NO” Vote…
By Dennis Rhee, managing member of Treesdale Partners, and portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR) and AdvisorShares Gartman Gold/Yen ETF (GYEN)
In an unanticipated result, the Greeks showed a strong rejection of the bailout plan primarily due to the pension cuts that were on the table. The Greek Prime Minister Alexis Tsipras gained a huge vote of confidence by his constituency and will be expected to negotiate a better bailout package.
The initial capital markets response has been global stocks down, Euro lower, Yen and US dollar stronger. European bond yields are wider and this will be the impetus for the ECB to act expediently as this is counter to the master plan of lowering rates with quantitative easing. Ultimately Germany needs Greece and other weak EU countries to keep the Euro weaker. Imagine if the Deutschmark was trading. Germany would be in a similar situation as Switzerland with an inflated currency and all the problems that come along with it. Along with the fear of contagion, we feel that a deal will be worked out and Greece will stay in the Euro.