March 14, 2011
Unexpected, yes, but is it a “game-changer”? The initial reaction from investors to the deal agreed by eurozone leaders at the weekend was above all surprise that anything at all had been achieved so low had been expectations.
That helped explain a relief rally that saw borrowing costs fall for the peripheral eurozone countries but far less than they did after the “shock and awe” rescue plan was unveiled last May. “We are certainly in a better place than we were last week,” says Padhraic Garvey, strategist at ING.
But it did not take long for scepticism to set in. The deal, which extends the eurozone’s bail-out fund, eases rescue terms for Greece and increases policy co-ordination, is for many investors merely an extension of the eurozone’s current strategy of trying to buy time by pushing the problem down the road rather than embarking on something more radical.
“The latest eurozone deal follows a long line of announcements that are yet to change the game,” says Tamara Burnell, head of sovereign and financials analysis at M&G Investments, the UK investor.
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