Investors are becoming increasingly bullish on the long-term Greek outlook, with yields of Greek ten-year bonds now broadly in line with those of their Italian counterparts. In total, Greek yields have fallen by just under 300 basis points since the start of the year, while the spread has fallen by 1.6 percentage points. Refresh the chart in your browser | Edit the chart in Datastream The more bullish stance reflects investors reassessing the level of risk associated with the euro area’s most indebted sovereign, brought about by the remarkable turnaround in the Greek fiscal position since the crisis. Indeed, while Greece ran

The Greek government has announced plans to give €2,000 for every child born in Greece, to curb a plunging birth rate and improve the supply side of the economy over the medium term. The recent crisis led to a national brain drain which affected the economy by reducing the working-age population by 7%. However, the economy’s revival has slowed the rate of emigration, with fewer people leaving as domestic employment recovers. As well as aiming to increase the size of the workforce, the government is aiming to make better use of its existing pool of labour. Greece has a well-educated

Sunday’s general election saw Greece’s centre-right New Democracy party win an outright majority in parliament. The result had been widely expected with the spread of Greek government bond yields over their German counterparts falling by roughly 70 basis points over the past month. The fiscal adjustments made by previous governments mean that Greece’s public finances are manageable in the short term, but the country’s elevated debt burden still limits the scope for any dramatic loosening of fiscal policy. Refresh the chart in your browser | Edit chart in Datastream The chart in this article has been created using Chartbook on Datastream. The Chartbook was

The yields on Greek government debt fell last week, with the yield on the country’s benchmark five-year government bond briefly falling below that of its Italian counterpart for the first time since 2008. The decline since the start of the year is remarkable, with Datastream data showing that the yield dipped below 2% for the first time since the series started in 1997. Refresh the chart in your browser | Edit chart in Datastream Greek equities also surged on the news ― at the time of writing, total returns were up by roughly one-third since the start of the year. Indeed, the

During the heyday of the sovereign debt crisis, speculation over whether Greece would abandon the euro was rife. In the end, Greece defaulted and its economy shrank by one-quarter, but it did not leave the euro. Ever since, there has been concern that Italy’s elevated debt burden might lead to its own debt crisis, and a possible ‘Italexit’. Refresh the chart in your browser | Edit chart in Datastream Fathom’s proprietary indicators suggest that investors continue to see a high risk of default in Greece and a significant risk of both default, and euro exit, in Italy. However, drawing close comparisons between

Fathom’s probability of default indicators calculate the market-implied probabilities of sovereign defaults based upon credit default swaps. The latest data suggest that the market views the likelihood of any European sovereign defaulting as remote, with the indicators for all countries bar Greece remaining below 10%. Refresh the chart in your browser | Edit chart in Datastream For Greece, the likelihood of default remains high — the market views the probability of a default by the euro area’s most indebted nation within the next five years as 28%. Such concerns are likely to be highlighted this summer as Greece seeks to negotiate a

After a prolonged period of crisis, Greece’s economic outlook seems to be improving. GDP growth is up, and unemployment is down. A successful sovereign bond issuance in recent weeks has added to that optimism. Since the most acute phase of the crisis, which many feared would see the beleaguered nation leave the euro area, Greece’s market-implied probability of default within the next five years has fallen from almost 100% back in 2015, to just 40% or so in recent weeks. But given Greece’s still weak economic growth outlook, and the government’s exposure to rising debt servicing costs, we believe that

In the April Market Voice, we outlined a number of reasons why financial stress could reemerge in the EUR market heading into the summer months. In addition to the uncertainty of the 23 June UK referendum, we were concerned that Greece was showing little progress in addressing their debt overhang. And despite aggressive liquidity creation from the European Central Bank (ECB), there was little evidence of much credit generation. The ECB’s adoption of quantitative ease has been successful at maintaining a steady growth rate for the relatively narrow M1 monetary base. As shown in the chart below, the broader M3