Risk Management, Trading & Portfolio Strategies

Is Greece set for another bailout?

The Greek government may be forced to request a new bailout, according to a leaked Bundesbank report.

The Greek government may be forced to request a new bailout, according to a leaked Bundesbank report.

Few investors will forget the market turmoil created by the admission by the Greek government that it needed hundreds of billions of dollars to keep its financial system – and economy – afloat.

Three years and over $300 billion later, it appears that Greek leaders are on the verge of asking for more emergency funds. A secret report written by the Bundesbank, Germany's powerful central bank, and leaked by Der Spiegel, a German-language newspaper, indicated that there is a high probability that the government of Greece lacks the resources to remain solvent without additional support.

The revelation could not come at a worse time, as German Chancellor Angela Merkel is currently campaigning for a stronger mandate – and more control in the Bundestag – on a platform of fiscal strength and a future without taxpayer-funded bailouts. The financial support of countries such as Greece, Spain, Portugal and Ireland has faced fierce criticism in Germany, and opposition parties are now clamoring for an explanation from Merkel.

"It is becoming increasingly clear that the Greeks will not be able to avoid a fresh aid package linked to a new debt haircut," Bernd Lucke, who heads an anti-euro political party in Germany, said in a statement published by U.K.-based The Telegraph. 

What does this development mean for global investors? The market volatility created by the eurozone sovereign debt crisis spread worldwide, and the threat of contagion has never really gone away. Rather, European governments have been able to assuage fears over defaults through bond insurance and outright purchases. Yet should Greece apply for another bailout, all bets are off in terms of where global markets head first.

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