MENU

Greece reaches debt deal: Markets rejoice

Somebody go wake up the kids — Greece finally hit the pinata. The struggling country appears to have agreed with the European Union on a debt deal that will “save” the country from bankruptcy.

After weeks of being just “hours from a deal,” Greece’s parliament voted in favor of very stringent austerity measures that could reduce public wages by as much as 22%. In exchange for strict public spending cuts, Greece will shave $132 billion (about half) of its private sector debt off its books and will receive a $171 billion cash infusion from the EU and International Monetary Fund to keep it out of bankruptcy.

Greece’s citizens aren’t too happy about the deal — and with good reason. The country itself was in a no-win situation, facing either bankruptcy or severe budget cuts. In just a two-year period, Greece’s unemployment rate has nearly doubled to 20.9% and almost half of Greece’s unemployed citizens (47.5%) are currently listed as “long-term unemployed.”

anImage

Source: TradingEconomics.

Don’t get me wrong, I do understand the reasoning behind the stringent budget cuts. If the EU had appeared to come off as soft on Greece, it would offer an easy “out” for Portugal, Ireland, and potentially Spain and Italy if things continued to deteriorate for those debt-riddled economies. In order to present a sheriff-like appeal, the EU had to take a hardline approach to its dealing with Greece and drive home the point to other EU nations that default is not the answer.

The other point that was driven home is that Greece is going to be a mess for a long time. These austerity measures are only bound to make a struggling economy even worse.

anImage

Source: TradingEconomics.

Adjusted savings as a percentage of gross national income are at 30-year lows, which bodes poorly for the country’s citizens, which are dealing with a rapidly shrinking economy and rising unemployment rates.

This deal might be enough to get European banks BNP Paribas (OTC: BNPQY), Deustche Bank (NYSE: DB) , and HSBC Holdings (NYSE: HBC) to breathe a temporary sigh of relief since they have Greek debt exposure of $7.1 billion, $2.5 billion, and $1.9 billion, respectively, but it does nothing to change Greece’s near-term economic outlook.

You know, on second thought, I’ve changed my mind. Go put the kids back to bed — there’s nothing to see here that materially changes Greece’s situation.

Don’t let your search for solid investments be derailed just because Greece can’t get its act together. Dean Morel, The Motley Fool’s Investment Analyst recently released a report titled “The Motley Fool’s Top Stock For 2012“. Best of all, you can find out the name of Dean’s top stock for free for a limited time.


The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!