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Greece buys Europe time but no solution

Monday, June 18, 2012 - 02:23

June 18 - Investors' initial relief about the Greek election result was wiped out by fresh worries about Italy and Spain's debt problems. Analysts say the euro zone has bought itself some time, but the markets want to see a concerted effort to end the crisis. Joanna Partridge reports

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It wasn't the rally many had hoped for. European shares only got a small boost from the results of the Greek election, before turning negative. They were dragged lower by investors' renewed concerns about Spain and Italy's debt problems. Carsten Brzeski is an Economist at ING. SOUNDBITE: CARSTEN BRZESKI, SENIOR ECONOMIST AT ING, SAYING (English): "Obviously this Greek exit scenario, this gloom and doom scenario is now off the table. But at the same time, I think markets are right now a bit more asymmetric, which means they react very strongly to negative news but they would only react very mildly and very limited to positive news." The positive and negative news isn't just coming out of Greece. Investors are worried about Spain's banking and fiscal problems. PTC: Investors were recently accused of being addicted to bailouts. Now the relief rallies keep getting shorter and it's becoming hard to see what it would take to convince the markets. It seems investors are no longer happy with the euro zone buying time to solve its problems - they want a real solution, and soon. Justin Urquhart Stewart is from Seven Investment Management. SOUNDBITE: Justin Urquhart Stewart, Marketing Director, Seven Investment Management, saying (English): "The Greek government has to be seen to be carrying out re-negotiations of the deal, it cannot not do so. However there's only a limited amount they can really do, are they going to be able to adjust any of the core elements of the bailout package, the answer is no. What they will be able to adjust, I suspect, as long as the others are willing to go along with it, will be some of the timetables, maybe extending the restructuring by a year or so." The euro zone is moving towards greater integration. But that takes time. Michael Hewson from CMC Markets says European leaders still aren't working together. SOUNDBITE: Michael Hewson, Senior Analyst, CMC Markets, saying (English): "All the different EU leaders are basically playing to their own political gallery. At the end of the day, France essentially wants Germany to open its chequebook. Well, Mr Hollande, there's a price to pay for that. You have to give up a certain amount of fiscal sovereignty and you can't expect German pensioners to retire at 67 when you've cut the retirement age to 60. And it's that sort of mixed messages that markets are looking at and thinking there's never going to be a solution." Greece's exit from the euro zone has at least been postponed. But that only gives EU leaders a little more time to find a way to stop the crisis. And they're likely to see at the G20 meeting that world leaders' patience with Europe's woes is also wearing thin. Joanna Partridge, Reuters

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Greece buys Europe time but no solution

Monday, June 18, 2012 - 02:23