As Greek political leaders continue to insist the country will not default on its loans and will return to profitability by the end of next year, a Bank of America Merrill Lynch survey of global fund managers indicates that is likely impossible.
The survey found that 92 percent of 199 fund managers skilled in money management believe Greece is just spinning the news with optimism unsupported by the financial facts. Worse for Greece, they believe the markets have already factored in what they believe is the inevitable and are making judgments based on a default. Some 70 percent said the default will happen within six months, but despite that they are less optimistic about the world’s economic situation as they think the markets expect Greece to fall.
“The survey shows investor consensus has priced in, or hopes for, an orderly default by Greece,” Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Research, said in the survey, reported in OnWallStreet. They are now more concerned about the Greek Contagion affecting the rest of Europe, including other Eurozone countries with weakened economies, such as Italy, Spain, Portugal, and Ireland. Greece is the worst off, with a 10.6 percent, a projected debt to reach $515 billion, and a deficit of Gross Domestic Product running at more than 162 percent. “Europe appears back from the brink. But it seems investors are waiting for the all clear from both Europe and emerging markets before committing cash,” Gary Baker, head of European Equities strategy at BofA Merrill Lynch Research, said in the report.
BofA officials said a total 286 panelists with $739 billion of assets under management participated in the survey conducted between Oct. 7 and Oct. 13. The fund managers oversee $570 billion in investments.
European Union leaders will gather on Oct. 23 in a summit that could finally decide whether Greece can be saved and to either devise a strategy to solve the country’s debt crisis or let Greece fall. That includes a plan to recapitalize EU banks or allow a partial Greek default on its debt and force many Greek banks to seek government help or be nationalized. EU leaders have been going back and forth for the last two years coming up with half measures which as British Prime Minister David Cameron appropriately said last week, were always “a bit too little, a little too late,” The Financial Mirror reported.
German Finance Minister Wolfgang Schaeuble told Reuters that Greece’s debt crisis could not be solved without larger write-downs on Greek debt. In July, private creditors agreed to a voluntary write-down of 21% on their Greek debt, a figure which now looks insufficient. Euro zone officials said last week that losses are now likely to be between 30 and 50%, which Greek bank officials said could lead to a nationalization of privately-held banks that could otherwise fail if Greece doesn’t pay them back what is owed.