This coming week is going to be one of the biggest that anyone can remember. There’s tons of global data, elections, central bank activity, and earnings.In his latest Sunday Start note, Morgan Stanley’s Joachim Fels is really just watching three events:
- Next weekend’s Greek election.
- Thursday’s ECB meeting (to see if Draghi is turning dovish).
- Fridays US Non-Farm Payrolls report (to see if it’s weak enough to push the Fed towards more easing).
On the Greek election, he sees pretty huge statkes.
No less than the future of Greece’s membership in the euro and the EU is at stake in the Greek election next Sunday. True, the polls suggest a majority for the two parties supporting the current government and the adjustment programme. However, if the pollsters get it wrong and there is no stable majority for a continuation of the current policy path in the new parliament, Greece might
abandon the programme, the European partners might withhold further aid payments, and Greece might decide to leave the euro to monetise her debts and deficits – thus joining the US, UK and Japan in the printers’ club. As Arnaud Marès has explained…, a Greek euro exit would amount to a change in the nature of money in the euro area, which would lead to massive deposit flight from other challenged euro members and could unravel the single currency altogether. This is why I’ll be watching the Greek election next Sunday more closely than the second round of the French presidential election on the same day, where the outcome seems more predictable and the consequences are more widely understood.