Financial Meltdown, Protracted Negotiations: Will the Greek Bailout Deal Work?
On Monday (3rd August) when the Athens Stock Exchange reopened after a five-week shutdown, the share price index plunged by more than 23 percent in early trading. The banking index covering Greece’s biggest banks witnessed the largest decline, down to its 30 percent daily limit. This was the worst stock market bloodbath in decades despite an ongoing ban on short selling in Greek markets. Only in 1987, its share index collapsed by 15 percent in the wake of Wall Street stock market crash, popularly known as “Black Monday.”
The massive sell-off on Monday was partially triggered by the release of three surveys which revealed that Greek manufacturing output has plummeted to its lowest level in July 2015. The surveys have indicated that Greece will suffer a further contraction in its economy this year. The investors are wary about the dismal outlook of the Greek economy which was in recession during 2008-14. In addition, there is general uncertainty over the country’s membership of the eurozone.
