Greeces Failed “Oxi” Vote. EU wins by austerity once more.
After harsh days, Greece finally had a clear answer for the European Union and its central bank. The Greek said no to all the new austerity measures. However a week later, Greeces prime minister went back on the peoples wishes, the leader of the anti-austerity party Syriza caved in, and paved the way for more austerity measures. For the Greek people who vote “Oxi”, this is a disaster, but for global markets, it seems to have brought stability, and benefits Europe and the rest of the world, albeit likely at Greece’s expense.
Despite all financial logic and argument, gold bullion prices in the international markets keep losing points. What were a safe haven for decades, now is ignored by investors who are fleeing away the possible “Grexit”.
Syriza sailing upon heavy seas, banishes momentarily its opponents before caving in to the EU’s pressure.
To be fair, everyone was against Syriza and its position facing the European leaders. Greece’s Prime Minister, Alexis Tsipras, was criticized for his stubborn position when the terms of the new bailout were proposed. They meant more austerity periods and more suffering from a people already in serious pain. He didn’t say no at that moment in Brussels, but all the leaders knew that the terms would not be accepted as initially presented.
When the referendum were put on the table publicly, most politicians and journalists declared that the “Yes” would win without a doubt. Tsipras was under pressure and attacks every day until the big and anticipated referendum. Even the European officers and most commentators were confident that the Greeks would vote for a “Yes” because their desperation by the local situation.
Now everything is partially clear. The Greek peoples stance is, even now, still solid and tough. They did not accept any more austerity measures in order to recover their economy, many wished for no more loans while the country suffers a transition period, what they ended up with was a more flexible plan that is not based on several initial public sector cuts. The real problem however resides in common and average people, who do not comprehend the financial system as it actual inner workings.
There is a chance that the austerity measures are the only viable way to defeat the escalating debt inflation suffered for many years. The greek people didn’t consider that point. But the “No” in Brussels represented a clear change of the game. Because, sooner or later, a bailout will occur. And by that moment, the bailout and the rescue plans and all the possible tools granted by the EU will not be entirely against the will of the Greek people.
The only benefit here is that the public opinion will be considered before the choice making, not often a common circumstance. In addition of this, the rival parties in Greece now know a little bit more about the people and will think twice before making statements that may harm them in status and image.
There is little chance, according to experts, that Greece could pay its debts any time soon. The media keep criticising that the extreme austerity measures applied in the past and the ones proposed lately are necessary for a long-term recovery. But the Greeks are tired of it. They said “Oxi”, and got a slightly better deal than if they had voted otherwise.
What about gold?
Gold prices had a little bounce despite the Greece’s situation outcome. With some finance trouble occurring also in China, experts find that really odd. In fact, the prices drop to US$ 1.156.85, the lowest point since March. About this, Mr. Carsten Fritsch, analyst at Commerzbank said “It is not only about the outcome of the referendum, but also about the reaction of the European Central Bank, which could cut the credit levels of its funding to Greece, (…) that could trigger some buying on gold”.
The possible Grexit event itself didn’t make to help in any way the gold prices but the future decision of the European Central Bank could be useful for this goal. The entire industry is expecting some changes in the few next months. The logical behaviour of the investors remains expected for the short-term future.
The “safe haven” concept keeps its validity to the present day and the lack of investors buying this precious metal asset continues to baffle the professionals in the sector. Looks like the drop in general inside the mining industry. Iron, copper, palladium, platinum and many others are suffering as well serious falls in prices.
The deterioration of the European Union – Greece relationship has unfortunately done nothing to boost gold prices, a progressively weaker Euro currency is about all we have to show for it on the markets, however unpleasant things happen in one place and often trigger good things in another, we will need to keep our eyes out for such opportunities now that the Greek matter is resolved.