Flash crash at the Greek Stock Exchange is not expected to have a significant impact on the EU economy

5 august 2015 | Nezavisimaya Gazeta

On Monday, the Athens Stock Exchange experienced a fall which was the severest one for about last 30 years. It was a reason for a deteriorating economic situation predicted for the European Union. Standard & Poor’s rating agency revised its credit rating forecast for the EU from stable to negative one. Revenues of the EU budget may decline due to negative forecasts for the United Kingdom and France that are among major donors.

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

The flash crash at the Greek Stock Exchange is not expected to have any impact on the European economy at least because of the small capacity of the Greek market, says Daniil Nametkin, expert of the Analytical Center to Nezavisimaya Gazeta. Nevertheless, some signs of an economic slowdown are already visible, according to him. “In particular, the industrial production in the euro zone fell unexpectedly by 0.4% in May 2015,” said Mr. Nametkin.

In his opinion, this fall at the Greek Stock Exchange is not expected to have any significant effect for the European economy at least because of the small capacity of the Greek market. Such severe fall of the Greek stock market was caused, first of all, by introducing a special trading system which prevented local investors from using deposits to purchase securities that deprived many bidders of the ability to file purchase bids, he explained. This measure was intended to prevent a further capital outflow from the country. In addition, a long interruption in the stock exchange operations (five weeks) was a strong catalyst of the fall. The market accumulated many negative factors that led to a dramatic drop in the attractiveness of Greek assets. Therefore, this fall was largely due to technical factors and it might happen that the market would recover rapidly due to small trading volumes, the expert said.

The expert also noted that business climate indicators remain at a high level in the European economy – the overall PMI index is 53.7 points in July, remaining near the 4-year high, but trends in macroeconomic indicators do not rule out the risk of an economic slowdown. “In particular, the European industrial production fell unexpectedly by 0.4% in May. In addition, there is a higher risk of budget problems in the European Union due to a heavy load on the budgets of Germany, France and the United Kingdom accounting for 70% of revenues to the EU budget to overcome debt crisis in challenged EU member states, Greece in the first place. This has already made the international rating agency to downgrade its forecast of the EU credit rating,” - stated Mr. Nametkin.

As to the impact on the Russian economy, it is not expected to be significant now as current relations between the countries are defined mainly by geopolitical factors and a situation in the currency market that affects mutual trade structure.