Greek deal brings sigh of relief

Greece’s move towards a third bailout has brought relief to Central and South Eastern Europe where concerns about contagion were very real, particularly in the Balkans. While it is too early to say whether there has been a hit to consumer and business confidence from the heightened risk of “Grexit” earlier in the month, the financial market reaction suggests that the fallout should be limited. Currencies have strengthened against the euro, and interbank interest rates have held steady. Moreover, it looks like the most of the region’s economies were performing strongly before problems in Greece came to a head. Indeed, monthly activity data suggest that growth in Q2 formost countries was broadly in line with the strong readings seen in the first quarter.