In the euro periphery, the Greek political uncertainty is in focus. The spillover to other periphery countries has so far been relatively limited. Negotiations are likely to continue until it is absolutely necessary to reach an agreement (months). We believe an agreement will be reached in the end. It is in the interests of both Germany and Greece to reach a solution where Greece remains in the euro. However, the risk of a Grexit is real.
Looking ahead, we expect economic activity to be supported by the oil price decline and stimuli from the ECB. A weaker currency, lower lending rates and a higher credit impulse will in our view be supportive of higher growth in the periphery going forward. From a market perspective Portugal is set to be the biggest beneficiary of QE by the ECB due to a relatively high capital key and a low amount of outstanding debt (see Draghi Delivers: ECBs bazooka in detail and market implications , 23 January).
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