Political risk: Prominent, but manageable
Political risk appears to be the main threat to the eurozone outlook in 2016. There are a few risk factors, such as the challenges of implementing the Greek financial support program, which may put pressure on eurozone assets at some point. Political uncertainty in Spain and Portugal also stand out as potential sources of volatility.
The situation in Greece has calmed down over recent months, but is likely to be back in the headlines later in 2016. The main risk event, in our view, is the debt repayment to the ECB in July. Concerns about Greece’s ability to repay the debt and remain in the eurozone may prompt volatility in other peripheral markets, as happened during the summer of 2015. That said, Greece is much less systemically important now than five years ago.
