The turnaround in sentiment has been due to a number of factors, which helped the Greek economy to avoid the risk of collapse and get back onto the track of rebalancing and stabilisation. The first among these factors was the affirmative answer of the Greek people to the historic dilemma concerning Greece’s continued participation in the euro area.
Arguably, these developments increased appetite for and under pricing of risk (although the pricing of risk was (and is) becoming increasing difficult in the face of fast-paced financial innovations), elevated asset prices, increased capital flows across borders in search of better yields (reflecting global macro imbalances), “carry trade” and currency misalignments.