Danish pension providers PFA Pension and Nordea Life & Pension expect continued volatility on financial markets this week as the crisis over Greece’s debt repayments remains acute but believe it unlikely the situation will escalate to cause broader troubles in the EU economy.

On Monday morning, banks and cash machines in Greece were closed as the Greek government imposed capital controls after talks broke down with its creditors.

Anders Schelde, CIO at Nordea Life & Pension in Denmark, told IPE: “The situation is very unclear, so obviously there is a risk of further falls. But let’s not forget there could also be positive surprises that could send us in the other direction.

“Thus, it is really anybody’s guess at this stage, and market volatility seems to be the only certainty.”

Henrik Henriksen, chief strategist at PFA Pension, said that while stock and bond markets in Denmark had started with a fall this morning, the Greek crisis was relatively isolated.

“The European economy is in better shape than the last time the Greeks were in crisis,” he said.

The latest growth indicators from European companies were at their highest level in four years, despite the fact the data was collected in the middle of June, when the Greek crisis had grown, Henriksen said.

He said he was not nervous about the Greek referendum set for 5 July to vote on the aid package from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission.

“There will be financial turmoil for rest of the week, and the Greek opinion polls ahead of the referendum may have a central role,” he said. 

If Greeks do vote in favour of the creditors’ bailout, as figures now indicate they will, and shares start to recover, the market will then probably rally, Henriksen said.

“But it requires a Greek government that can implement a yes,” he warned.

Schelde said he agreed with the consensus there would be limited contagion in the event of a Greek exit from the euro.

“I don’t think markets will start pricing contagion effects in any serious way, but, obviously, Greek assets are selling off sharply, and, combined with the increased uncertainty, that does raise the risk premium in other markets as well,” he said.

Schelde said Nordea Life & Pension in Denmark, because the situation was so unclear and could go both ways, would not be making any tactical moves at the moment to protect its investments.

“But should markets outside Greece start to sell off sharply for some reason anyhow, I would tend to see that as an buying opportunity,” he said.

Henriksen said there was no prospect of the stock market falls seen earlier today escalating because of the positive trends in the European economy and also because private investors have positioned themselves defensively against the Greek turmoil.

He also said the European Central Bank’s quantitative easing programme announced in January could be used to stem the turmoil in the markets.