The recent referendum in Greece led to a decisive victory for the ‘No’ campaign, emboldening the Greek government in their stance against the austerity terms laid out by the so-called Troika (ECB, IMF, EC). The two warring parties have returned to the negotiating table but both sides appear adamant that they will not be moved to a substantially different position. But despite the ongoing stalemate and severity of the situation, ETFs have largely been unfazed. Whilst the Global X FTSE Greece 20 ETF (GREK), the only pure-play Greece ETF, did open a thumping 9.7% lower on Monday, it has quickly bounced back, recovering 5.2% by the end of Tuesday and making further gains in subsequent days. It now stands above its close price before the referendum.

ETFs have been unperturbed by the ongoing crisis in the Eurozone.

This somewhat nonchalant response to the Greek drama has been seen elsewhere, with ETFs tracking European equity markets also largely unaffected by the referendum result.

The iShares Euro Stoxx 50 ETF (EUE), which tracks the performance of the 50 largest firms by market-cap in the Eurozone, was down just 2.2% during Monday trading. The iShares MSCI Europe ETF (IMEU), which tracks the MSCI Europe Index, representing a broader scope of European names including UK companies, declined by only 1.2%.

Across the Atlantic, US equities were even less affected. The SPDR Russell 3000 (THRK), which tracks the Russell 3000 Index, a composite representing 98% of listed equity in the US, traded flat through Tuesday and nudged up 0.6% on Wednesday, a further indicator of stability over the ongoing stalemate.

Indeed, there appeared to be no sign whatsoever of a ‘flight to safety’ as ETFs following traditional safe-haven assets saw minimal net inflows during this period. ETFs linked to short-term Treasury Bills, such as the SPDR Barclays 1-3 month T-Bill ETF (BIL) recorded no significant increase in trading volume after the Greek referendum. Gold, considered by many to be a refuge during turbulent periods and which has historically done well during financial crises, did not rally at all; ETFs such as ETFS Physical Gold (PHAU), the largest European-listed gold ETF, opened flat on Monday trading.

All this points to the fact that the markets are not reacting as hastily to the ongoing situation in Greece as they once did during the onset of the crisis in 2010. So what has changed?

Dodd Kittsley, head of ETF strategy at Deutsche Asset and Wealth Management (Deutsche AWM), argues that the current background is far different from that of 2010. Specifically, he argues that both the private and public sectors in Europe are better prepared now to deal with the effects of a Greek fallout. Foreign banks have reduced their exposure to Greek debt significantly, from $269bn in 2008 to just $67bn in 2014. At the same time the Troika have increased their exposure and now hold 75% of the $323bn of Greek fixed income instruments. The European taxpayer may raise a cautious eyebrow at this figure but it is still in the long-term interests of Eurozone stability that the risk of these debts are more widely dispersed.

The economies of other peripheral European nations has strengthened over the last five years, reducing the likelihood of financial distress in the Greece markets spreading to their financial systems. At the start of the crisis, investors talked collectively about the dire situation of the ‘PIIGS’ (Portugal, Ireland, Italy, Greece and Spain). However, the economic future of these countries, at least in the near term, except Greece, is on the whole looking brighter. Deutsche AWM are predicting GDP growth rates for 2015 of 2.6% for Spain, 1.5% for Portugal and 3.5% for Ireland. Necessary trimmings to each country’s budget has resulted in far healthier Debt/GDP ratios.

Investors have even started treating the national debts of Greece in a different manner to the sovereign debt of these other countries. When examining the correlations between Greek debt and that of peripheral countries during 2010-2011, there is a relatively high degree of correlation found, ranging from 0.54 between Greece and Ireland up to 0.91 between Greece and Italy. However, these same correlation pairs have actually turned slightly negative over the period 2013-2014. This actually indicates that when investors wanted to reduce risk in their portfolio by selling Greek bonds, they shifted part of the funds into the fixed income securities of the governments of these countries.

There are also currently better institutions and programmes in place compared to the start of the European sovereign debt crisis, allowing the provision of liquidity to countries who are in financial distress. These include the European Stability Mechanism, an establishment with 450bn euro lending capacity; the European Financial Stabilization Mechanism, providing conditional loans of up to 60bn euros; the Quantitative Easing Programme, injecting at least 60bn euros per month to increase liquidity through asset purchases; the Targeted Longer-Term Refinancing Operation, promoting ECB counterparty banks to lend to the private sector at preferential rates; and Emergency Liquidity Assistance, better enabling distressed banks to access liquidity directly from the central bank.

Market sentiment surrounding Europe has improved as a result, also led by the firm resolve of European authorities to “do whatever it takes to preserve the euro”. A recent report published by Sentix, a survey provider that specialises in current sentiment surrounding capital markets, found that despite the ongoing crisis in Greece, the majority of those surveyed considered Europe to be in an economic boom. Their poll reported that medium-term sentiment over Europe has roughly remained the same but there was increased optimism regarding the short-term situation.

It appears that, although the dire Greece situation gets a disproportional amount of news time, especially relative to its proportional size in the European Union, investors are less worried today about the contagion effect of Greece leaving the euro than they were in 2010. This is due mainly to macro-economic progress in previously troubled European countries, a dispersion of Greek risk, a strengthening of institutions designed to deal with future crises, and an improved market sentiment that the authorities will act as stated to protect the monetary union.