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'Grexit' risks rise but still hope

Written by Business World, on 17th Feb 2015. Posted in EU

article headlineThe chances of Greece being forced out of the euro zone have risen but a compromise agreement between Athens and its European partners is still possible, Greek media and investment banks said on Tuesday. They said all eyes were now on the European Central Bank, which must decide on Wednesday whether to extend Emergency Liquidity Assistance (ELA) funds to Greek banks to keep them in cash while the crisis unfolds. Talks in Brussels between Greece and the rest of Dijsselbloem's Eurogroup broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout package as "unacceptable." Investment bank Barclays said this had raised the risk that Greece would leave the euro zone and raised the prospect that the new leftist government of Prime Minister Alexis Tsipras would eventually have to call a referendum on whether to accept a deal with strings or ditch the euro. Chris Scicluna of Daiwa Capital Markets said the failure raised the risk that no deal will be reached by the end of the month, when the current bailout ends, making for a "disorderly conclusion." "But all is not lost and we see no need for panic just yet," he said in a note. U.S. stock futures and many share markets in Asia retreated after the talks broke down. The euro wavered and German government bond yields fell to near record lows on Tuesday as investors sought shelter in top-rated assets. The chief executive officer of one of Greece's top four banks said late on Monday that he expected deposit outflows to speed up as a result of the impasse. Outflows have been running at around 500 million euros a day, which prompted the ECB to agree an increase in its ELA funding last week, running until Wednesday. Greek newspapers put the blame for Monday's impasse squarely on the Eurogroup, saying it had been a case of "nekranastasis," a resurrection from the dead of a proposal that Greece had already rejected. Tsipras' government has said it will not accept anything that requires it to sign up to an extension of the current European Union/International Monetary Fund bailout because of the austerity strings that come with it. Greek media also made much of reports that Greek Finance Minister Yanis Varoufakis had been prepared to sign a separate plan offered by Economics Commissioner Pierre Moscovici, although EU officials say no such plan was presented. (Reuters) For more visit: www.businessworld.ie

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