Greek political saga is likely to have implications for FX markets

Greek PM Alexis Tsipras

Negotiations remain highly uncertain at a time when the liquidity situation has further deteriorated, ahead of important end-of-month pension and salary payments and about €1.7bn IMF payments due in June (5, 12, 16 and 19 June).

Despite incremental progress on the negotiations front, key differences between the Greek government and institutions remain, testing the market’s recent complacency surrounding the likelihood of a Greek default and exit. Despite our view of a last-minute agreement, the dynamics of the necessary process remain highly uncertain.

A political change could emerge through: 1) a government re-shuffle with more radical members exiting; 2) a referendum; or 3) snap elections.

We think the first scenario is the most likely. It would seem the least disruptive and allow Greece to ‘return’ to a program agreement before end-June. More importantly, we think the Eurogroup could find ways to bridge temporary funding gaps (e.g., by disbursing SMP profits or raising the T-bill ceiling), if it thought the prospects for successfully finalizing program negotiations were good (see “Euro Themes: Greece: A crisis to avert a crisis”, 21 May 2015).


About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "Greek political saga is likely to have implications for FX markets"

Leave a comment