Dubai: The unexpected twists and turns in Greece’s negotiations with its creditors over the past two weeks have literally exhausted even standard clichés to describe the theatre involved, according to financial analysts.
“The news that Greece has requested a 2-year bailout programme from the ESM office has come as a surprise to the market after we spent most of the morning accepting that Greece was going to default. This [the new development] throws a cat among the pigeons and leaves a number of freshly unanswered questions,” said Kathleen Brooks, Research Director UK EMEA at FOREX.com.
The development has left analysts and markets wondering: Will the request be accepted? (Greece has also asked for debt restructuring, something that has not been allowed before); Will Greece be able to pay the International Monetary Fund? The Greek Finance Minister has reiterated that they will not pay ahead of tonight’s deadline; Will Sunday’s referendum go ahead?; And What does this mean for Grexit fears?
Many analysts are at their wits end as no one expected Greece to ask Eurozone authorities for a new, third bailout in a bid to try and secure financial lifeline hours before the country’s current rescue deal expires.
The expiry of the bailout at midnight in Brussels is likely to force the European Central Bank to reconsider its emergency lending to Greek banks, which is the only lifeline keeping the financial system from collapse. Standard & Poor’s on Monday night downgraded Greek debt to CCC- and warned “the probability of Greece exiting the Eurozone is now about 50 per cent”.
“In our view, the Greek government’s decision to hold a national referendum on official creditors’ loan proposals indicates that Prime Minister Alexis Tsipras will prioritise domestic politics over the country’s financial and economic stability, commercial debt service and membership of the Eurozone,” S&P said.
Whether the new request for a bailout is in response to harsh criticism the Greek government is facing from market players who are not party to European politics is the sudden change of heart, it clearly has thrown up more questions than answers.
Analysts say this development adds up to even more uncertainty. The markets are taking the news gingerly, and there has been no positive impact from this event. “We shall have to wait and see, one thing is for sure — 8 hours is a long time in this Greek crisis, and who knows what may happen ahead of the IMF deadline this evening,” said Brooks.
