There’s now a 50-60% chance that Greece is going to default on its debts, and a 20-30% of a Grexit.
That probability is from economists at global investment banking giant UBS, which just outlined its pessimistic view, citing “growing liquidity problems.”
Greeces owes the International Monetary Fund (IMF) nearly half a billion euros on Thursday this week. Finance minister Yanis Varoufakis says the payment (and all others) will be made. But that follows comments from a junior minister last week, which suggested that the payments would be delayed until Greece got its latest bailout money.
Greece has a tentative agreement to unlock some bailout assistance, but needs to present a detailed list of reforms — something that its creditors haven’t seen (to their standards) yet.
And the IMF payment isn’t the only one that’s fast approaching — Greece has a series of payments to make that will be impossible without some sort of assistance:
Cooperation has improved on both sides, but progress to agree on the reform list has been slow and we believe that the difference in positions between the institutions and the Greek government remains too large to allow for a fast agreement within the next days.
Rather than scheduling a Eurogroup meeting by this week, the Brussels Group (technocrats from the EU Commission, ECB, IMF and ESM) continued pushing back on Greek reform proposals. We understand that a Eurogroup meeting may only take place on 24 April according to various media reports. At the same time, Greece is gradually running out of liquidity and our interpretation of comments of various Greek officials is that there may still be enough liquidity to meet the EUR 447m loan payment to the IMF on 9 April.
If Greece doesn’t make a payment after that there’ll be a “grace period” of 30 days (assuming it’s to the ECB or IMF).
Although the UBS base case doesn’t include Greece having to leave the eurozone, the analysts say there’s now a higher chance of that, and a 30-40% chance of capital controls:
The recent pace of progress is disappointing, so that we need to increase the exit risk probability from 10-20% to 20-30%. In addition, the risk of capital controls is substantial because a default would accelerate deposit flight. We still expect difficult negotiations ahead, but do view an agreement as the most likely outcome. As a matter of fact, the vast majority of Greeks still want to remain in the Euro and an exit from the Euro would likely mean severe economic hardship to a country that already has a very high unemployment rate.
They have outlined all the probabilities they attach to different scenarios here:
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