Five important questions about the Greek debt talks

时间:2019-10-08
作者:窦蹬狗

Why is a Greek deal so urgent?
In theory, Athens has until 30 June – when it is due to make a €1.6bn (£1.15bn) payment to the International Monetary Fund – to secure a fresh injection of cash from its creditors. They have held up the €7.2bn remaining in its bailout fund, until an agreement on economic reforms can be reached.

But it has become increasingly clear that the country’s already fragile financial sector is now suffering a debilitating bank run. A total of €2bn was withdrawn from Greek banks between Monday and Wednesday this week, as scared savers opt to put their cash under the mattress. That more than swallows up the €1.1bn increase in emergency funding for Greek banks that the rubberstamped on Wednesday.

At this rate, it looks highly unlikely that the banking sector can survive until the end of the month, without either fresh financial support from Greece’s eurozone partners to shore up the banks, or capital controls to stop money flooding out; perhaps both.

What happens next?
Capital controls – rules on how much money can be withdrawn from the banks, or taken out of the country – now look all but inevitable, perhaps within days; much depends on whether they are slapped on by policymakers in Athens, as a desperate attempt to prevent their financial system collapsing, or – as in Cyprus – imposed as part of an emergency rescue deal.

Unilateral capital controls would effectively put outside the euro, with its currency no longer freely exchangeable on financial markets. If imposed as part of a rescue deal – which would also have to involve a fresh injection of cash for the banking sector – they could still be viewed as a temporary measure.

So can Athens avoid defaulting on its debts?
Only with some kind of new financing agreement: chief negotiator Euclid Tsakalotos has made very clear that Greece cannot make the €1.6bn payment that is due to the IMF without a new deal on economic reforms; and so far there is little sign of compromise on either side.

If default looks likely, Greece would also probably lay plans to start reintroducing its own currency – the classic road back from default starts with a sharp devaluation.

How would the markets react to Grexit?
There’s a theory that a Greek default – and euro-exit – now looks so likely that it is “priced in”; but that doesn’t tend to be how financial markets work in reality. If Greece plunges out of the single currency, investors would be likely to react by dumping the sovereign bonds of other peripheral countries, including Portugal and Spain; European shares; and the euro itself.

The ECB – whose chairman Mario Draghi famously calmed markets in 2012 by promising to do “whatever it takes” to shore up the single currency – could announce crisis measures, perhaps increasing the value of the ECB’s €60bn-a-month quantitative easing programme, or even triggering its emergency bond-buying scheme, known as Outright Monetary Transactions, or OMT.

And in the long term?
Long after the immediate drama has died down, Greek exit from the single currency would change perceptions about the euro project.

As Simon Derrick, of BNY Mellon, puts it, “if somebody leaves, it’s no longer a single currency, it’s a fixed-peg exchange rate system.” Next time a country – Portugal, Spain, Italy – gets into trouble, the question would immediately become, will they be the next to leave? It could set up a very, very slow domino effect.”