FXStreet (Barcelona) – With a full European summit called in on Sunday, and Greece set to present a new set of reforms, the developments in this weekend will be key to decide whether Greece will gain another short-term loan or an exit from the Eurozone, according to George Saravelos, Strategist at Deutsche Bank.
Key Quotes
“A Eurogroup meeting has been scheduled for Saturday and a full European Union (including all EU states) for Sunday. The importance of such decisions was cited as the reason behind calling a full European Union Summit. If the Greek proposals are deemed acceptable, Europeans will formally open negotiations for the ESM program, as well as arrange a short-term bridge loan for Greece. This is required to finance Greece’s July 20th ECB bond redemption, because disbursements under an ESM program will take time. Press reports that short-term financing could be provided under bilateral country loans, an increase in the ECB t-bill limit or the SMP ECB profits due over 2014 and 2015 (we think the latter is the most likely). Disbursement will only be made once prior actions are passed through the Greek parliament. Perhaps a reference to potential future debt relief will also be made at Sunday’s summit, but this was left unclear.”
“What happens in the event of no agreement? Juncker mentioned that the European Commission is now openly preparing alternative scenarios, involving an exit from the Eurozone and humanitarian aid for Greece. If no agreement is reached by Sunday morning, we would expect the Euro Leaders’ summit to discuss Greece’s Eurozone exit, including the legal aspects that such a decision would involve and humanitarian aid. In turn, we would expect the ECB to suspend ELA financing on Monday morning, effectively putting the entire Greek banking system into resolution, and moving the country a step closer to exit from the Eurozone.”
Greece crisis: Europe sets the framework for potential agreement
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