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Quick takes: Economists weigh in on emergency EU summit on Greece
EUROPE leaders will hold an emergency summit in Brussels next Monday (June 22), after talks between eurozone finance ministers on Greece's bailout failed on Thursday.
Anxiety continues to mount over Greece's debt crisis - exacerbated by reports that Greek savers have pulled out an estimated 2 billion euros (S$3.03 billion) from banks over the past few days.
Here's what economists have to say about the upcoming meeting:
Rabobank's view: "We must all still hope for a deal given what is potentially at stake, not just for those involved in Europe, but also for the global economy and financial markets. However, it appears the two sides are still talking past each other, conceptually: it's not so much of one side saying '10', the other '1', and them being able to meet at 151, as when haggling; it's more of one side saying 'blue', which is valid, and the other replying 'sausages', which is equally valid, but an entirely different conversation (unless you know someone who produces blue sausages).
"More concretely, 'We must all follow the EU's rules' is an argument it is impossible to disagree with, as the rule of law is paramount; but the logic that debt which physically can't be repaid won't be repaid, and that austerity policies in an economic depression make things worse, not better, is just as iron."
OCBC's treasury research team: "While expectation for any breakthrough remains dismal, it has not stopped euro-area leaders from convening again, with another summit called for this coming Monday. The lack of mutual respect and trust on both sides is apparent, however, and will continue to be an issue no matter how many times they meet. Tellingly, the IMF chief Christine Lagarde said that 'the key emergency is to secure a dialogue with adults in the room'.
"So far, global markets appear to be relatively nonchalant on the issue, with US equities heading up by one per cent overnight despite the ongoing Greek impasse."
Mizuho's Vishnu Varathan: "The half-full spin on things is that with things coming to a head, there are signs that Greek Prime Minister Alexis Tsipras may concede some ground on the reforms and may avert default. So for now, 2Y Greek spreads (over Bunds) have narrowed and European as well as Greek equities are higher. But buyers beware as this is still no more than can-kicking.
"And the real worry is for how long the ECB (European Central Bank) will have appetite to extend ELA (Emergency Liquidity Assistance) given that Greek banks are bleeding money ... Some 2 billion euros of funds appear to have fled Greece just this week; so the liquidity crisis is the foremost risk even if one may be convinced of Greek solvency.
"As ELA discussions get underway some caution will overhang. But for now, Greek risks are deemed to be ring-fenced as exodus from Greece is 'recycled' back into the core eurozone."