The coming weekend is the most significant time frame in this Greek saga, as the euro leaders have given Greece the concluding deadline to come to its senses. Greece has submitted their proposal last night and this has a prudent foundation on which a conceivable deal can be reached between the two parties- Greece and its creditors. So far today, the headlines are mostly printing a possible fruitful outcome and it is exceedingly likely that the relief rally for the euro, which we are experiencing today, could continue next week.
Nonetheless, the threat of Greece leaving the Eurozone remains very real, but it is not our base case scenario. The probabilities are certainly over 50 percent, and if there is no deal finalized this weekend, we could see Greece moving one step closer to leave the Euro zone. The Greek banking system remains extremely strapped for cash and the situation is becoming worse every day despite the capital control, which the country introduced last week.
Therefore, if the ECB stops providing emergency funding for the Greek banks, the country will have very limited options, which are either print some parallel currency to the euro or to revert to pre 2001 currency, Drachma. Greece not only has a massive payment due on the 20th July, which it needs to pay to the ECB, but it also has its commitment towards its welfare system and its coffers are completely barren.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam