ECB: Concerns For Greek Bankruptcy Are Increasing

While ECB finds low probability risk as a whole for the Eurozone in the biannual report, it pushes the alarm for Greece, noting that the expectations of a bankruptcy have significantly increased in Greece, and that the Greek banking sector shows significant outflows of deposits.

As it is noted by the ECB in its report, the prevailing conditions in the financial markets, provide clear support for the capacity to service debts. At the same time, fiscal positions remain cautious in some countries.

"The government risk that arises from Greece in particular, has increased significantly because of the high political uncertainty of the last six months, while the banking sector in Greece has experienced significant outflows of deposits, loss of access to financial markets and deterioration in the quality of asset», the ECB mentioned.

It adds that the market reactions to developments in Greece are mild for the time, but the absence of an immediate agreement on the structural needs, the risk of an upward adjustment in the risk premium that is required for vulnerable Eurozone states could be implemented.

The ECB says that the developments in Greece are in contrast with the trends in the wider Eurozone, as the yields increased and the spreads widened compared with Germany. The long and uncertain process of negotiations between the newly formed Greek government and its creditors, has helped to have a period of extreme volatility in Greek markets.

It also says that the impact from Greece to other parts of the euro area was limited. "Actually, it caused little volatility in the government bond yields and also in the levels of swaps of Portugal and Spain," it said.

It added that Greece's financial difficulties did not have negative effects on other vulnerable countries, where the average growth rate of deposits was positive in 2015 and rose to 1.9% in February. Also it’s worth mentioning that the exposure of the financial sector in Greece has fallen by 95% compared with 2011, as the ECB says.

Euro Trades Steady Above $1.09

Euro moves upwards against the dollar today, with the market now being slightly stabilized above the levels of $1.09, while expectations for catalysts that are influencing the conversion rates are positive for the European currency.

In particular, at 10:05 GMT, euro moved with gains of 0.27% to $1.0935, while earlier it had "visited" for some time the level of $1.0891.

The discussions for the Greek rescue program continue to have the attention of the market, while the investors watch with moderate optimism the progress of negotiations between Greek government and institutions.