What Would Be The Impact Of Greece Exit On Markets?

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Crucial talks held on Monday to discuss Greece’s economic debacle might have ended in a standoff but that does not mean a deal won’t be struck, before the end of the month according to Eurasia European analyst, Mujtaba Rahman. During an interview on CNBC, Rahman reiterated that the ongoing standoff is not expected to reach scenarios of capital controls in Greece as a deal will be agreed on in the days to come.

Greece under the leadership of newly elected President, Alexis Tsipras, is pushing to tear up the current bailout agreement something the Eurozone is against. Greece is pushing for a new set of terms for paying its debt while also maintaining its position in the Eurozone block.

“I think ultimately we are moving towards a deal, it might not happen this week, it might come closer to the 28th of February but I do think a deal is more likely than not. I think that is what the market is telling us this morning,” said Mr. Rahman.

The worst case scenario according to Rahman is Greece not reaching an agreement with the European Union on the extension of the current bailout deal, which is the government’s aspiration. If no deal is agreed on before the end of the month, Greece may end up facing funding challenges probably in March, according to the analyst.

The risk of Greece moving out of the block on failing to reach an agreement is highly unlikely according to Rahman.

“We have an 80% probability that ultimately there is going to be a deal. [..]In terms of the Grexit we place that at around 20% more driven by Germany internal constraints than Greece’s. Think Angela Merkel German’s Chancellor clearly playing Greece very-very aggressive for a set of domestic reason,” said Mr. Rahman.

The analyst expects the impact of a Grexit to becontained as there are already mechanisms and institutions in place to deal with such instances. The analyst expects the likes of Spain, which is expected to grow by 2.5% this year to offset some of the impacts, and more importantly the ECB gearing up to do sovereign QE in March.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.
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