18 April 2015

What would a Greek default look like?

14 Apr 2015

While Greece has denied it is about to default on its debt obligations, there are growing concerns the country will not be able to make a slew of onerous loan repayments to its international creditors—prompting analysts to debate what form a future default could take.

These analysts are unconvinced that further negotiations, due to take place on April 24 between Greece and the Eurogroup of finance ministers, will be fruitful. This could see further aid withheld from Greece, leaving the country struggling to make upcoming repayments and potentially liable to default.

Robert Kuenzel, director of euro area economic research at Daiwa Capital Markets, warned on Tuesday that Greece's cash buffers were "increasingly thin" and that a default could be "very nasty."

"There are different sequences of events that could happen if Greece defaults, all of which might end up in a very nasty scenario - especially, when Greece is no longer able to access ECB (European Central Bank) funding facilities, such as its Emergency Liquidity Assistance (ELA) provision – as solvency is a requirement for ELA," Kuenzel said.

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