Greek stalemate before referendum

By Eirini Tsekeridou, Fixed Income analyst at Julius Baer

Everything and everyone is on hold. All involved parties are now waiting for the outcome of the referendum before making any further decisions regarding Greece. The Greek government’s stance is not facilitating any reaction of creditors in Greece’s favour.

After Greece (Sell/Speculative) missed the payment to the IMF, Managing Director Lagarde officially informed the Executive Board. Such an official notification is considered an event of default for Greece’s loans with the European Financial Stability Fund (EFSF).

The EFSF, while having the possibility to ask for an acceleration of its loans, decided to reserve the claim for later. Greek Prime Minister Tsipras addressed the Greek population last night, still advocating a ‘no’ vote to Sunday’s referendum, blaming the creditors for the imposition of capital controls.

After his announcement, the Eurogroup, which held an extraordinary meeting last night, stated that there will be no change to their stance towards the Greek government and its request for a new two-year bailout programme worth EUR29bn until the referendum outcome is known.

In a similar vein, the ECB decided to maintain the level of emergency liquidity assistance (ELA) for Greek banks at EUR89bn with no change to the haircut imposed on the collateral. The market reaction has been subdued, as most market participants have already heavily discounted any negative news flow out of Greece.

The only one who changed stance was Moody’s who downgraded Greece’s government bond rating to Caa3 from Caa2 and placed it on review for further downgrade. As a reason for the downgrade, the Moody’s cites lack of official support leading to defaults on privately held debt.



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