Financial noose tightens around Greek banks
The financial situation in Greece grew increasingly dire at the end of the week, amid reports of accelerating deposit flight, the increased difficulty faced by Athens in collecting taxes and emergency meetings between the ECB and the country´s central bank to avoid a liquidity crunch.
Despite all of the above, analysts continued to pencil in a last-minute agreement between Athens and its creditors as the most likely outcome.
Indeed, longer-term bond yields had remained well behaved despite the recent tensions.
Likewise, Greek bonds were still comfortably above prices – 50 cents on the dollar - often associated with an imminent default, although some observers noted the danger that the situation could worsen quite rapidly.
The most like date andvenue for an agreement to be reached remained the 22 June emergeny Eurozone leaders summit, RBS analysts wrote in a research note e-mailed to clients.
The same analysts wrote the ECB would likely maintain its life-line to Greek banks via its Emergency Liquidity Assistance facility even if the country missed its end of June paryments to the IMF.
However, under such circumstances and ahead of the 20 July deadline to repay the ECB, it would likely tighten its collateral rules.
At the current pace Greek banks could sustain deposit flight for about 20 days, falling to as little as 12 under certain assumptions, RBS added.
As regards the impact of Grexit on the UK. The country would probably suffer the short-term effects of financial market instability should Greece decide to exit the Eurozone, "but we doubt that a “Grexit” would bring the recovery to a halt," Capital Economics said.
"We do not buy the view that Greece would slip out of the euro-zone without a ripple. Should it become clear that a major default and exit are indeed coming soon, we will pull down our projections for growth across the rest of the Eurozone this year and next, possibly to predict a renewed recession," the think-tank added.