As the second quarter begins, Greece is still waiting to reach a deal with its creditors, while its banks are haemorrhaging deposits fast and investors are losing whatever confidence they had left.
Talks broke off on Tuesday with no conclusion, and Athens now faces paying its debts, including a tranche of more than €450 million ($485 million) it owes to the International Monetary Fund (IMF) on April 9, without any help.
The European Central Bank (ECB) governing council has a meeting on Wednesday – because it is not a monetary policy meeting, it has not been mentioned in Marketmoving.info’s weekly calendar – and there is speculation in the markets that it could decide to take more measures to keep Greece afloat.
However, John Higgins, an analyst at London-based think-tank Capital Economics, said the markets may be underestimating the chances of a Greek exit from the eurozone. There are a few signs the country’s situation is getting worse, one of them being the fiscal stance.
Greece’s budget position has deteriorated in the first two months of the year compared to last year’s results and to this year’s targets.
This reinforces the fears that the reforms carried out before the elections are already going into reverse.
Looking at the monthly survey of investor sentiment by Frankfurt-based firm Sentix, the results of the March poll, which were published on Tuesday, showed that 36.8% of the respondents expect one or more countries to leave the single currency area in the next 12 months. More than 96% picked Greece as the most likely to leave first.
“This shows that the risk is being taken seriously. But the proportion of investors expecting euro break-up remains well below the peak of 73% recorded in the early days of the survey in July 2012. The proportion also fell slightly in March, from 38.0% in February,” Higgins noted.
By contrast, Capital Economics analysts view the probability of a Grexit as still high and rising.
Greek banks are even more dependent on emergency funding from the ECB, as deposits continue to flow out. The economic sentiment indicator weakened, suggesting that “the modest economic recovery evident over recent quarters has been brought to a halt,” Capital Economics warned.