21 Jan 2015
Will Greece leave the monetary union? - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that there is heightened fear that a Syriza victory will lead to Greece leaving EMU.
Key Quotes:
"While this is possible, we continue to regard it as unlikely."
"There is plenty of room for compromise. It has long been signaled that after completing the assistance programs, there was room for the official creditors to reduce the interest rates and lengthen maturities to ease Greece's debt burden."
"The current assistance program expires at the end of next month. If a new one is not in place, the ECB has indicated that it no longer could accept Greek sovereign bonds as collateral. About 2/3 of Greek banks 40 bln euro borrowings from the ECB use government bonds as collateral."
"Those funds would need to be replaced. The Greek central bank can only provide emergency funding (ELA) with the ECB's permission. At least a couple of Greek banks have applied for ELA funding now, and the ECB is likely to authorize it. Without an assistance program in place, it may be more difficult to secure ECB approval."
"The political uncertainty in Greece is unlikely to play a significant role in the shape of the ECB's bond buying program. A decision not to buy below investment grade bonds would impact not only Greece, but also Portugal, Cyprus, and Slovakia."
Key Quotes:
"While this is possible, we continue to regard it as unlikely."
"There is plenty of room for compromise. It has long been signaled that after completing the assistance programs, there was room for the official creditors to reduce the interest rates and lengthen maturities to ease Greece's debt burden."
"The current assistance program expires at the end of next month. If a new one is not in place, the ECB has indicated that it no longer could accept Greek sovereign bonds as collateral. About 2/3 of Greek banks 40 bln euro borrowings from the ECB use government bonds as collateral."
"Those funds would need to be replaced. The Greek central bank can only provide emergency funding (ELA) with the ECB's permission. At least a couple of Greek banks have applied for ELA funding now, and the ECB is likely to authorize it. Without an assistance program in place, it may be more difficult to secure ECB approval."
"The political uncertainty in Greece is unlikely to play a significant role in the shape of the ECB's bond buying program. A decision not to buy below investment grade bonds would impact not only Greece, but also Portugal, Cyprus, and Slovakia."