Explained: Grexit looks nigh — here’s why

Frustrated European leaders gave Greece one more day — Thursday — to deliver a plan, and until Sunday to reach an agreement to pull back from financial catastrophe. On Monday, July 20, the deadline to repay bonds worth € 3.5 billion runs out, and no one believes Greece can stay on in the Euro after another default. Athens has promised to submit a “a comprehensive and specific reform agenda” on Thursday.

The patience is gone…

“The situation is really critical and unfortunately we can’t exclude the black scenarios of no agreement,” Donald Tusk, president of the European Council, said. “Until now I have avoided talking about deadlines. But tonight I have to say it loud and clear — the final deadline ends this week. I have no doubt that this is the most critical moment in our history.” European Commission president Jean-Claude Juncker said, “We have a Grexit scenario prepared in detail.” Juncker expressed fury at the attacks on creditors by Greek officials: “Who are they and who do they think I am? …I cannot prevent it if the Greek government is not doing what we expect it to do to respect the dignity of the Greek people.” German Chancellor Angela Merkel, who many believe will have the last word on the crisis, ruled out a positive response to Greek Finance Minister Euclid Tsakalotos’s appeal to the European Stability Mechanism for help. “The conditions for starting negotiations on a programme in the framework of the ESM continue not to exist,” she said.

…And hope seems dead

For the first time, economists polled by Reuters have said they believe the European monetary union was more likely than not to break up. As Greek Prime Minister Alexis Tsipras spoke in the European Parliament in Brussels, asking for a fair deal, Reuters asked 57 economists to assess the chances of the country leaving the Eurozone. It was a question the agency has asked for many years — and for the first time, the respondents gave a median 55% chance of a Grexit. “It’s gone too far… there is absolutely no trust whatsoever any longer,” Christel Aranda-Hassel, senior economist at Credit Suisse, said. “Ultimately, I think the Greeks have overplayed their hand.”

Even markets are indifferent

The euro has barely weakened this week while bond yields for peripheral countries such as Portugal, Spain and Ireland have even dipped a little. To be optimistic, this could be seen as still-afloat hope for a deal — however, for many large banks, Grexit is now their base case, and financial markets might just have mentally dismissed it as a non-event. The fact that European markets have not been badly hurt shows that “investors are a little numb,” said Carsten Brzeski, an economist in Frankfurt with ING-DiBa. “At the stock market, people don’t want to hear about Greece anymore. We’ve had so many ‘final’ showdowns,” he said.

— COMPILED FROM REUTERS, AP, NYT