Greek exit risk view affirmed after EU summit

Greek exit risk view affirmed after EU summit Ricardo Garcia-Schildknecht economist Thomas Wacker CFA, analyst Patrik Ryff economist Dear reader, Not much progress has been made since the Eurogroup agreement on February 20. Technocrat talks in Athens stalled and the Eurogroup Chairman is now talking about capital controls in Greece. Late last night, Greek Prime Minister Alexis Tsipras met with leaders of the EU, the Eurogroup, the ECB, France and Germany. They agreed that the Institutions' technocrats would only fact-find in Athens, and that policy talks would be held in Brussels. The agreement last night should allow for a resumption of talks in Athens by next week, and we also expect Greece to deliver a comprehensive reform list to the Eurogroup in a few days. Difficult days are ahead, and we still hold to our euro exit risk probability of 10-20% (consensus: 25%), but our position is under review. The situation has reached a crossroad, and time for a successful conclusion is running out. We think Greece may become unable to service debt by early April. The risk has increased that no agreement on releasing loan payments will be reached in time. We now put the probability of a default on government bonds at 30-40%, up from 20-30% before. The prospect of a government default and its likely repercussions on Greek banks may serve as a catalyst for Greece to meet creditor demands and avoid exiting the Eurozone.