There is a significant chance that Greek debt negotiations will collapse, according IHS Global Insight.
“We estimate that the newly elected Greek government will have to be significantly more flexible than it has been so far if it wants to reach a deal with the creditors. However, given the strong popular domestic support for the government’s position, it will be politically difficult for it to perform a U-turn on many of its policies. This leads us to believe that the probability of a collapse of negotiations is significant, despite the strong incentive for both sides to find a solution,” IHS senior economist Diego Iscaro, said.
“Although expectations of a deal were low, the fact that the two sides even failed to reach a political consensus on what to do next is not encouraging. Greece is now running out of time to reach a new deal before its current bailout programme expires at the end of February. Without a new deal, Greece might not have enough funds to pay interest payments due in March. More importantly, it is likely that the European Central Bank may stop providing emergency liquidity assistance to Greek banks without a new programme in place.”
“IHS estimates that the Eurozone is unlikely to accept many of the proposals being put forward by the Greek government, such as debt relief and a halt to the privatisation process. Other proposals could be negotiated, but this will depend on the Greek government presenting concrete reform policies, as well as plans on how it intends to fight tax evasion. Even those are unlikely to be accepted without a new programme in place, something the Greek government does not seem prepared to accept.”