Eurozone finance ministers meeting failed to reach an agreement about Greece debt problem. Athens' proposal was rejected and no bailout funds secured ahead of the bundled-up IMF debt payment deadline.

For the nth time, Eurozone finance ministers meeting last week failed to reach an agreement about Greece debt problem. Athens' proposal was rejected and no bailout funds secured ahead of the 1.6 billion Euros bundled-up IMF debt payment deadline on June 30. The absence of highly influential economic data release in the next few days might means that Greece will stand on the spotlight again after the release of several better-than-expected figures from the Eurozone freed the Euro from pressures in the last few days.

Grexit

 

Turmoil Before Storm

Following the crumbling discussions between Greece and its lenders last week, European Central Bank (ECB) decided to increase the upper limit of supports for Greece banks that are currently losing liquidities. However, the Eurozone highest monetary authority is still hoping for an agreement to be reached in order for the Greece to receive further bailouts and fulfill all of its responsibilities. Along with it, market attention is coming back to the Greece debt negotiation that has been on-going for months without bearing any substantial results.

Greece PM Alexis Tsipras ended the last negotiation by criticizing their creditors that have rejected Athens' latest proposal. In the proposal, the country has given several concessions by agreeing to selectively increasing VATs, new taxes for businesses and the wealthy, as well as revisiting their stance on early retirement and pensions. However, as Tsipras has stated before, they refused to further cut on pension funds or public sector wages.

Greeks reacted negatively to their government's concession on the later proposals by holding demonstrations in Athens. Nevertheless, their creditors argued that the planned tax hike and revisions on pensions are insufficient; thus the proposal was strongly rejected, particularly by the IMF. Meanwhile, Eurogroup leader, Jeroen Dijsselbloem, once again urged for further discussions although agreement is not yet on the horizon.

 

June 30 Deadline

Greece is back in the main agenda of the 28 EU countries' two days meeting (June 25-26 EU Summit) in Brussels. It will most probably be the last chance for Greece to reach an agreement with other EU leaders. Afterward, if a draft can be made, then in Saturday-Tuesday each respective countries has to discuss the draft separately and put their stamp on it.

The market now concerned about the possibility of Grexit if there is no breakthrough and Greece get into default. Because of that, investors is looking for indications of solutions in the end of the discussions or contrarily, whether the discussion will end disastrously.

Ilya Spivak from DailyFX mentioned that if a breakthrough is confirmed, then the Euro may see near-term gains amid ebbing uncertainty risk. Risk appetite may likewise find support, boosting higher-yielding currencies (notably in the commodity FX complex) while weighing on the safety-linked Japanese Yen.

 

Grexit Projection

However, it should also be noted that if Grexit is to happen, then EUR/USD may fall down in short-term, although the heaviest impact will be received by Greece instead of the Eurozone. Contagion potentials has severely limited due to the relatively vast growth experienced by the formerly-in-huge-debt countries: Ireland, Portugal, and Spain. Foreign assets in the country has also significantly decreased over the years.

The biggest impact of a Grexit toward financial market will probably come from the banking sector and politics. By the end of 2014, there are 10,624 million Euros of German banks assets, 10,171 million Euros of US banks assets, 9,738 million Euros of UK banks assets, and other far minor asset figures of Netherlands', France', Italian, and so on. Apart from that, UK has provided around 1.72 billion pounds of funds as part of IMF's Greece bailout package. German, France, and its peers also has provided a not small number of bailout as a part of Eurozone's Greece bailout that is not yet repaid thill this day. If Greece defaults and has to exit the Euro, all of those funds can be considered as a monstrous loss.