© Dario Perkins
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I believe that the risk of the default is growing bigger day by day. Hence, if the Greece will not reach an agreement with its creditors during the next week, the default is very likely to happen. Since the banks are under enormous pressure, the possibility of a default is in a matter of days with the current level of funding. Greece is requesting more funding but it keeps getting denied, while European Central Bank is tightly in a collateral, therefore, the pressure is getting more intense every day and it should be decided very soon.
What further development of the situation do you see in case of the Grexit regarding the Euro zone's economy and currency?
The impact of the Grexit to Euro zone's economy and the Euro would most probably be fairly modest, as, at the moment, most of the growth is coming from consumer demand. The problem with the Greece is that, as the benefit of the low oil prices start to fade, they are going to need an investment recovery, which is delayed under the uncertainty of the Grexit.
Nevertheless, it is very hard to say what will be the precise impact and how destructive the Grexit may be to other European Union countries, as we are unaware how contagious it will be. As we look at things from the probabilities perspective, I think no one can forecast the outcome of Greece debt crisis. Economists have been assuming that Greece will reach a consensus with its creditors and stay in the Euro zone all year; however, they have been wrong so far.
What could be other drivers for the Euro for the rest of the year?
Naturally, the Greek situation is the most important driver for the shared currency. However, later in the year we can monitor the Federal Reserve, which could start raising interest rates eventually pushing up the US Dollar against its major counterparts, including the Euro.
If we look at the United Kingdom, I believe that we are not going to see any big activities from the Bank of England, and it will be a long way behind the Fed regarding the rate hike. Therefore, the biggest impact on the common currency will be seen from the Fed and our Mediterranean nation.