Eurozone members have given Greece a final deadline of Sunday to come up with a proposal for sweeping reforms in return for loans that will keep the country from crashing out of Europe’s currency bloc and into economic ruin.
But months of negotiations between Athens and its creditors has so far yielded nothing and Greece became the first developed economy to default on a debt payment to the International Monetary Fund last month.
Trust has also eroded between both sides after prime minister Alexis Tsipras unexpectedly called a referendum in which six out of 10 Greeks voted to reject further austerity.
“It’s gone too far in the sense that there is absolutely no trust whatsoever any longer,” said Christel Aranda-Hassel, senior European economist at Credit Suisse referring to the long-drawn-out negotiations
“Ultimately, I think the Greeks have overplayed their hand.”
Fifty-seven economists polled yesterday, as Tsipras pleaded in the European Parliament for a fair deal for his country, gave a median 55% chance of Greece leaving the eurozone.
That is the first time the median probability has shown Greece is more likely than not to leave the euro in many years of Reuters polls asking the same question.
While the results show economists have begun warming up to the possibility of “Grexit” — for many large banks it is now their base case — it also reflects a glimmer of hope a deal could be clinched just in time.
Financial markets also appear to have either held on to that hope or have dismissed a possible Greek exit as a non-event.
“It’s [a deal] still not impossible, especially if the Greek government comes up with a new proposal and does not insist on a nominal haircut on the debt but accepts lengthening of the maturities,” said Johannes Mayr, economist at BayernLB.