HSBC: Greece’s Bailout Exit Plausible, Clean Exit Less So



Greece may be able to exit the bailout programme established by international lenders as soon as this year, banking giant HSBC has said, adding that a clean exit is less clear.

The country last year regained access to capital markets, its economy is looking less dreary, and it will have enough cash reserves in August of this year to finance itself for the next “year or so”, said Fabio Balboni, European economist at HSBC.

However, it is less clear whether Greece will be able to make a clean break, one without a follow-up scheme.

“A ‘clean’ exit might be feasible, at least for a period. But a precautionary programme, or at least ‘enhanced’ post-programme surveillance, might be needed to ensure Greek bonds remain eligible in the ECB refinancing operations,” said Mr Balboni.

If Greece is successful in moving past the string of bailouts it has received over the past eight years from the EU and International Monetary Fund, it would mark the latest sign of progress for the country, the economist added.

Mr Balboni noted that Greece is “still far from an investment grade [and] the country remains excluded from the [European Central Bank’s] QE programme.” He reckons inclusion into the bond buying programme is “some way off”, which could limit a further reduction in bond yields.

Much hinges on the eurozone’s willingness to provide Greece with debt relief. The bloc owns 80 per cent of Greece’s debt, according to HSBC. Without “substantial” relief, “Greece will fail to meet the IMF’s debt sustainability requirement,” said Mr Balboni.

Source: FT


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