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In a report published Thursday, Deutsche Bank Strategist George Saravelos said that Greece's "endgame is here."
The cash-strapped country is trying to come to an agreement with European officials to unlock much-needed bailout aid and avoid financial insolvency. Any such agreement would need to be ratified by the Greek parliament. Greece will owe the IMF €1.6bn over the course of next month, with the first of four installments being due on June 5.
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According to Saravelos, there are three possible scenarios:
1. No agreement reached, non-payment to IMF
"This scenario would likely provoke the most negative reaction from the [European Central Bank]." Even if cross-default provisions, which would cause Greece to automatically default on its loans from other creditors, are not immediately invoked, Saravelos said, the ECB would likely "severely restrict Greek bank access to [emergency] financing."
Deutsche Bank estimates that the ailing nations' banks currently hold €30-40bn in liquid assets, but Saravelos said that tightened financial controls would significantly reduce this number.
2. Agreement reached, but doesn't pass through Greek parliament before June 5
According to Saravelos, no disbursements will be made by European institutions until a deal is approved by the country's legislature. Even if this is the case, however, Brussels could still throw Athens a life tube. "It is possible the ECB provides interim financing to pay back the IMF via raising the amount of treasury bills that the Greek government is allowed to issue."
Alternatively, he said, the central bank could allow Greece "to fall into arrears with the IMF," but still allow ongoing liquidity provisions to the nation's banks. Saravelos thinks this approach could maintain pressure on Parliament to ratify an agreement while still keeping the country's financial system afloat.
3. Agreement reached, followed by timely parliamentary passage
"This would be the most positive scenario." Saravelos said that even if disbursements to repay the IMF aren't made by June 5 "because of other national approval processes," the ECB would likely tolerate an increase in Greek treasury bill issuance to finance the outstanding debt.
Saravelos gives the third scenario a 60 percent probability of happening, indicating a positive outlook on Greece's financial future.
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New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.