Other EU nations may knock on ECB door for help: IG Markets

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Jason Hughes of IG Markets believes that the amount of wiggle room that has been given to Greece may encourage other countries in the Euro zone to knock on the European Central Bank's door for some assistance. "Some countries could look to investigate the Greece route to see if they can reduce the burden on their economy, so we are in an interesting stage," he said in an exclusive interview to CNBC-TV18

Hughes expects today's meeting on Greece's second bailout to be a final piece in the whole puzzle, but adds that there will be a need for further requirements another three-six months down the line. "This closes one chapter but we are just potentially moving on to another in the near future anyway," he said.

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: What is your expectation from today's meeting about Greece and how do you expect the markets to react?

A: Today seems to be a day where optimism is ripe in the market and risk assets have responded accordingly. We are likely to see final bit of the jigsaw being put in place for this latest bailout to be accepted by the euro finance minister. However, as some people have said before, where do we go from there? There is going to be further requirements 3-6 months down the line, so this closes one chapter but we are just potentially moving on to another in the near future anyway.

We are overly optimistic perhaps at the moment, with this latest reaction in the markets, but every time we take two steps forward we often take one step. It will be interesting to see what comes out of this latest meeting.

Q: What does this mean for countries like Portugal or Italy? Does that mean that perhaps there is some amount of worry that there should still remain for those countries as well?

A: The amount of wiggle room that has been given to the Greek situation perhaps encourages other countries that have deficit issues to investigate going down the similar route, with the level of private sector write off that is now being talked about. Why wouldn't some countries look to investigate this route to see if they can reduce the burden on their economy, so we are in an interesting stage.

We know that Greece is probably in the worst position out of all and other countries such as Ireland have improved over last 12 months or so in terms of getting deficits under control. But it could be tempting for other countries to investigate a similar route to Greece and this potentially opens the flood gates to other issues further down the line. We are at the early stages of all of this and there is a lot to play out, and as austerity bites across Europe over the next 12 months we could see the growth really contracting. If we do end up going into heavy recession in Europe, then other countries might be knocking at the door of the EU and ECB for further assistance.