Portugal and Italy need to be watched: Lakefield Partners

In an interview to CNBC-TV18, Bruno Verstrate, chief executive officer of Lakefield Partners says, everyone is still waiting for the final solution on Greece. However, he says, the markets also start to realise that the economic importance and also the collateral or direct impact of a Greek default is manageable.

According to him, Portugal and Italy need to be watched. "If those can keep their yields under control, I think everything will be fine," he adds.

Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.

Q: Would there be a temporary lull in the global equity markets or risk markets because of the postponement of the Greek bailout package or will we be in for something stronger?

A: Everyone is still waiting for the final solution on Greece. That will kick the ball a bit further again. But I think the countries have started to realise that even if they help them finally get into 120% debt to GDP for 2012, it's not really what they are looking for. So, the doubt about the Greece is still there.

I think the markets also start to realise that the economic importance and also the collateral or direct impact of a Greek default is manageable. I think we are already looking further. It's mainly Portugal and Italy that need to be watched. If those can keep their yields under control, I think everything will be fine.

Ofcourse, in the short-term, it will have a negative impact, especially the Euro would be affected by a Greek default because it would remain to be seen whether they stay in or out of the Euro zone. I think it's that doubt, at this stage, is increasing volatility in the short-term.

Q: Yesterday, we heard chatter about how you could in the near-term have Greece not default on the March 20 payment. They could make a few temporary arrangements, but the bailout package could be deferred. Do you think that as a scenario that could play out? We may not have a final decision on Monday, but you could have a temporary bailing out for the March 20 event?

A: At this stage, a lot of scenarios are probably on the table. It is quite interesting to see that the Finance Ministers have conference calls to talk about it. I think, at this stage, the countries that have the money are considering any possible scenario that would not harm their banks as much as it potentially could. That is a reality.

I think Germany and France have a lot of Greek bonds on the balance sheets of their banks. So, they want to limit the negative impact in the short-term. But they also want to make sure that in the long-term it will not come back and cost even more. I think that scenario is most likely a scenario that's on the table amongst many others.