In an interview to CNBC-TV18, Nick Parsons of National Australia Bank said, the global markets are 95% convinced that Greek debt agreement will be reached. "It is highly likely that we will see an agreement over the course of the next two weeks," he said.
However, if that doesn't happen and Greece defaults disorderly, then he expects to see a huge sell off. "Its quite possible that all the year to date gains might well be undone and probably reversed," he added. Below is the edited transcript of Parsons's interview with CNBC-TV18.Also watch the accompanying video. Q: The German data seems to be helping the markets right now, but we did have negative news flow in terms of the Greece deal falling through and again getting back to the drawing board. Are you worried that the March deadline is approaching or do you think negotiations will fructify soon and we could have a deal very soon? A: It is a source of concern to the market. Government in Europe and indeed the IMF themselves seem to be taking a much tougher line on the private sector involvement in the Greek bailout. They are trying to get a reduced coupon paid on the new bonds, which Greece is going to have to issue when its maturing debt is not repaid in full on March 14. So, that was a source of some concern. Those concerns have been alleviated by some very good economic news both in Germany and France because the French PMI service data and Germany is back in expansion territory. The hard evidence on the ground from the economy is that the new year got of to a decent start. It might well be weather related. because we have seen quite remarkable weather in the continent of Europe. But the hard data does seem to be coming in just a little bit better than might have been expected. Q: If there is no concrete solution that comes out of this toing and froing of the Greek debt deal, what kind of repercussions do you think it could have on global markets? Do you think this news flow has the potential to drag global markets further down or the market is pretty much done with all that kind of news in the past? A: The markets are 90% or 95% convinced that there will be a debt agreement reached. Were it not to happen, we would see quite a substantial sell off. Its quite possible that all the year to date gains might well be undone and probably reversed. To put some numbers on that, so far this year the DAX in Germany is up 8.1%, the CAC is up 4.8%, the Euro STOXX 50 Index is up 4..4%. If Greek agreement could not be reached and there was to be a disorderly default, then I am pretty sure that all those year to date gains would be wiped out and we would do so very quickly. It is highly likely that we will see an agreement over the course of the next two weeks. It is a bit of a Mexican standoff at the moment, it is a bit of a game of chicken, but I am pretty convinced - so too is the market. Come March 20 when Greece has to make a payment on USD 13 billion of maturing debt, the funds will have arrived from the TROIKA and that those funds would be repaid partially if not in full. So, the debt agreement will be reached. Q: What you are saying is also being reflected in the currency markets, Euro-Dollar above 1.30 and all the problems that we had at the start of the year havenDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
