Greece deal with EU partners unlikely: ANZ Research

Today is the deadline for Greece to strike a deal with its European Union Partners to get aid. Greece needs 2.5 billion euros.Richard Yetsenga, head of global markets, research, ANZ Research thinks it is unlikely that Greece will be able to strike a deal with its EU partners because of difference of opinion between partners.Below is the transcript of Richard Yetsenga’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Sonia: What is your own expectation of what will happen at today’s meeting with the European Union (EU) partners?A: There are obviously high elements of uncertainty but a deal today is quite unlikely. There still seems to be quite a bit of distance between all the parties and it is not even possible in fact really to identify where the main issue is. It seems the general problem is the difference of opinion around the broad approach in this issue, which is why I say any sort of deal today seems very unlikely. Latha: So, what happens if that deal does not come as you say it is unlikely to? Will we see any Greek defaults from now to May 11, when the next meeting is scheduled?A: I do not think so. Obviously I keep emphasizing the word uncertainty. But I do not think so. I think we are actually talking about well into May or even possibly June if some things go in Greeks favour in terms of their creditors being a bit lenient for when we really face deadlines which seem immovable. So, those are few things which are going to affect financial markets. We could be waiting a little while yet unfortunately.

Sonia: Those are for financial markets in and around Europe, but what about the rest of the world? Do you think this Greek issue has the ability to snow-ball into a bigger issue for financial markets globally or should we not be too worried?A: We should always be worried about any sort of default. I mean obviously if Greece defaulted in the height of the European crisis in 2011-2012, it would have been a very significant issue; the experience we have had with major defaults in the last decade have been particularly uncomfortable.So, there are obviously a range of reasons for thinking that if Greece unfortunately ends up defaulting this time then it will be less serious than we might have seen a couple of years ago but certainly not something to ignore. And at the very least it would be an issue for European asset prices, I mean if it is confirmations for instance that the Euro is really just a group of fixed exchange rates rather than a genuinely a common currency. And that would be problematic for Europe and the message they are trying to send.Latha: What you are trying to drive at is in your own treasury for instance, are you moving around assets in some fashion just to hedge yourself against the happenings in Europe?A: The favourable aspects of the Greek situation is the financial markets community globally has had a couple of years to get used to this situation so, if you look at holdings for Greek debts almost all of the Greek debt is held by Greece’s official European partners or the International Monetary Fund (IMF). So, which is why I think the direct affects of the Greek default are likely to be relatively modest. The flow-on effect, potentially the European asset broadly which is where there are some questions, even there the fact that we are talking about questions rather than having a generalised expectation of contagion tells you how much, how less extreme the situation is now compared to a couple of years ago.