Despite all the tough talk of ultimatums and games of poker, Greece and its creditors in the 19-country eurozone are still expected to cobble together some sort of deal that will allow the country to remain a member of the euro currency.
However, as a Feb. 28 deadline nears, jitters are mounting.
For now, investors and European policymakers are not panicking despite a breakdown in talks between the two sides over the new Greek government’s attempt to renegotiate its financial bailout.
That’s likely because they’ve been here before — the eurozone has in recent years often run into moments of brinkmanship, often with Greece. Each time, a deal was clinched in time.
“If Greece were to leave the euro, the financial chaos that would follow could also spell the end of the Syriza-led government,” said Jane Foley, analyst at Rabobank International, referring to the radical party that won elections last month.
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“What the Greek finance minister has said gives us a positive feeling, though I must say that (their) opinions are changing pretty much every day and that actually is our problem,” Austrian Finance Minister Hans Joerg Schelling told Germany’s Deutschlandfunk radio.
After this week’s sudden breakdown in talks, Dijsselbloem has said trust needs to be rebuilt.
“At the moment, the two sides are running down their reserves of trust more quickly than they are narrowing the gulf that separates them,” said Aengus Collins, The Economist Intelligence Unit’s lead eurozone analyst. He added that the EIU “remains of the view that a last-minute deal will be agreed, but the risk of Grexit remains high at 40 percent.”
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Geir Moulson in Berlin and Elena Becatoros in Athens contributed to this report.
