European Union authorities are scrambling to patch together a last-minute deal to prevent a Greek debt default and keep the over-indebted country in the eurozone. Greece is due to pay billions of dollars to the International Monetary Fund (IMF) at midnight. But if no agreement can be reached, the country will be forced into default.
Ahead of the news, global stock markets plunged. On Monday, June 29th, European equity indices opened the trading session down as much as seven percent, though they pared much of those losses through the rest of the day. Unease also sent traders stampeding into safe-haven assets, including gold, silver, and U.S. Treasury bonds.
For investors, the fear is that a Greek debt default could spiral into an even larger financial crisis. A Greek bankruptcy would be the largest in history. Such an event would test the strength of the European Central Bank and other institutions.
Analysts now have to fully contemplate the idea of Greece abandoning the euro; the so-called “Grexit” scenario. And with other countries such as Spain and Portugal struggling under the weight of massive public debts, commentators fear a Greek exit could tempt other countries to leave the eurozone as well. The ultimate risk is the complete collapse of the European Union.
Greece is currently meeting with its creditors in an attempt to hash out a last minute deal. When asked about the probability as to whether the two sides will be able to reach an agreement, German Finance Minister Wolfgang Schaeuble told reporters it’s too close to call.
“The chances for an agreement are about 50-50,” a finance ministry spokesman representing Schaeuble confirmed last week.