Greece’s dance along the financial tightrope has kept markets, and investors, watching closely. Due dates come and go with no action, but with many threats and promises on both sides—that of the Greek government, elected by a populace sick of austerity measures, and that of the troika (the International Monetary Fund, the European Central Bank and the European Commission), determined to compel Greece to even sterner measures in exchange for additional rescue funds.
While some involved in the negotiations say progress is being made, others disagree, and markets roil accordingly—or not. Worries over a potential Greek default, or an exit from the euro, war with the belief of many that authorities will not allow such chaotic moves to occur—and the talks continue.
Most of its debt is not due this year, but Greece has to fork over a major payment to the International Monetary Fund by May 12. If it fails to reach an agreement with the troika that will allow it to access more cash, it will be in trouble—particularly since Athens continues to insist that it will not back off on salary and pension payments. That’s just one of the arguments with the troika.
Meanwhile, Greece continues to examine existing commitments with an eye toward compelling changes and making the terms more beneficial, or less stringent.
Here’s a look at some of the top ways that Greece’s stance is affecting markets.
1. Airport group could be affected.
Although the deal was hammered out in 2014, Greece is now trying to change the terms of an arrangement with a consortium led by German airport operator Fraport to lease 14 regional airports. That’s according to an anonymous source familiar with the deal, cited in reports, who said that Stefan Schulte, head of Fraport, had already met with the Greek government on the matter.
The $1.3 billion deal, which already had a spot at the table for Greek energy firm Copelouzos, did not previously include any participation by the Greek government, but that’s one thing Athens is now seeking—as well as a reduction by half of the number of airports involved in the deal. Since the current government rose to power in January, it’s already put the kibosh on a number of privatization deals, including the sale of the country’s largest port—although it’s since backtracked on some of those actions.
According to the source, while Fraport has expressed willingness to consider some involvement by the government, the challenge will be to arrive at terms that are agreeable to all the involved parties. The company had said earlier this year that the deal, which was originally expected to be completed by Q3 2015, now may take till the end of the year or even move to the beginning of 2016.
2. A Greek default could escalate Target2 liabilities.
Currently, under the Target2 system, euros created in any of the 19 euro zone countries move unrestricted throughout the currency bloc. However, if Greece defaults, that would open up the other 18 individual central banks in the euro zone, as well as the ECB, to losses. The ECB tracks the debt of euro zone countries to one another, and Greece already owes more than 40% of its economic output to other euro zone countries.
So say Greece defaults and can’t pay what it owes to the ECB. Suddenly, the ECB can’t pay any of the other member central banks their share of whatever Greece may owe them—whether for goods it’s imported from other countries or for some other purpose.
And if Greece is cut off from additional rescue funds from the troika, which is the most likely scenario in the case of a default, it has no way to pay up and other nations, and their banks, are left holding the bag.
3. A Greek default could trigger defaults among Greek companies.
If Greece defaults, a number of Greek companies would probably do likewise. In addition, their overseas assets could be subject to seizure by creditors, although after so many years of fiscal woes there likely aren’t all that many to seize.