Greek crisis: What the experts are saying

As the Greek debt crisis intensifies, we look at what the experts are saying and how they see key events unfolding.

On default, market meltdown and a 'Lehman moment'

Burkhard Varnholt, chief investment officer at Julius Baer:

"While we agree with market expectations that a default of Greece on its obligations to the International Monetary Fund tomorrow is close to a 100% probability, we do not think that such a non-payment would cause a meltdown in bond or stock markets for three reasons.

"First, such an event is being highly anticipated. Second, almost all Greek government bonds are owned by public institutions, which will neither panic nor default themselves. Third, sadly enough, Greece really does not produce more than 2% of European gross domestic product and will thus not become a 'Lehman moment'."

Is Greece too big to fail?

Ipek Ozkardeskaya, analyst at London Capital Group:

"As the Grexit would be an unprecedented event, the market has hard time pricing in such a first-time event. From a portfolio perspective, the eradication of the worst performer could only improve the expected value of the future cash flows and should therefore lift the fundamental value of the single currency. It all depends, however, on the severity of the exit and the costs that Greece and the EU should suffer following a potential rupture with Greece.

Greece is not too big to fail as the market exposure to Greece has diminished significantly over the past weeks. The main risk is contagion."

Contagion

Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight:

"If the EU is successful in ring-fencing Greece, then contagion to the rest of the Eurozone may be limited. While there is likely to be initial turbulence in global financial markets and a flight to safe haven currencies and assets, notably to the USD and US Treasuries, the contagion effects to Asia may be limited if the rest of the eurozone is successfully ring-fenced from the Greek exit.

"However, in a more severe contagion scenario where vulnerable eurozone countries such as Spain, Portugal and even Italy could be impacted by contagion and investor doubts about whether these countries might also eventually exit the eurozone, the Euro could depreciate more sharply. Global financial markets could suffer more stress due to renewed uncertainty about the eurozone outlook."

Referendum

Jane Foley, senior currency strategist at Rabobank:

"A recent opinion poll conducted by Alco for the Proto Thema newspaper reported that 57% of respondents supported a deal with the creditors while 27% were against. A poll published by Kapa research for Vima saw 47.4% voting in favour and 33% against. The PM, however, has pledged to campaign against a deal. This raises questions about the viability of the far-left government if the people vote in favour of accepting the creditors' offer next weekend. Early elections could be on the cards for Greece.

"While the Greek people will have an opportunity to have their say on the creditors' proposal at the referendum, IMF Chief Lagarde has warned that technically the offer will no longer be valid on July 5 since Greece's bailout, along with the extension offer, runs out on June 30. That said, if Greece votes to accept, it would seem unlikely that the creditors would adopt a pedantic line with respect to the dates."

On the EU, IMF and ECB

Jim Reid, analyst at Deutshce Bank:

"The IMF and EU will surely tread a careful path and while they will want to make it painful this week for Greece they won't want to cut them off completely. Merkel has been strangely quiet so far, which may reflect a desire not to antagonise a delicate situation. Overall the EU are likely to try to show the voters that things have taken a turn for the worse (without making any irreversible decisions) and give them a glimpse of the chaos that might arise at the end of the week if they don't vote yes.

"One important factor to consider will be the European Central Bank (ECB)reaction function this morning. We've already got verbal evidence of support following the emergency liquidity assistance decision with the associated statement including such rhetoric as 'determined to use all instruments available within its mandate' and the bank is 'closely monitoring' market conditions. Given the tools available, specifically quantitative easing, it'll be interesting to see if we get an aggressive response from the ECB."

What the bookies say

William Hill has closed its market on whether Greece will leave the eurozone before 2016.

"In such a volatile situation in which events can move very quickly it is very difficult to be confident that our odds are accurate. The only option people have been wanting to back for the past couple of days is that Grexit will happen this year and as we can no longer hope to balance our market so we have decided to pull the plug'," said the bookmaker's spokesman Graham Sharpe.

Paddy Power is offering odds of 13/8 on the country exiting the Eurozone this year and a whole host of referendum specials. Greece are odds-on at 1/2 to approve the creditor's bailout terms and it is huge odds-on at 1/7 that there they clear the 30% turnout figure required to make the vote valid at a referendum. The bookie is also taking bets on when the banks will open again.