After some early optimism in the market, Greece and its European creditors were unable to reach an agreement on a new bailout deal and analysts from Barclays say that the prospect of a Greek exit is at its highest point since 2012. They added that discussion will continue on Monday but there are no expectations that an agreement will be reached anytime soon. “Although they have a strong incentive to reach an agreement on an EU-funded program, they seem fundamentally opposed on many policy issues,” they say. Despite the risks, Barclays adds that is it uncertain if a “Grexit” will create financial instability across the eurozone the biggest contagion risk would be Spain. “While the direct exposures of other member states to Greece appear manageable, a Greek exit could leave the door open for speculation that other EMU members may follow, especially where the election of new governments hostile to the current policy approach appears likely,” they say.
