They note that the only obstacle to the ECB moving into action has been the refusal of Madrid to request ESM aid, thus meaning that the ECB’s bailout efforts have not gone as smoothly as hoped and the Spanish question is unlikely to be answered in the short term. In fact, they highlight Greece as being more likely to be able to generate momentum as the majority of donor nations are willing to allow Athens more time to implement the urgently required reforms. However, extra time will come with extra cost.
However, when assessing the whole Greek story, Karpowitz and Kinsella find more questions than answers surrounding how necessary reforms can be implemented and how funding can realistically be sustained and/or implemented. They finish by highlighting, “The fairy tale claiming that at some stage the funds the European countries are paying to Greece will be repaid is increasingly turning out to be just that – a fairy tale. As a result the lower end of the trading range in EUR-USD is likely to be the weaker one in the short term.”