EUR-USD recovers within short span of time following Greece shock

The Greek government has already announced, is unlikely to be able to make the EUR 1.6bn repayment to the IMF. Even though the major rating agencies had signalled before that this would not be seen as a default as the IMF is a public creditor it nonetheless sends out a strong message. 

The IMF is usually seen as a preferential creditor. It is still open whether it will use this power, but it is nonetheless likely to receive criticism that it has jeopardized the funds of its members. When the aid package for Greece was passed the IMF already doubted the sustainability of the Greek debt. 

However, until then that had al-ways been a condition of the IMF granting a loan at all. Due to the systemic risks the default of Greece would have entailed it was decided to grant the loan after all, says Commerzbank. This decision is now catching up with the IMF. 

It has become very clear to the market once again just how difficult Greece's budget situa-tion is. Not only will the Greek government be in arrears with its payments, it will not receive any more funds for the time being either. Neither from the IMF, nor from the ECB nor its euro zone partners. 

The ECB had already made it clear over the weekend that it would freeze the volume of its emergency loans for the Greek banking sector (ELA) forcing the Greek government to close the banks and introduce capital controls. Moreover following the collapse of the negotiations over the weekend the euro group announced that the current aid package for Greece would expire today, notes Commerzbank. The prospect of a new aid package is more than uncertain as the outcome of the referendum next Sunday is difficult to predict.