Analysis: What’s Next for Greece?

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Gut-Check Time for Merkel and the Euro Zone

We have entered uncharted territory, but it should be stressed that Greece is not exiled from the euro zone yet. There will be a flurry of negotiations this week, and so far a meeting between Chancellor Merkel and President Hollande has been scheduled for Monday afternoon, followed by a Eurogroup summit on Tuesday.

There will be two noteworthy deadlines looming over the last-ditch talks this week. First is the massive payment owed by Greece to its euro zone creditors on July 23; missing this payment would be tantamount to a Greek default in the legal sense (recall that it’s technically ‘in arrears’ in regards to the missed IMF payment last week). Second is the more intangible deadline of hammering out a path forward before capital controls strangle the Greek economy. The ECB can play hero or villain in this by loosening the tap of emergency liquidity assistance or turning it off completely, which would effectively be the first step of a relaunched drachma at this point.

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