While policy makers and investors around the world are fretting about a Grexit—the possibility of Greece abandoning the common currency—I would instead insist on considering an agreement as to the most likely outcome of current negotiations between Athens and the Brussels institutions. Even in the case of extreme political and financial turbulences, the Euro area could still arrange emergency assistance to Greece through the provision of an emergency credit line by the European Stability Mechanism (ESM), which is operated by the European Central Bank (ECB).
Before June 30, Greece must repay 1.6bn euro to the International Monetary Fund. If Greece fails to meet its financial obligations to the IMF, its political relationship with its official creditors would deteriorate further. Moreover, Greece would enter a 'grace period' where its access to additional IMF resources (and consequently to further European financial support) would be cut off and a long administrative process would be launched which, in principle, could ultimately result in Greece's expulsion from the IMF with severe consequences for the country's future access to the markets. But along this process, European policy makers can exercise discretion as to the nature of their response and they are likely to take in the due consideration the high risk that Grexit would represent for the future existence of the Eurozone.
Far from designing a definitive solution for the dramatic Greek crisis, the current negotiations primarily ought to provide a reasonable bridge in order to overcome the July-August deadline for Athens' debt refinancing. In fact, after the summer, the Greek government should be able to make good on its financial commitments.
Against this backdrop, one should consider whether the current hostile rhetoric can be rewound and whether small tactical concessions on the part of both negotiating parties can wipe out the mistakes of the past six months, taking into consideration what the former Greek government had already obtained from the Eurogroup at the end of last year.