Greece has managed to cobble together cash from various sources, which should enable it to keep paying the International Monetary Fund (IMF) for the moment, said JP Morgan Asset Management In its latest Weekly Strategy Report.
But, the firm added, "The critical period comes in July and August, when it has to repay about €7bn ($7.56bn) to the European Central Bank (ECB) as some of its bond holdings mature."
This is about 3.7% of Greek GDP, and the payment can only be made if the Euro-group decides to disburse the remaining €7.2bn ($7.78bn) from Greece's last package.
JP Morgan says there is a risk that the Greek government will choose to keep paying the IMF but will default on the ECB obligations to prove a point to its electorate and to the European authorities. "Quite where this would leave the Greek banks is an open question," the asset manager notes.
Last Friday ECB president Mario Draghi focused attention on the Greek banks in comments after a meeting of Euro finance ministers in Riga, Latvia. The uncertainty over Greece's debt negotiations and high interest rates on the nation's debts are making it more difficult for Greek banks to find the assets they need to post in return for these loans. "The higher the volatility, the more collateral gets destroyed," Draghi said, according to Dow Jones.
The ECB stopped accepting Greek debt as collateral in its own liquidity operations in February and Greek banks have since been relying on more expensive funding from the Greek central bank.
In JP Morgan's view, "We are therefore heading slowly towards the end game, which should be in about six weeks' time, given the time lags involved in putting funding agreements in place."
Private-sector counterparty risk is negligible, and the official holders of Greek debt could wear a default without jeopardising their capital, according to the asset manager. Greek sovereign debt is negatively correlated with other peripheral countries, but prime minister Alexis Tsipras now holds very few cards.
As Draghi reiterated on Friday: "Time is running out. Speed is of the essence."