ECB Warns of Contagion Risk If Greece Deal Not Reached Fast

A failure to reach an agreement on Greece’s aid program soon may drive yields on bonds issued by other euro-area countries higher, the European Central Bank said.

“In the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro-area sovereigns could materialize,” the ECB said in its twice-yearly Financial Stability Review published Thursday in Frankfurt. “The lengthy and uncertain process of negotiations between the newly formed Greek government and its creditors” has already contributed to bouts of extreme volatility in Greek markets, it said. Continue reading