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28 Jun 2015
Greek crisis: New chapter of uncertainty has opened up - Deutsche Bank
FXStreet (Bali) - George Saravelos, Strategist at Deutsche Bank, takes a look at the possible Greek scenarios after the June 5th referendum, noting that an uncertain outcome will prevail even after the referendum.
Key Quotes
"The most important medium-term question on what happens after Sunday’s referendum remains. A negative vote will be perceived by the Greek government as a strong mandate to pursue changes to the current proposed framework, but in the face of a non-functional banking system. As has been evidenced over the last few months, the scope for creditor flexibility would likely be limited, leaving the possibilities of a potentially more targeted bank recapitalization program without state financing or Eurozone exit as the most likely alternatives."
"The outcome of a "yes" vote would be equally uncertain however. Finance ministers yesterday highlighted the important credibility issues that would arise from Greek government implementation of an agreement it campaigned against. A government change and a cabinet of national unity - possibly under the pressure of a continuously strained banking system - would be the most likely outcome. Any agreement would likely have to be fast given the accelerating impact of the crisis on the economy."
"In sum, a new chapter of uncertainty has opened up with the Greek crisis. More clarity on the eventual outcome is unlikely until the following Sunday and likely beyond."
Key Quotes
"The most important medium-term question on what happens after Sunday’s referendum remains. A negative vote will be perceived by the Greek government as a strong mandate to pursue changes to the current proposed framework, but in the face of a non-functional banking system. As has been evidenced over the last few months, the scope for creditor flexibility would likely be limited, leaving the possibilities of a potentially more targeted bank recapitalization program without state financing or Eurozone exit as the most likely alternatives."
"The outcome of a "yes" vote would be equally uncertain however. Finance ministers yesterday highlighted the important credibility issues that would arise from Greek government implementation of an agreement it campaigned against. A government change and a cabinet of national unity - possibly under the pressure of a continuously strained banking system - would be the most likely outcome. Any agreement would likely have to be fast given the accelerating impact of the crisis on the economy."
"In sum, a new chapter of uncertainty has opened up with the Greek crisis. More clarity on the eventual outcome is unlikely until the following Sunday and likely beyond."