17 Feb 2015
What lies ahead for Greece? – Nomura
FXStreet (Barcelona) - The Research Team at Nomura shares the probable outcomes for Greece from the Eurogroup-Greece talks.
Key Quotes
“Before discussing future options, we note that our baseline view remains the same (albeit with lower conviction) as the one after last week’s inconclusive Eurogroup, i.e. that some muddle-through solution will be found either through a properly rebranded programme extension (the most likely outcome at this point) or through a request for a new ESM programme (that includes most of the conditionality of the current EFSF programme).”
“However, that outcome would only buy a few weeks’ worth of time for Greece rather than be the beginning of the end for the Greek crisis. This is because we do not believe that the current coalition will be able either to complete a review with the Troika or to agree on "alternative" policy conditionality following the request for a new ESM programme.”
“As a result, we think a muddle-through solution next week would only delay what we see as an inevitable clash between the current government and the eurozone.”
“This clash could be resolved in our view either 1) through the formation of a unity government and/or a snap election, or 2) by a referendum on policy conditionality and/or eurozone membership. Clearly, the market implications of those outcomes are quite different. For now we still place the balance of probabilities on the first outcome.”
Key Quotes
“Before discussing future options, we note that our baseline view remains the same (albeit with lower conviction) as the one after last week’s inconclusive Eurogroup, i.e. that some muddle-through solution will be found either through a properly rebranded programme extension (the most likely outcome at this point) or through a request for a new ESM programme (that includes most of the conditionality of the current EFSF programme).”
“However, that outcome would only buy a few weeks’ worth of time for Greece rather than be the beginning of the end for the Greek crisis. This is because we do not believe that the current coalition will be able either to complete a review with the Troika or to agree on "alternative" policy conditionality following the request for a new ESM programme.”
“As a result, we think a muddle-through solution next week would only delay what we see as an inevitable clash between the current government and the eurozone.”
“This clash could be resolved in our view either 1) through the formation of a unity government and/or a snap election, or 2) by a referendum on policy conditionality and/or eurozone membership. Clearly, the market implications of those outcomes are quite different. For now we still place the balance of probabilities on the first outcome.”