6 Jul 2015
Grexit closer after the ‘No’ vote in the Greece Referendum – KBC
FXStreet (Barcelona) - The KBC Bank Research Team, believes that the ‘No’ vote in the Greece Referendum and thus the rejection of Eurozone creditors’ conditionality brings a potential Grexit near.
Key Quotes
“The “No” at the Greek referendum complicates policymaking and brings a Grexit a giant step closer to materializing. We expect policymakers to try once more to find a modus vivendi with Greece, but the “No” has made things more difficult. Europe wants a deal with strong conditionality, while Greece rejected conditionality at the referendum.”
“Is it reasonable to expect PM Tsipras to accept austerity now? An agreement on debt restructuring might be used as sweetener for accepting austerity by Greece, but even then the absence of trust in the Greek government will make many countries reticent to take that road. They will be suspicious whether the Greek government may take the effective measures needed to bring the austerity.”
“The ECB may currently keep the ELA ceiling unchanged, but raise the haircut on Greek collateral. If no speedy deal is agreed, it is the ECB that may pull the trigger by stopping or tapering the ELA lending, which would result in a collapse of the banking sector, the issuance of IOU’s by the Greek government and finally the printing of a new currency.”
Key Quotes
“The “No” at the Greek referendum complicates policymaking and brings a Grexit a giant step closer to materializing. We expect policymakers to try once more to find a modus vivendi with Greece, but the “No” has made things more difficult. Europe wants a deal with strong conditionality, while Greece rejected conditionality at the referendum.”
“Is it reasonable to expect PM Tsipras to accept austerity now? An agreement on debt restructuring might be used as sweetener for accepting austerity by Greece, but even then the absence of trust in the Greek government will make many countries reticent to take that road. They will be suspicious whether the Greek government may take the effective measures needed to bring the austerity.”
“The ECB may currently keep the ELA ceiling unchanged, but raise the haircut on Greek collateral. If no speedy deal is agreed, it is the ECB that may pull the trigger by stopping or tapering the ELA lending, which would result in a collapse of the banking sector, the issuance of IOU’s by the Greek government and finally the printing of a new currency.”