FXStreet (Barcelona) – According to the KBC Bank Research Team, the Greek population favouring a ‘No’ vote raises risk of a Grexit.
Key Quotes
“About one week ago Greek PM Tsipras rejected the final proposals from the creditors on the bailout conditions and called a referendum. He asked to vote No and the Greek people complied. A large majority of about 60% voted yesterday “No” to the proposal. From the European side, many officials said the real question was in fact whether Greece wanted to stay in the euro area or not. The Greek people, of which a large majority wants to stay in the euro area, clearly were not impressed by this threat and voted “No”.”
“The Council of Europe said the referendum wasn’t in line with international accepted norms, which opens the possibility that the results will be challenged in courts. However, given the unexpected large majority, such a challenge is less likely.”
“Many European leaders said the referendum hadn’t any object anymore, as the proposal didn’t exist anymore. While this is formally correct, the “No” vote gives a clear political signal that also European leaders cannot put aside easily. Prime Minister Tsipras said it would strengthen his position on the negotiation table and that a deal would soon be signed.”
“Prime Minister Tsipras’ optimism on a fast deal is probably wishful thinking or at least that’s not how we interpret the situation. It is unthinkable that the European leaders will drop overnight the conditions (austerity) for a new bailout deal. It would set a precedent in Europe that would weaken the euro area maybe fatally in the longer term. Chancellor Merkel very clearly said that the bailout deal will be attached with conditions to avoid that the euro area becomes a transfer union and that the rules of the euro club needed to be respected.”
“The deterioration of the Greek economy since the January elections makes it likely that the amount of the bailout needed to keep Greece functioning became a lot bigger. As the IMF may refuse to participate, the cost of an eventual bailout for the other euro countries (via the ESM or otherwise) will be higher. This should be reflected in still more stringent conditions for Greece and less appetite for euro countries to conclude such a deal.”
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