6 Jul 2015
Grexit to provide a negative shock for Eurozone and Euro – BTMU
FXStreet (Barcelona) - With Greece Referendum resulting in a ‘No’ vote, things have fallen into the hands of the Eurozone creditors as a Grexit would result in a negative shock to the economy and the Euro as well, according to Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ.
Key Quotes
“The Greek government will likely attempt to begin negotiations over securing a third bail-out package which includes less onerous austerity and reform measures and more debt relief.”
“Greek Finance Varoufakis, fresh from the success of securing popular support for his staunch opposition to the creditors “pretend and extend” strategy, has just resigned. On his blog he stated that soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants and assorted partners for my absence from its meetings”. The announcement has provided a partial offset to the unfavourable referendum result as negotiations could be potentially smoothed in his absence.”
“Still it has become more likely that Greece will not be able to reach an agreement with its creditors for additional financing increasing the likelihood of it defaulting on its debt and eventually leaving the euro-zone.”
“European creditors will now have to decide whether they are willing to ease their austerity and economic reform requirements and offer debt relief in order to preserve stability within the euro-zone and prevent Grexit. It remains to be seen whether that proves too hard to swallow.”
“Downside risks for the euro have increased in the near-term as Grexit would provide a negative shock to the euro-zone economy, increase the likelihood of looser ECB policy, and introduce some re-denomination risk into euro-zone assets and liabilities.”
Key Quotes
“The Greek government will likely attempt to begin negotiations over securing a third bail-out package which includes less onerous austerity and reform measures and more debt relief.”
“Greek Finance Varoufakis, fresh from the success of securing popular support for his staunch opposition to the creditors “pretend and extend” strategy, has just resigned. On his blog he stated that soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants and assorted partners for my absence from its meetings”. The announcement has provided a partial offset to the unfavourable referendum result as negotiations could be potentially smoothed in his absence.”
“Still it has become more likely that Greece will not be able to reach an agreement with its creditors for additional financing increasing the likelihood of it defaulting on its debt and eventually leaving the euro-zone.”
“European creditors will now have to decide whether they are willing to ease their austerity and economic reform requirements and offer debt relief in order to preserve stability within the euro-zone and prevent Grexit. It remains to be seen whether that proves too hard to swallow.”
“Downside risks for the euro have increased in the near-term as Grexit would provide a negative shock to the euro-zone economy, increase the likelihood of looser ECB policy, and introduce some re-denomination risk into euro-zone assets and liabilities.”