As the euro slides again on deadline day for Greece, there are many open questions next.
Will Greece leave the exit or not? The team at RBS weighs in:
Here is their view, courtesy of eFXnews:
RBS now sees increased chances of a Grexit, but GRIN (Greece remains in Eurozone) remains its base case scenario.
“If we use a 60/40 probability for a yes/no vote from recent polls, and assume there is still some chance to get back to the Grexit scenario after a yes vote, then we should estimate the Grexit probability at a maximum 40%, up from our 10%-20% previous estimate,” RBS clarifies.
“Grexit is more likely, but GRIN remains our base case scenario. The major issues to unlock the negotiations remain political. The economic cost of keeping Greece remains immensely lower than the potential fallout from an exit. The hardline stance from the SYRIZA government has put negotiations closer to the edge, with the potential for crossing a point-of-no-return in case of a No vote this weekend,” RBS argues.
“The most likely scenario is a Yes, with the ECB extending liquidity to Greek banks and the Eurogroup making its proposal available again upon the vote, and a potential reshuffling of government coalitions, a unity government, or new elections. With a No vote, we enter uncharted territory. The government will probably stay in power, having supported it. But the Greek banks will probably face a liquidity crisis, even if ELA continues to be extended at current levels, pushing the Bank of Greece (or the Treasury) to issue IoUs and bringing Greece one step closer to an Exit,” RBS adds.
“Eventually, it will be the Greek government and the Greek people to decide whether to stay in or out of the Euro, and the majority of Greeks so far wants to stay,” RBS concludes.
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