Yesterday’s referendum in Greece resulted in “NO” to the troika of lenders. This means that Greece is not going to practice deeper austerity and perform structural reforms required to get further financial aid from the ECB / EU and the IMF, not to mention debt restructuring.
Here are the 10 factors that can manifest themselves following the referendum in Greece:
1. The “NO” camp takes the lead. This scenario implies a total sellout of Greek shares and bonds worldwide long with the pressure on the bonds of other peripheral Eurozone and emerging economies. At the same time, German and American bonds are going to witness a boost in demand.
2. While being taken by surprise, European politicians may start urgently seeking ways and means to take over the initiative. Angela Merkel and Francois Hollande are to have talks in order to work out an efficient strategy to smoothen the disputes with the Greek authorities. This is going to be tough to achieve if to consider the mutual blames.
3. Even amid such challenges, Greece and the Eurozone still have very little time to have talks. Greece is going to get deeper into financial and economic troubles. Without the ECB’s support, the Greek banking system will have a hard time reopening local banks and allow ATM withdrawals.
4. As the Greek storages are gong to be pilled up with unsold goods, the deficit will definitely get more substantial - especially when it comes to fuel and foodstuffs. The government will exercise tougher control over financial flows inside Greece. The economy will plunge, thereby triggering higher unemployment and poverty along with lover standards of living.
5. As a result, the pressure on the local government will increase and fill be forced to issue some bills, which will be treated as a kind of the local currency along with the Euro.
6. Outside Greece, the attention will be drawn to capping he negative impact and to avoid the possible domino effect. The ECB is likely to introduce some new measures to control and fight regional crises in Eurozone economies, including the possibility of expanding the asset purchase program. This is going to trigger an even bigger decline of the Euro currency all way down to the parity with the U.S. Dollar. On top of that, the lenders, including the IMF, will be getting ready to a series of defaults in Greece.
7. All the parties will be seeking Plan B. This one, if any, is going to be more painful for Greece rather than the rest of Europe.
8. The Eurozone will try to preserve tis integrity. This will require a lot of effort from the ECB and local financial authorities.
9. It is unlikely that after the NO answer Greece will be able to to regain its status as a full-fledged Eurozone member.
10. Greece is going to go deep into crisis - political, economic and financial – as the failed government is going to resign. Still, any Greek government will have to decide ho to pay off the huge debt and work out the solution.
