Comments from bank analysts following the victory by 'No' at the Greek referendum
BNP economists have shifted their call for the Federal Reserve's first rate hike to December (from September) following the 'No' victory
- Markets are likely to be stressed tomorrow morning with risk-off the order of the day
- Good chance the ECB would move quickly to alleviate strains
- Heightened uncertainty about Greece's continued membership of the eurozone is likely to continue for some weeks
- Greece will try to reopen negotiations tomorrow and the EU will respond, but the base case is these will not get very far. There are still a couple of weeks before Greece has to make a EUR3.5bn payment to the ECB on 20th July, which we see as a very significant date.
- The Fed's concerns about the possible impact of a Fed hike on markets and therefore on the economy will have intensified. We do not see these tensions being resolved quickly and so have changed our call for the Fed moving in September, which we now see as only a 30% chance. December is now our base case.
- It is unlikely that there will be sufficiently smooth waters in Europe for the Fed to tee up a September hike at its late July meeting.
Barclays - Say a Greek euro exit remains most likely
- Chancellor Merkel and President Hollande are scheduled to meet tomorrow, we argue that EMU exit now is the most likely scenario
Agreeing on a programme with the current Greek government will be extremely difficult for EA leaders, given the Greek rejection of the last deal offered and will be a difficult sell at home, especially at the Bundestag or in Spain ahead of the general elections
The ECB Governing Council will meet tomorrow to decide on ELA. We would expect ECB's GC to shut down ELA at the latest by 20 July
Assuming that all of the pledged collateral at the ECB is recorded at (close to) par on Greek banks' balance sheets and that current average haircut on collateral is 50%, then retention of the collateral by the Eurosystem would translate into a more than E3Obn loss for the banks. This alone would wipe out shareholders' equity. The Greek central bank will eventually need to print its own currency in order to inject new liquidity and capital
The direct exposure of other EMU member states and the Eurosystem amounts to 3.5% of euro area GDP, while exposure of European banks to Greece has fallen to less than one-tenth of that. Even with low recovery values, direct losses should be manageable. Contagion remains the key concern, in our view
Can an exit be avoided? We believe the answer is potentially yes: we see two possibilities, even if both are less likely than an exit. Europe and Greece could agree on a programme on the IMF's terms. A more disruptive scenario would be one in which financial and macroeconomic conditions rapidly worsen and social unrest could result in a political crisis, yielding a more moderate pro-deal government.
JP Morgan - Greece leaving the Euro ... the baseline scenario
- A probability of about 2/3rd at present
- "We see possibilities of Greece remaining in the Euro zone, either via a last minute agreement with current government under the assumption that the ECB continue to maintain and potentially increase ELA (15%) or in case in which Tsipras steps down and a new unity government is formed (20%)."
Deutsche Bank
- The range and probability of unpredictable outcomes to the Greek crisis has again materially increased this evening
- Credibility and trust between Europe and Greece has been seriously damaged this week
- Negotiations around an ESM program will be even more difficult
- Over the next few hours, both sides' willingness to re-start negotiations and under what conditions remains the most important next step. Beyond that, it is the increasing pressure on the Greek economy and people via a frozen banking system and capital controls that will drive the speed of developments
- Decisions have to be taken soon on whether to return to the path of negotiations or consider the alternative of a Eurozone exit
