Back
30 Jun 2015
Greece referendum turning into a referendum on EMU – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team presents the case of Greece referendum and the possible reaction by the present Greek government.
Key Quotes
“The poorly constructed referendum itself is turning into a referendum on EMU. That said, it is not clear what happens if Greece votes no on Sunday, and precisely how that leads to an exit from the euro area. The Greek Finance Minister apparently has threatened to seek an injunction from the European Court of Justice to prevent this. However, many suspect that if the ECB withdraws approval for ELA, the ensuing banking crisis, without means of recapitalization, could be a powerful push.”
“A report suggests that the Syriza government may appeal to the ECJ to try to force the ECB's hand, but the ECJ’s most recent decision on OMT suggests the ECB would be given wide latitude. Ruling that the ECB can buy sovereign bonds under OMT is not the same thing as forcing it to grant ELA.”
“The referendum itself is confusing. As former Greek Finance Minister Venizelos has noted, the government is asking the Greek people to vote against measures for which the Syriza government itself supports 90%. Moreover, the second financial assistance expires today.”
“When S&P cut Greece's debt rating yesterday to CCC-, it said that the odds of Greece leaving EMU were 50%. We suspect it is a bit lower than this. Instead, we see the Syriza government so frustrated by the inability to change Europe and the terms of the debate, or even to peel off some of the peripheral countries that it hoped would have been more sympathetic, that it is willing to self-immolate. On top of the financial crisis, and the humanitarian crisis that Syriza so passionately identified, it will bequeath a political crisis.”
“A no vote could see the president of Greece resign and a yes vote would topple the Syriza government. Yesterday, Tsipras hinted that he would resign on a yes vote.”
Key Quotes
“The poorly constructed referendum itself is turning into a referendum on EMU. That said, it is not clear what happens if Greece votes no on Sunday, and precisely how that leads to an exit from the euro area. The Greek Finance Minister apparently has threatened to seek an injunction from the European Court of Justice to prevent this. However, many suspect that if the ECB withdraws approval for ELA, the ensuing banking crisis, without means of recapitalization, could be a powerful push.”
“A report suggests that the Syriza government may appeal to the ECJ to try to force the ECB's hand, but the ECJ’s most recent decision on OMT suggests the ECB would be given wide latitude. Ruling that the ECB can buy sovereign bonds under OMT is not the same thing as forcing it to grant ELA.”
“The referendum itself is confusing. As former Greek Finance Minister Venizelos has noted, the government is asking the Greek people to vote against measures for which the Syriza government itself supports 90%. Moreover, the second financial assistance expires today.”
“When S&P cut Greece's debt rating yesterday to CCC-, it said that the odds of Greece leaving EMU were 50%. We suspect it is a bit lower than this. Instead, we see the Syriza government so frustrated by the inability to change Europe and the terms of the debate, or even to peel off some of the peripheral countries that it hoped would have been more sympathetic, that it is willing to self-immolate. On top of the financial crisis, and the humanitarian crisis that Syriza so passionately identified, it will bequeath a political crisis.”
“A no vote could see the president of Greece resign and a yes vote would topple the Syriza government. Yesterday, Tsipras hinted that he would resign on a yes vote.”