Greek countdown

• On July 5th Greece will say if it agrees to the terms set by international creditors 
• It will determine the future of the country

The significant market reaction (see adjacent table) shows how much of a feeling of uncertainty has been created by the Greek government’s decision to call a national referendum on the conditions its creditors want to attach to its bailout funding. It seems safe to assume that by now the Greek population will have a very good understanding of the ramifications of the referendum. A ‘yes’ vote would clearly show that Greeks want to stay in the monetary union. A change in government might be needed considering that the Greek government has called on voters to reject the creditors’ proposal. This could make a deal with the current Greek government very difficult. If the “No” side won the referendum and if an exit from the Eurozone were nevertheless to happen, the impact on the Greek economy would be drastic but more limited for the Eurozone. Private-sector exposure to Greece has fallen dramatically since 2012 and the direct exposure via international trade is also limited. However, in the longer run investors might very well become more sensitive to political news and country-specific developments, something which would force the Eurozone to speed up its integration process.