Greek prime minister Alexis Tsipras and his finance minister Yanis Varoufakis promised the Greek population that a “No” vote will be a game changer in negotiations with the country’s creditors.
But already this morning the differing comments from German and Greek officials suggest Europe still sees the problem as being exclusively Greece’s dilemma. Dutch finance Minister Dijesselbloem said the result of the Greek referendum is “very regrettable for the future of Greece”.
That in itself suggests Tsipras has over-promised and nothing has changed. But the NAB’s co-head of global currency strategy, Ray Attrill, has gone further highlighting the long list of EU leaders who have and continue to line up against Greece.
In a note to clients this morning Attrill said “luminaries ranging from French President Francoise Hollande, Italian PM Matteo Renzi to EC President Jean-Claude Juncker, have made clear they would consider a No ‘a breach within Europe and a choice to leave the euro.” He also highlighted “German economy minister Gabriel is being reported as saying that Greek PM Tsipras ‘has ripped down the last bridge on which a compromise with Europe could have been built’ and that Tsipras is leading the Greek people ‘down the path of hopelessness’.“
Attrill said the “No” vote is the worst possible outcome from an “uncertainty perspective”. That’s because, “‘Grexit’ risk has clearly risen sharply, and is now the singularly most likely scenario following the referendum.”
Attrill reckons nothing will change on the deal front because of the moral hazard risk associated with letting Greece off lightly.
“Of one thing we can be sure: the ‘moral hazard’ risks arising from immediately granting Greece a soft deal with substantial debt relief to a Tsipras/Varoufakis- led government under which there is no confidence that agreed-to reforms will be adhered to, makes this a less likely scenario than Grexit. This is likely to be the message that emanates from the EU summit that Mrs Merkel and Mr Hollande have just called to take place on Tuesday.”
We know the Greek people have voted to empower their leadership in order to play hardball with the EU and IMF creditors. There is no evidence that the creditors behaviour has changed.
If one thing has changed it is that we are now closer to what many believed impossible just a few months ago — Greece leaving the Euro.