It looks like we can now take “Grexit” out of our daily vocabulary.
Following the news on Monday about an “aGreekment” between Prime Minister Alexis Tsipras and Eurozone leaders, Wall Street says it’s a lot more likely that Greece will stay in the euro — especially in the short term.
“In light of today’s agreed deal, and broad support from the political parties domestically, we think that risks of a Greek exit have reduced in the short term as the ECB should remain supportive as long as prior actions are passed in Parliament by next Wednesday and talks are headed in the right direction,” Barclays analysts wrote in a note to clients on Monday.
And so while the odds of a Grexit remain high in the long term, Barclays no longer considers it their “base case.”
“Although a legal barrier, we do not think that national Parliamentary votes will jeopardise this agreement, which has been supported at the highest political level,” the firm wrote.
Greece is expected to receive around €50 billion ($US55.83 billion, £35.97 billion) in assistance in return for significant structural reforms.
A vote by Greece’s Parliament to approve the deal is expected by Wednesday.
However, Barclays doesn’t think that the chance of a Grexit has gone away forever, but right now, the bank is not planning for it, as it was a week ago.
“[W]e continue to believe that longer-term risks remain very high, particularly surrounding program negotiations and execution; however, not to the extent that we consider a Greek exit as part of our baseline,” the firm wrote.
“Negotiations and execution of a third bailout will likely prove extremely challenging, as banks may be forced to remain closed (temporarily) and capital controls will need to remain in place for a while.”
In other words, there is still a long road ahead, but today is a win for those that wanted to keep Greece in the euro.
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