The Greek referendum could swing either way on Sunday.
A “Yes” vote would mean Greeks prefer their government to agree to conditions for a bailout that it is strongly against.
The government is encouraging a “No” vote that allows Greece to stay in the euro and work with creditors to create more favourable bailout conditions, or some debt forgiveness.
In a note Thursday, Goldman Sachs’ chief European economist Huw Pill wrote that what happens after the vote is more crucial than its outcome.
Ahead of the vote, Pill said the outcome was too close to call and opinion polls were not reliable. But he wrote (emphasis added):
“If forced to take a view in this uncertain environment, on balance we see a ‘Yes’
outcome as more likely. The closure of the banks and resulting liquidity squeeze on the
Greek private sector has served to concentrate voters’ minds on the gravity of the situation, bringing the broader question of Greece’s place in Europe to the fore and thus ultimately
favouring a ‘Yes’ vote.“
Pill said these are the three scenarios after the referendum:
- A “Yes” vote that’s followed by the resignations of prime minister Alexis Tsipras and finance minister Yanis Varoufakis. “This is likely to be the most market-friendly outcome,” Pill wrote. Varoufakis has already said he would quit if this is how voters decide. Pill says the new government would have to be really smart and committed to rescuing Greece for the political change to be worth it.
- A “Yes” vote, with Tsipras’ government refusing to step down. This would lead to more of what we’ve seen in the past week — no further access to emergency funding and banks remaining closed. “Eventually the political contradictions and economic fragilities that would follow are likely to create powerful forces for political change in Greece.”
- A “No” vote that would give the current government exactly what it wants, and grant it even more political clout. “This is likely to be viewed negatively by markets,” Pill wrote, although it doesn’t necessarily imply a Grexit. Rather, the economic slowdown would eventually motivate Greeks to vote in a new government.
Here’s Pill again: “In short, across the spectrum of scenarios sketched out above, our base case is that: (a) eventually there will be political change in Greece; and (b) this political change will ultimately lead in the direction of Greece reaching a new accommodation with its creditors that preserves Euro membership.”