After months of negotiations, and after rejecting the latest proposal from the creditors, Greece has called a referendum for Sunday 5 July: citizens will decide whether or not to accept the fiscal and structural reforms that would allow the aid package to be unblocked ( here is the text of the agreement proposed by the creditors).
Meanwhile, the counters of banks are closed and the Athens Stock Exchange Also. Greece, in the end, was forced to impose capital control measures. The European Stock Exchanges, meanwhile, do not seem to like it: theEuro Stoxx 50 index marks -3,80% at the time of writing this post.
The situation in Greece
Il 30nd June the loan expires €1,5 billion from the International Monetary Fund. Unless a miracle happens, Greece has no money to repay the creditor (who may not immediately declare it legally insolvent – essentially the IMF could only “remark and solicit” payment, due by the end of July) . Now, do default on an IMF loan is a really bad idea: this could have direct repercussions on the liquidity that Greece receives from the ECB, since the latter could decide to "turn off the taps".
In fact, Greece is by no means self-sufficient in terms of liquidity necessary to carry on the ordinary administration of a State. Bank deposits plummeted in passing from €164 to €130 billion within six months. The phenomenon has accelerated in recent weeks (a veritable run on the banks) and this has led to the decision of the Greek government to close bank branches.
The Greek banking system depends crucially on the ECB, which provides money through theEmergency Liquidity Assistance (AND THE). The ECB has already placed a limit on the amount of money Greek banks can receive. And it has the power to terminate the ELA, if 2/3 of the twenty-one members of the board that governs the central bank vote to do so. This could happen, after a default against the IMF. In that case, the Grexit it would be probable.
If, on the other hand, this does not happen, they will stall until Sunday's referendum, waiting for the result. The closure of banks and stock exchanges serves to limit the damage in a very delicate situation.
The referendum has two possible outcomes:
. yes wins – there would be the release of financial aid, the scope of which is limited; furthermore Tsipras (who is basically in favor of no, as he considers the requests to the Greek people humiliating) could even be pushed to resign and within a few months we would find ourselves in new political confusion and uncertainty about Greece's solvency (editor's note: uncertainty does not there is, Greece is clearly insolvent from whatever angle you look at it);
. wins the no – it is difficult to imagine with what technical-political ploy Greece could remain in the Monetary Union, given that in essence it would give Tsipras a mandate to leave the euro; Greece's default is practically certain on the July 20 deadline; at that point, technically insolvent, Greece would no longer be entitled to the ELA.
If the no won, and there was a Grexit, things would hardly remain the same for the other peripheral countries of the Eurozone. Anti-euro movements would receive a strong positive boost. Perhaps we would see a phase transition for the eurozone.
However, it must be said that in Greece the majority of the population is in favor of remaining in the euro area (even if there are those who say no). There are strong pushes in this direction at an international level: US President Barack Obama on Saturday declared "Europe remains united".
The consequences for savers
It is useless to lecture Tsipras, the IMF and European political leaders for their insane conduct. Let's take it as a sad fact and look at the possible consequences on the financial markets and savers.
1. Yes wins – In our opinion, it remains the most probable scenario, despite everything. There will likely be a sigh of relief on the part of the markets, with a rebound in risky assets, but a climate of uncertainty and volatility will still persist, because the situation in the Eurozone would only be buffered, and not structurally resolved, given that Greece would still need to a new substantial financial aid plan.
2. Wins the no – a generalized decline in risky assets would be very probable, with good performance of investments considered defensive in these situations: gold and precious metals in general, bonds in hard currency (for example in USD and Yen). There could also be rapid and violent contagion, with panic spreading and Lehman crisis-style sell-offs, although the ECB says it is ready to do everything possible to stem the harmful effects. Minister Padoan also spoke on the subject, who appears confident that there will be no contagion - let's hope it's not the "famous last words".
In terms of financial exposure, that of Italy with respect to Greece is quantified at 65 billion euros (including bilateral loans, EFSF, ESM, ELA), but the problem is not so much this, as the possible spread of fear on the financial markets, with the sale of Italian government bonds. Systemic risk is also on the rise – look at the downward trend (storm direction) in our European Risk Barometer.
In these cases caution is a must. For weeks we have reduced the exposure to risky assets both in the asset allocation of the Premium Portfolios and in that of the Express Portfolios. For the most pessimistic, the Euro Tsunami anti-crisis portfolio remains valid, and for the most optimistic, Euro OK.
