An Oxi-dent waiting to happen
WHAT happens if the Greeks vote Oxi, or No, on Sunday? Of course, what might happen is that the Greek government's wishes are fulfilled and that creditors come back with a new, better, offer. But thoughts are now turning to the more likely scenarios - that Greece leaves the euro (Grexit) or is stuck in the position of being formally within the euro zone, but without access to ECB credit (dubbed Grimbo).
Three reports have just been published, a short blog from the Peterson Institute and longer (but private) reports from Standard & Poor's and Citigroup. They don't agree on all the details but they do suggest that the widely-touted benefits of Grexit (the reduction in debt service costs, the boost to competitiveness from a lower currency) need to be heavily qualified. S&P suggests that Greek GDP may be 20% lower than it would otherwise have been if Grexit occurs. The effect on the rest of Europe would be much more limited; perhaps a cut of 0.3%-0.5% in GDP growth over the next 1-2 years, says Citigroup.
The immediate impact of a No vote would presumably be that Greek banks will still be cut off from additional liquidity funding from the ECB. This would make it impossible for Greece to repay the various debts due over the next weeks and months (including money owed to the ECB). This will exacerbate...MORE
