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Barclays forecasts a referendum or elections if no agreement with creditors is reached

22 May 2015 / 17:05:46  GRReporter
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The British Barclays Bank presented an analysis with forecasts for Greece’s future. It stresses that in order to overcome the crisis, the country needs not the current moderate government but a different one.

"We think that the policy commitments needed for a programme agreement may only be achieved after some form of government crisis that serves as a catalyst for political change," reads the analysis.

According to the experts at Barclays, the developments in Greece over the coming weeks and months will follow three scenarios, the most likely among them being the "moderate."

"Moderate" scenario

Athens would reach an agreement with the creditors at the last moment but the government would violate its election promises before that, thus facing a cabinet reshuffle. According to Barclays, violating the "red lines" might provoke radical members to exit both the government and the party.

In addition, under the same scenario, SYRIZA would have to seek a new coalition partner because Independent Greeks would not vote for another Memorandum of financial assistance. Therefore, the radical left would most probably turn to PASOK or Potami.

The analysts at Barclays believe that 15-28 SYRIZA MPs who belong to the "left platform" would leave the party. Ten more, including president of parliament Zoe Konstantopoulou, also might consider doing the same thing.

If this scenario took place, it would lead to avoiding the mass withdrawal of deposits (bank run) and the control on capital movement. However, Greece’s economy would continue to be in a critical condition next year too.

The financial markets would show a great interest in Greek government securities, especially in bonds maturing in 10 years as well as in those of Europe’s peripheral countries. Meanwhile, Greek government bonds would regain investor confidence and the country would benefit from this change.

Referendum scenario

All polls indicate that in the event of a referendum on for or against the euro, the vast majority of Greeks would vote for the country to remain in the euro zone. However, this scenario would cause the Greek economy to face the most significant problems.

This is due to fears that the crisis might spread to other European countries, which would provoke investors to sell the high-risk securities they hold. Control on capital movement would be possible too.

However, if the Greeks voted in favour of exiting the euro zone this restriction would be immediately imposed. In addition, the European Central Bank would stop funding Greek banks and payments inside the country could be made with IOUs (informal documents for financial liabilities that will be redeemed at a later stage).

Snap elections scenario

Barclays indicates that Prime Minister Alexis Tsipras is not considering announcing snap elections although polls show that SYRIZA would win them again.

This scenario would limit the demand for Greek government bonds even more than a referendum on the euro.

Tags: PoliticsAgreement with creditorsScenarios for Greece's futureBarclaysNew coalitionReferendumSnap elections
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