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An analysis of the investment bank Goldman Sachs outlines the uncertainties that may be caused by the harrowing negotiations between Greece and its European lenders. The analysis stresses that tensions around Greece will continue into the coming months.

The baseline scenario remains in force: the tensions will ultimately lead to a compromise between the new Greek government and the European institutions.

The road before the Greek rulers is rather thorny. On the one hand, it is upon them to mend fences with the country's European partners. On the other, they must meet domestic expectations for a new adaptation approach, as was promised by SYRIZA during its election campaign. But the European partners’ desire to avoid the consequences of a bigger quarrel with Greece must be weighed against the risk that succumbing to the aspirations of the Greek government might fuel political populism in other European countries as well.

Until now, time has been borrowed for another round of negotiations towards a third bailout programme, given the Greek bonds maturity in July and August. However, although Grexit is not desired by any of the parties, this opportunity must be kept in mind as well. As a consequence of the new adaptation package, a political stalemate in the relations between Greece and its European partners is not impossible. In this context, seeing Greece's exit from the eurozone only in black and white is misleading. There is a wide grey area with a variety of options and consequences.

Goldman Sachs have analysed a number of obstacles and challenges, which Greece will be faced with, if it unilaterally decides to leave the eurozone. Amendments to contracts, to intergovernmental agreements and legal frameworks, as well as instability of the banking business – these are just some of the snags that make giving up on the euro a pretty unappealing opportunity for the Greek authorities. The consequences from the unpegging of the Argentine currency from the dollar and the 2000-2001 bankruptcy of the country are being quoted as an example, which might become a sad reality in Greece’s financial, political and social life.

Therefore, Goldman Sachs believe the Greek government is unlikely to take unilateral action towards leaving the euro area and re-adopting a national currency. This will certainly lead to a great deal of painful consequences for trade, capital flows and the economy as a whole.

Greece's exit from the euro, which is undesirable for European governments as well, can be done in several ways: through unilateral cancellation of external financial support, through denying Greek banks access to the monetary policy of the European Central Bank, and also by suspending the Emergency Liquidity Assistance mechanism.

Such a scenario will create a huge risk for the peripheral economies. It will set a precedent whereby any political and financial indiscipline and/or lack of viability may lead to exiting from the euro zone. Such a development will put the value of assets in the periphery at risk: something that the eurozone could definitely do without.

How can the situation creep into a grey area where Greece’s use of the euro could be ‘illegal’, but still active, prior to the introduction of a new national currency? According to Goldman Sachs, this question will not receive a definitive answer. Experience in other countries shows that this will be decided by micropolitical conditions during the tough negotiations, where the parties do not want to step back from their positions, but hate to see the consequences of a real exit from the eurozone.