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Greece votes NO! Economic uncertainty in Europe on the Horizon

by Silver Coin Guy on July 5, 2015

Greek drachma replacing euro

Will the drachma be replacing the Euro soon?

The polls in Greece have now closed and from all appearances those voting “No” have won the referendum.  What now? That’s a question no one can answer with certainty at this point.  One thing is certain, there are literally billions of dollars at stake not to mention the future of the Euro and the political future of the European Union itself.

From Zerohedge is a glimpse of how Deutsche Bank sees it –

Here is how the German megabank sees the possible outcomes of what is shaping up to be a “No” vote:

  • N1 – Soft deal: The most unlikely scenario is that the euro-area partners offer a much softer programme to Greece.

  • N2 – Default-and-stay: Moderately less unlikely is a scenario where Greece defaults but stays in the euro thanks to a direct recapitalisation of Greek banks by the euro-area partners, with the Greek government using only domestic resources for the country’s fiscal needs.

  • N3 – New deal: The third scenario is one in which the rising economic and political cost of a closed banking system results in the Syriza government being replaced by a new government of national unity and a new deal with creditors being reached.

  • N4 – Grexit: In our view, Grexit and Scenario N3 are the most likely – with about equal probabilities. That said, we see the probability of Grexit increasing the larger is the margin of victory of the NO vote. Even with a NO vote, the cumulative probability of the first three scenarios still exceeds that of Grexit.

As we see it the best option for the Greek people in the long term is scenario N4, if Greek politicians are wise enough to put in place the necessary economic steps (read as: reject socialism) to take advantage of the opportunity.  Based on their history however I view this (the rejection of socialism part) as highly unlikely, especially with SYRIZA in charge.  Regardless, the one thing we can predict with certainty is that the road ahead for Greece will be a rough one economically.

Most people made the right choice for the wrong reasons – magical thinking that things will go back to the way they were before the economic crisis, but regardless, the die has been cast.  We wish the best for the Greek people going forward.

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