This is getting a little gridiculous, but grere you gro. When the question of whether Greece will remain within the Eurozone or exit from the common currency is finally resolved, we can drop a few ‘g’s.
Greece’s Democratic Decision
Yesterday, more than 60% of Greek voters rejected the bailout terms previously proposed by Greece’s creditors. Today, the Greek Finance Minister, Yanis Varoufakis, resigned, ostensibly to pave the way towards a new compromise deal that would keep Greece within the Euro. The retention of Greece within the Eurozone is the publicly-stated goal of all parties.
European Reaction
The President of the Eurogroup publicly announced this morning that the Greek vote was “very regrettable” and that the Eurogroup will await the next Greek proposal for a solution, before convening tomorrow (Tuesday) for further discussions.
Big Guns Meet
The key upcoming event is a meeting in Paris that will occur this evening between the German and French Prime Ministers. The French government is taking a more lenient line towards Greece, whereas the Germans are taking a less conciliatory stance. Today a senior member of the German Prime Minister’s party suggested that a Greek exit would be the best result for everyone. If an agreement between the German and French governments can be reached tonight on how to handle any emerging Greek proposal, this will be a truly key event in determining what plays out.
ECB’s Next Steps
Tomorrow will be a crucial day, with the ECB governing council meeting, as well as Eurozone Finance Ministers. The public remarks that will begin to emanate from these meetings should provide some strong clues as to how accommodating Greek’s creditors have truly determined to be. The ECB, while nominally independent, will follow the lead of the political decision-makers, determining whether a cause to provide Greece with enough emergency liquidity to tide them over will be found.
The Greek banks are close to running out of Euros, and it currently seems probable that within a few days Greece will either be forced to print its own emergency currency or the ECB will have to extend emergency funding. It is also likely that this will happen before the political echelon can reach a properly constructed agreement, so some kind of bridging liquidity is a likely scenario, if Greece’s creditors truly wish to prevent a de factor Grexit before the weekend.