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    Strange referendum and its consequences

    Last week, when national referendum in Greece saga was unfolding, I deliberately refrained from any comments on this topic. The events were developing so rapidly, that any comment might instantly become obsolete … Now that the referendum is over, let me share some thoughts about this event.

    My impression from this event I would describe in one word – “strange”. Strange referendum.

    First, the speed at which it was organized and held is rather confusing. When people are asked to make a decision that could determine the fate of their country not just for years, but for decades, it’s probably a good idea to give them enough time to think about possible consequences of their choice.

    Secondly, the question that the Greeks were asked to respond sounded very strange too: “Should the draft agreement, tabled by the European Commission, the European Central Bank and the International Monetary Fund to the Eurogroup of June 25, 2015, consisting of two parts, be accepted?”. After all, at the time of the Greek referendum that proposal made by creditors was no longer relevant! And even if the majority had answered “yes”, the plan wouldn’t have been implemented anyway. They would have to work out a different plan, and the EU representatives warned in advance that the new version of the agreement would be even stricter than previous. And even if Athens agreed to this stricter plan, there would inevitably arise the question of another referendum: “If the previous version of the agreement was called for a referendum, how’s it possible to approve more austere plan without the referendum then?”.

    Sunday’s answer “no” creates even more problems. It is clear that Greeks are not satisfied with the plan proposed on June 25. And what plan would be acceptable? Softer? But even if a compromise is reached, how do we know that it’s soft enough for Greece? To hold a referendum again?.. And if the referendum shows that the Greeks want more concessions?

    Projections of various banks and analysts, published after the referendum, suggest a high probability (over 50%) of a Greek exit from the Eurozone. The Greek Prime Minister Tsipras says: we won’t leave the monetary unit – in fact, no one has the right to kick us out. However, the truth is that Athens might have no other choice but to go back to the drachma. The government has no money left to pay salaries and social benefits, and if the agreement with creditors fails, Tsipras won’t be able to think of a better solution than to print drachma and pay it to the people.

    The euro zone emergency summit on the Greek issue will be held today. Apparently, there’s no easy way out of this situation. That is why the leaders of the eighteen states will be on the horns of a dilemma. To concede or to say no to the Greeks? Which decision would cause less of a problem?

    It’s going to be extremely difficult for the European authorities to make concessions to Athens. Such decision may set a dangerous precedent, which will be then used by the Eurosceptics and other countries. In addition, it is obvious that the rest of the Euro area will be dissatisfied with “capitulation” of the region to the Greeks. On the other hand Greek bankruptcy will have unpredictable consequences too – both economic and political …

    Today may go down in history.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    Last week, when national referendum in Greece saga was unfolding, I deliberately refrained from any comments on this topic. The events were developing so rapidly, that any comment might instantly become obsolete … Now that the referendum is over, let me share some thoughts about this event.

    My impression from this event I would describe in one word – “strange”. Strange referendum.

    First, the speed at which it was organized and held is rather confusing. When people are asked to make a decision that could determine the fate of their country not just for years, but for decades, it’s probably a good idea to give them enough time to think about possible consequences of their choice.

    Secondly, the question that the Greeks were asked to respond sounded very strange too: “Should the draft agreement, tabled by the European Commission, the European Central Bank and the International Monetary Fund to the Eurogroup of June 25, 2015, consisting of two parts, be accepted?”. After all, at the time of the Greek referendum that proposal made by creditors was no longer relevant! And even if the majority had answered “yes”, the plan wouldn’t have been implemented anyway. They would have to work out a different plan, and the EU representatives warned in advance that the new version of the agreement would be even stricter than previous. And even if Athens agreed to this stricter plan, there would inevitably arise the question of another referendum: “If the previous version of the agreement was called for a referendum, how’s it possible to approve more austere plan without the referendum then?”.

    Sunday’s answer “no” creates even more problems. It is clear that Greeks are not satisfied with the plan proposed on June 25. And what plan would be acceptable? Softer? But even if a compromise is reached, how do we know that it’s soft enough for Greece? To hold a referendum again?.. And if the referendum shows that the Greeks want more concessions?

    Projections of various banks and analysts, published after the referendum, suggest a high probability (over 50%) of a Greek exit from the Eurozone. The Greek Prime Minister Tsipras says: we won’t leave the monetary unit – in fact, no one has the right to kick us out. However, the truth is that Athens might have no other choice but to go back to the drachma. The government has no money left to pay salaries and social benefits, and if the agreement with creditors fails, Tsipras won’t be able to think of a better solution than to print drachma and pay it to the people.

    The euro zone emergency summit on the Greek issue will be held today. Apparently, there’s no easy way out of this situation. That is why the leaders of the eighteen states will be on the horns of a dilemma. To concede or to say no to the Greeks? Which decision would cause less of a problem?

    It’s going to be extremely difficult for the European authorities to make concessions to Athens. Such decision may set a dangerous precedent, which will be then used by the Eurosceptics and other countries. In addition, it is obvious that the rest of the Euro area will be dissatisfied with “capitulation” of the region to the Greeks. On the other hand Greek bankruptcy will have unpredictable consequences too – both economic and political …

    Today may go down in history.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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