150625 global macro view greek shadow to lift

Page 1

Group Economics

Global Macro View

Macro & Financial Markets Research

Greek shadow to lift

Nick Kounis +31 20 343 5616

25 June 2015 Greece has been dominating financial markets over recent weeks reflecting worries about a default and euro exit. Although there is still work to do, the chances of a deal look to have improved. With Greek exit risks starting to ease – at least for now investors should start to focus on economic fundamentals. And here is the good news. They are improving. Indeed, if the situation with Greece calms down, we think there is every chance we will see a synchronised acceleration in the growth of the world’s three biggest economies over coming quarters.

Greece dominating financial markets

deal with its creditors, so in a few months’ time we could be

It might only account for 0.4% of world GDP, but Greece has

back in the same situation. In addition, the Greek banking

been front of mind for investors over the last few weeks. The

system looks vulnerable. Deposit withdrawal looks to have

breakdown of talks between the Greek delegation and the

continued at a blistering pace this week. We estimate that over

institutions and inflammatory rhetoric by Greek Prime Minister

EUR 10bn has been taken out of the banks so far this month

Tsipras the weekend before last raised worries about a Greek

(see chart), while another EUR 5 – 10 bn could leave given the

default and euro exit. There was a risk that the financial stress

most recent developments. The big question is whether the

and uncertainty would start to hurt confidence indicators.

Greek government and European leaders have done enough to restore confidence and stem the flow. The risk is that if

Stepping out of the Greek crisis shadow

deposit flight accelerates, the authorities will have no choice

Fortunately, the risk of a Greek default and euro exit has

but to implement deposit and capital controls. That could make

eased. The prospects for a deal on Greece this week have

the economic and fiscal situation worse and complicate talks.

improved following a new plan presented by the Greek government, which makes some important concessions. The

What if Greece does exit

Greek authorities and the institutions would now get into the

The lingering exit risk raises the question what a Greek euro

specifics of the proposals, including ‘doing the calculations’ as

exit would mean for the eurozone economy. There would most

well as agreeing on a list of ‘prior actions’ needed to be carried

likely be more financial stress, with peripheral government

out to unlock funds. So it is certainly not a ‘done deal’ though

bonds and other Southern European assets leading the

prospects look to have brightened considerably.

decline. However, it may not last long. Indeed, one could ask what investors are really afraid of. The Greek exposures of the

Greece bank deposit flight intensifying

rest of the eurozone are much less than in the past. Investor

Households and companies, EUR bn*

worries probably reflect the risk of an unravelling of the

240

eurozone, but other countries are unlikely to follow. So there

220

would seem little logical reason for enormous sustained stress.

200

European banks’ exposure to Greece

180

EUR bn

160 140

140

120

120

100

100 04

05

06

07

08

09

10

11

12

13

14

15

80 60 40

Source: Thomson Reuters Datastream, ABN AMRO Group Economics *May and June (up to Monday) data are estimates based on reports

20 0 11Q1

Not out of the woods yet Our base scenario is that Greece will remain in the euro, but a euro exit scenario still cannot be consigned to history despite the recent progress. Greece still needs to reach a longer-term

Public sector

12Q1

13Q1 Banks

14Q1

Non-bank private sector

Source: BIS, ABN AMRO Group Economics


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.