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