Goldman Sachs scenarios for a ‘Grexit’

Greece will not leave the Euro

Goldman Sachs has released a report saying that regardless of the outcome of Greece’s Sunday referendum the country will remain in the Euro. As the reports states the final verdict of the referendum is likely to prove less significant than how domestic politics in Greece responds to it. The reports focuses on various scenarios of either a ‘yes’ or ‘no’ vote.

The most market friendly development would be a ‘yes’ vote followed by a resignation of by both Greek PM, Alexis Tsipras and his Finance Minister, Yanis Varoufakis. In this scenario a technocratic government more committed to reform with a strong mandate would be in the position to strike a new program and get liquidity.

A ‘Yes’ vote with the SYRIZA-ANEL government remaining in power would be an unstable prospect, as creditors would be unwilling to resume a funding program due to the breakdown of trust with Tsipras. This would lead to the Greek economy remaining mired and the creation of powerful forces and eventually political change in Greece.

A ‘No’ vote would be viewed negatively by the markets, but Goldman Sachs notes that such a development would not necessarily imply a definitive ‘Grexit’. This scenario would lead to domestic political upheaval resulting from the creditor’s reluctance to resume negotiations and extend liquidity to Greek banks.

The report’s base case says that any attempts to bring about a shift towards a ‘Grexit’ would be met by internal political forces that would cause the toppling of the government and an effort to reach accord with Brussels.