Greece voted down a referendum that would have opened the door to much-needed bailout funds, so the financial universe is imploding now, right? Not exactly.
Greek stock markets were closed Monday, and things are looking a little rough elsewhere in Europe, particularly at the exchanges in Italy and Spain.
But the euro itself is looking much calmer. After losing big to the US dollar when markets opened, it has strengthened considerably, down only about 0.6% in New York’s mid-morning trading hours.
The see-sawing reflects the widespread feeling that no one is certain what happens next.
One possible reason for the euro’s snapback this morning is the news of Greek finance minister Yanis Varoufakis’ resignation from the cabinet of prime minister Alexis Tsipras. Yes, this throws additional uncertainty into the mix, but it also raises the distinct possibility that Varoufakis’ rancorous spot at the negotiating table will be filled by someone less polarizing.
“This could be a small olive branch to the Eurogroup/IMF/ECB, and suggests Greece still wants to get a deal done,” surmise the analysts watching the situation for the Bank of Montreal.
Meanwhile, the analysts at Capital Economics are suggesting that the probability of a Greek exit from the euro zone is more likely than not—but they’re also maintaining at least some room for optimism that this can be avoided.
“Overall, it is still just about possible to imagine some sort of deal coming together which keeps Greece inside the euro-zone for a while,” they wrote in a note to clients.
“But we have always argued that an exit, if it occurred, would be the result, not of a clear ‘in or out’ decision, but of a series of incremental developments and decisions which cumulatively and gradually make a Grexit unavoidable, even if those involved do not realise it.”