For Germany/Merkel there’s little appetite for any new negotiations until after the Greek referendum.
The latest polls ahead of Sunday’s vote show that the ‘yes’ camp has been gaining ground but when the electorate is asked to vote on a passionate issue, it’s a tough call. Just take a look at the dismal job the polls did in predicting the outcome of the Scottish referendum last year and the UK election this year.
As the economic situation in Greece deteriorates further, it is likely that the ‘yes’ camp will gain further support’ but this also requires eurozone policy makers to keep quiet.
At least they have realized that the threat of turning the referendum into an in/out vote could backfire and have shifted to a stance that Greece does not have to leave the euro if they vote ‘no’. A ‘yes’ vote at the referendum would likely mean fresh elections or even a technocratic government and a third bailout with conditionality.
For financial markets this week it is significant that fallout from Greece so far is contained. This test is incomplete, however, given that an exit from the eurozone could lead to unintended consequences and contagion.
