Soon after debt defaults to IMF that was long lasting issue lingering in the markets, now the Euro group confirmed in a meeting held yesterday that policymakers would think of a third bailout package, "only and on the basis of the outcome of the referendum" on Sunday.
As we expected, the ECB is said to have kept unchanged the provision of ELA funding to Greek banks (estimated at €89bn).
As the latest polls point to a small margin in favour of a YES, we believe that reaching agreement on a third bailout will be a lengthy process that will take weeks.
Also, the referendum will likely be followed by new elections, meaning that euro area policymakers would have to wait for a new Greek government before starting to negotiate.
All this suggests that Greece will miss the ECB payment as well on 20th July.
The euro slipped lower against the major currencies on yesterday and it would be expected to be weaker but not a steep declines like yesterday, even as European equities were boosted by fresh hopes for a deal between Greece and its creditors.
EUR/USD was down 0.34% to 1.1104 from 1.1145 late Tuesday.
