Greece after the referendum: a semi-stable outcome at best

The referendum announced by PM Tsipras for Sunday 5 July is now almost certain to go ahead. With the 'Yes' and 'No' votes neck and neck in recent polls, the outcome remains uncertain. It is believed that there is a 60% probability that a semi-stable agreement will ultimately be reached with a new government, allowing Greece to remain in the euro - but it will be a lengthy process. We see a 40% chance of a Grexit. A full formal exit is unlikely to happen in the next few days or weeks. Both sides would try to coordinate their actions to manage the exit ,notes Societe Generale.

Whatever the outcome of the referendum ('Yes' or 'No'), we see four common developments: 1) given the timelines involved, it seems likely that after missing the June payment on the IMF, Greece will also default on the ECB on 20 July; 2) capital controls will not go away anytime soon; 3) the Greek government will issue IOUs; 4) new elections are likely, probably in late July or early August. The ECB is unlikely to suspend ELA funding on Greek banks as long as the line of communication remains open between Greece and the rest of the euro area. But a request of resolution of some Greek banks seems likely in the meantime, which would put pressure on policymakers to make a decision, says Societe Generale.