Yet another twist and turn in the Greek saga as finance minister Varoufakis steps down to pave the way for smoother negotiations to take place between Greece and its creditors. The comprehensive No vote at the week end gives Tsipras a strong mandate so get back around the table and discuss new bailout terms, even if the referendum was not technically relevant as the latest bailout has now expired, it does mean the Eurogroup will have to take note and if they want to keep the Eurozone intact, better terms will need to be offered. The problem with this of course is that, as we’ve regularly mentioned, it sets a precedent for other debt laden Eurozone members who might experience similar political upheavals and make what is supposed to be an irreversible currency union into the exact opposite.
The market reaction has not been better as bad or dramatic as many predicted mainly due to the landslide result of the referendum and things could have been different if the result was much closer with a narrow No causing greater uncertainty. The 100 point gap in EURUSD has almost been filled just as it was a week ago with the pair trading at 1.1050 and equity markets have naturally opened in the red, but not as badly as expected. In the absence of any EU meetings until tomorrow, today investors will have to just hold their nerve until tomorrow and probably for the remainder of the week to see if Greece’s creditors are prepared to listen to the will of its people.