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3 Jul 2015
Impact on redenomination risk from the upcoming vote in Greece – Nomura
FXStreet (Barcelona) - Global FX Strategists at Nomura, believe that any systemic contagion risk to the Eurozone from a possible ‘No’ vote in the Greece referendum is unlikely.
Key Quotes
“We discuss the impact on redenomination risk from the upcoming vote in Greece. Our angle here is a bit different from the consensus, and rests on two basic assumptions:
First, breakup risk in the Eurozone is different in nature today compared with the early Euro crisis days (2010-12). It is less linked to systemic market driven tension, and much more linked to political risk at the country level.
Second, political risk in one country is not necessarily positively correlated to political risk in other countries. In fact, political tension in Greece may ironically support Euro-friendly centrist forces in other peripheral countries. This is important when thinking about political contagion, and cross-border spillovers (or lack thereof) in redenomination risk.”
“All told, we continue to hold the view that systemic contagion from Greece to the rest of the Eurozone is unlikely, even in the face of a NO vote on in Greece on Sunday. And the price action this week tends to support this idea. Linked to this, investors should think very carefully before extrapolating the increase in redenomination risk in Greece to other Eurozone countries.”
Key Quotes
“We discuss the impact on redenomination risk from the upcoming vote in Greece. Our angle here is a bit different from the consensus, and rests on two basic assumptions:
First, breakup risk in the Eurozone is different in nature today compared with the early Euro crisis days (2010-12). It is less linked to systemic market driven tension, and much more linked to political risk at the country level.
Second, political risk in one country is not necessarily positively correlated to political risk in other countries. In fact, political tension in Greece may ironically support Euro-friendly centrist forces in other peripheral countries. This is important when thinking about political contagion, and cross-border spillovers (or lack thereof) in redenomination risk.”
“All told, we continue to hold the view that systemic contagion from Greece to the rest of the Eurozone is unlikely, even in the face of a NO vote on in Greece on Sunday. And the price action this week tends to support this idea. Linked to this, investors should think very carefully before extrapolating the increase in redenomination risk in Greece to other Eurozone countries.”