Banking Sector Deposit Growth

If the creditors stand firm then no change, the money will run out soon with repayments to the IMF already in default, and major payments to the ECB looming. PM Tsipras will hope a renewed democratic mandate will strengthen his demands for austerity 'lite' and some debt forgiveness.

Whether the EU will find an elegant 'solution' that gets both parties off the hook, given the bruising clashes which preceded this referendum or, instead, will simply pull the trap door marked 'Grexit' is to be determined.  No doubt further intense discussions will take place as Mrs Merkel flies to Paris to meet President Hollande, the two key European Actors in this Greek 'tragedy'.

But what has really changed? The Greek people have helped their government seize the PR agenda with the EU waiting on the Greeks and reacting to their framing of the arguments. But Greece is running out of cash and without help from the EU, Greek banks will soon fold.

Syriza are clearly hoping scenes of protesting crowds will create a groundswell of popular support across Europe.

Two scenarios seem likely. Firstly, the EU and IMF will adjust their demands and find a compromise, effectively moving toward what the Greek government wants. The second scenario sees no new support, the parties can’t agree and the failure of Greek banks results in either a bail in, the seizing of depositors funds, or more likely a return of the Drachma and a conversion of assets possibly at a significant loss.

Largest falls in GDP graph

What might all this mean for Jersey?

There will be little direct impact, the Euro may fall in value as a currency, but as Jersey is in the Sterling area and the pound is seen as a ‘safe haven' we shouldn’t see too much change.

The amount of deposits held in Jersey by Greek residents in Euros is very small. At the last EUSD withholding tax return only £236,836 was paid in withholding tax and only just over £5,000 equivalent in Euros, a tiny amount. This is a strong indication that there is little by way of bank deposits held by Greeks in Jersey. Paradoxically Greeks worried about Euro security will be much more likely to have their funds in Germany.

What would give cause for concern is a destabilising of the Eurozone and pressure coming on the other countries who are highly indebted, such as Spain, Portugal, Italy and France.

Ultimately the large EU countries will decide on whether more support is provided; not Greece. If the EU says No, it is the Greek people who will have joined their government in triggering an exit from the Euro.

Greece is not big enough to cause any lasting damage to Europe even in a full default situation and if the ECB can keep the markets assured then Greece could exit, have a painful recession and eventually recover. The more likely prognosis is the EU will make some concessions led by France, who will feel exposed given the high level of French indebtedness, and both parties will kick the can down the road a few months, or even a year or two, only to revisit the whole drama again.

Ultimately a common currency can’t be applied to such disparate economies as are contained within the Eurozone. They need different interest rates, inflation rates, revenue and spending plans, to achieve the right policy outcomes.

Muddle through may just end up being the outcome and provided the ‘fix’ isn’t too blatant, markets will shrug off yet another Greek drama and move on.