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Uncertainty has been the only certainty in Greece’s seemingly interminable crisis, writes Nicholas Spiro of London-based consultancy Spiro Sovereign Strategy.

So claims that a convincing No vote in yesterday’s referendum on the terms of financial aid to Greece will automatically result in the country’s exit from the eurozone ('Grexit') are premature.

There are still several more political and financial pieces that need to fall into place in order for Greece to be forced out of Europe’s single currency area. A Grexit, moreover, is likely to prove to be an extremely politically and legally contentious affair.

For the time being, the convincing No vote in yesterday’s plebiscite pushes Greece further into a political and financial twilight zone, with the country’s cash-starved banking sector at the sharp end of the dramatic escalation in the standoff between Athens and its international creditors.

A number of conclusions can be drawn from the result of the referendum.

1. Syriza won in the sense that a majority of Greeks believed its claim that the country can reject the conditions attached to its rescue programme and remain in the eurozone. It appears that Greeks - the vast majority of whom want to stay in Europe’s single currency area - are convinced Germany lacks the mettle to kick them out of the bloc. Syriza’s brinkmanship, which has been reckless in the extreme, is about to be challenged in a much more forceful and decisive manner by eurozone countries, in particular Germany.

2. In the eyes of the creditors, the result of the referendum is the final confirmation that when push came to shove Greece opted for a path that’s incompatible with the current terms of its membership of the eurozone. There’s no longer any basis for meaningful negotiations between Athens and its creditors. The pendulum has swung decisively from efforts to keep Greece in the eurozone to efforts to prepare for, and manage, its eventual exit from the bloc.

3. The No vote sets the clock ticking on the collapse of Greece’s banking sector. The quality of the collateral that Greek lenders use in order to obtain emergency liquidity assistance (ELA) from the European Central Bank (ECB) is now practically worthless given the strong anti-creditor message delivered by Greeks. The credibility of the ECB will come under intense scrutiny this week.

4. The true resilience of other eurozone peripheral debt markets - in particular Portugal’s - is about to be revealed. Markets have been complacent about the consequences of a Grexit. The extent of investor complacency will be thrown into sharp relief in the coming days. The ECB is likely to underscore its determination to throw everything but the kitchen sink at Spain and Italy if financial contagion becomes much more severe.

Nicholas Spiro
Spiro Sovereign Strategy