The largest Singaporean lender, DBS Bank, said today that the overwhelming Greece vote against austerity measures on Sunday is not a foregone conclusion for its exit from the euro zone.
"Sunday's referendum pitched as Greece's decision to remain or leave the currency union kicked up more dust in its wake. However, despite the over 61 per cent 'no' vote, a Grexit is not a foregone conclusion," DBS Group Economist Radhika Rao said in a report.
Contrary to expectations of a close vote, over 61 per cent Greeks rejected the tough bailout terms proposed by the main creditors through a referendum on Sunday, giving a shot in the arm to the anti-austerity Syriza-led government, the DBS report said.
The report also pointed to the sudden resignation of Finance Minister Yanis Varoufakis, who had many rounds of tough talks with the EU leaders, as a precursor to a compromise solution. Another thaw is the statement by the Greek premier Tsipras soon after the vote that Athens wants to remain in the euro zone, the DBS report stated.
"It's clear that talks are likely to include some extent of debt recast or write-downs to provide relief to Greek public finances. However, European leaders will be keen to strike a balance on this for fear of setting precedent for other indebted member economies," the DBS report said.
However, the report also warned that "aggressive rhetoric" by Athens would also lower the EU's appetite to re-engage with the Greeks. "We reckon that a last-ditch attempt to arrive at a mutually acceptable deal is likely, failing which Grexit will be inevitable," it added.
