Early results in Greferendum show clear lead for 'no', euro drops

Early results from Sunday´s referendum in Greece over whether to accept international creditors´ demands for reaching an agreement on the terms of a bail-out showed the 'no' camp clearly in the lead.

With 51.05% of the counting done the country´s interior ministry said 61.25% of Greeks had voted 'no' and approximately 38.75% 'yes'.

"The markets had gone into the referendum actually expecting a ‘YES’ vote. Consequently, a ‘NO’ win can result in ‘fresh’ market volatility and risk aversion trading themes," commented Bill Hubard, chief economist at Bankor.

"Decisions must be taken soon including on Grexit"

"The increasing pressure on the Greek economy and people via a frozen banking system and capital controls that will drive the speed of developments. Decisions have to be taken soon on whether to return to the path of negotiations or consider the alternative of a Eurozone exit," Deutsche Bank analyst George Saravelos said in a research note e-mailed to clients.

"Overall, we are waiting to see how the markets will react. The other 90% of votes need to be counted, so the night is young. However, if the vote is No then expect a volatile day across all financial markets as risk sentiment dries up and investors flock to safe havens," said Kathleen Brooks, Director of Research at Forex.com.

According to many economists, central banks, especially the European Central Bank, will be closely watched for any signs they are intervening to limit any undue fallout from the referendum result.

As of 19:45 euro/dollar was changing hands 1.3% lower at 1.0970.

The results came against the backdrop of criticism last week from international observers regarding the lack of necessary preparations in Greece to ensure the referendum met international standards. Likewise, at least one observer pointed out that the lack of funds available to many ordinary Greeks meant they would be unable to make their way to their registered voting centres to cast their ballots.

What might the costs of Grexit be?

"The cost of Grexit? Steep for creditors, extremely steep for Greece. We estimate the minimum direct financial cost for creditors at around €227bn (2.3% of Eurozone GDP). This is higher than the cost of a one-off haircut to make Greek debt sustainable (€140bn) and excludes full contagion costs, geopolitical costs from potentially losing Greece as EU and NATO members, and the impact of creating a Euro-exit precedent.

"For Greece, the economic costs would be dramatic: GDP growth could fall by over 6%, based on past exit scenarios in other countries. Unemployment and inflation would rise substantially. The worst scenario could become a humanitarian crisis, where IOUs would discourage imports of key goods and social unrest could follow," Alberto Gallo wrote in researchnote e-mailed to clients on 3 July.

-- More to follow --