Brexit will further destabilise weak Greek economy

Subject

Economic uncertainty in Greece after Brexit.

Significance

The extent of the damage to economies can only be assessed once the EU and United Kingdom agree on the exit strategy and rules for future economic cooperation. However, some immediate negative consequences for Greece are already visible, in increased volatility in financial markets, widening Greek government bond yields and a fall in the market capitalisation of the four major Greek banks.

Impacts

• Brexit will require speedier resolution of Greece's third bailout negotiations, possibly making lenders more lenient to the Greek position.
• Yet if it turns the EU towards greater convergence, it might toughen lenders' stance on economic and structural reforms in Greece.
• A Brexit-induced revision of EU migration policy could funnel more financial aid to Greece as an EU immigration hub.
• Greece will not join any new wave of domestic Euroscepticism, as EU funds are a lifeline for the Greek economy.
• Nor is Brexit likely to strengthen Greece's far right; historical and social factors make society relatively open to migrants and refugees.