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Timothy Woods <http://seekingalpha.com/author/timothy-woods> Long/short equity, event-driven, currencies, macro Profile <http://seekingalpha.com/author/timothy-woods>| Send Message| Follow (33 followers) Performance <http://seekingalpha.com/account/login?rt=/pro/checkout%3fnotice=pro%26source=article_performance_link> 4 Reasons Why There Will Be No Greek Exit <http://seekingalpha.com/article/3291055-4-reasons-why-there-will-be-no-greek-exit> Jun. 29, 2015 12:43 PM ET | 1 comment <http://seekingalpha.com/article/3291055-4-reasons-why-there-will-be-no-greek-exit#comments_header> | About: CurrencyShares Euro Trust ETF (FXE) <http://seekingalpha.com/symbol/FXE>, Includes: GREK <http://seekingalpha.com/symbol/GREK> *Disclosure: *I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. *(More...)* Summary - Why a Grexit has virtually no chance of happening. - An agreement between Greece and the institutions will happen, one way or another. - Greek referendum will decide negotiating positions. Greece is not going to leave the euro (EUR). After the latest hoo-ha in the seemingly never-ending Greek saga passes, one way or another Greece will reach an agreement with the troika institutions. Meanwhile during Monday's trading, while the Greek banks remain firmly shut, the euro hovers around the 1.09 to 1.12 mark against the dollar (EURUSD) while the Athens Stock Exchange (ASE) crashes. Here's why I firmly believe Greece is going nowhere and Grexit is nothing more than a doom-mongering moniker that helps sell newspapers and gets people to click on online articles. 1. Merkel says if the euro fails Europe fails While it is reported that Europe's leaders are "confident" of containing a Greek exit should it occur and stem contagion to other countries, this is almost certainly simply a ruse to strengthen their negotiating position with Greece. This message essentially intimates to Varoufakis and co., "If you leave, we'll be ok, so do your worst," thereby weakening Greece's leverage, or at least, that is the idea. The Greeks however, seem astutely aware that European heads are bluffing. Because were Greece to leave, nobody has a notion what would happen. Yes, Europe's banking system is in better shape to withstand another financial disaster or the possibility of a country leaving the monetary union, but in all honesty, Merkel, Draghi, Juncker, Schauble and the rest - none of them have a clue what would really happen to the euro despite their postulations. Do you really think that they would take such a jump into the dark and allow Europe to fail? No chance. They will simply never allow Greece to leave. 2. Polls say 60% of Greeks want an agreement with creditors This could change, of course, but the vast majority of Greeks do not want to leave the eurozone and 60% of them want their country to reach an agreement with the institutions. Nevertheless, the Greeks are adamant that they want to stay in the eurozone and to leave would be a dreadful step backwards. Lest it be overlooked, this is a country that only a few decades ago was freed from the clutches of a brutal dictatorship, and before that a Nazi occupation. And since it became democratic once again, its politicians, bankers and oligarchs cosied up to one another to help themselves to all they could while running up unpayable national debts that would be paid for by ultimately, of course, the people. As part of the euro (NYSEARCA:FXE <http://seekingalpha.com/symbol/fxe>), Greece stepped forward and became a first world country, a member of the elite band of the eurozone. Its people will not want to go back to what was before and will fight tooth and nail to stay in. 3. Neither Syriza, Greeks nor the creditors want a Grexit It's important to note that the Syriza is very much opposed to a Grexit too. Nobody wants it. The 5-month long negotiation (and still counting) is simply a game of who can bluff the most, with an agreement an inevitability. What is in the air is not whether it will be reached, but how it will and what it will entail. The only people who can decide they want to leave the euro are the Greeks themselves, and they have demonstrated that they want nothing of the sort. 4. Scare tactics have worked throughout history, which is why Claude Juncker is using them Juncker has implored the Greek people "not to commit suicide for fear of death." Though he will have annoyed a good many Greeks with his intervention, scare tactics have worked for countless political campaigns and will work again. He went further, stating that a "no" vote would be a total disaster for Greece that would lead to a Grexit. Juncker is an astute politician and his reaching out to the Greek people, complete with some words of Greek, could have a considerable sway on Greek voters' minds. Framing the vote as he has done, with a "no" tantamount to leaving the euro, though this is almost certainly not true, will nevertheless spook Greeks into voting yes. Such politicking can be seen in referendums of similar magnitude. The Scottish voted in favor of staying inside the UK last year largely because of the scare tactics employed by the British government. Something similar happened in the 1995 Quebec separation vote in Canada. Juncker has taken a political gamble in intervening - he did after all call Tsipras a liar - though if history is to be repeated, his scare tactics will have a say in the outcome of the referendum. The takeaway Tsipras boldly called the institutions' bluff in turning down their take it or leave it ultimatum offer by calling a referendum, which caught them completely off guard. The fact that Juncker has now come out with his proverbial gloves off to try to sway the vote shows that they were after all completely bluffing and they now have egg all over their faces. Even if Greece votes no, the most likely scenario is that while the institutions will continue to play hardball, they will be forced into softening their position and cede some ground to Greece. If the Greek people vote yes, they will reach an agreement. Beyond the aforementioned reasons, there are others too, including the following - A Grexit would strengthen Britain's hand in their own negotiations and a "Brexit" would be a more likely eventuality. Were Greece to leave, it could be a viable way for Russia to augment its influence in Europe, something which is unthinkable right now for the EU and the United States. Greece is going nowhere. However, investors have shown their penchant for overreacting to the Greek saga and will probably plow capital into the Swiss franc (CHF) and US dollar (NYSEARCA:USD <http://seekingalpha.com/symbol/usd>) as they look for safer territory. While the impasse rumbles on into a sixth month and possibly beyond, the euro will continue to be volatile, likely bouncing between 1.05 and 1.12. Expect a surge once an agreement is reached.
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