Most agree that a No vote would be bad for UK investors. It would, says Konstantinos Venetis at Lombard Street Research, point to a "de facto euro exit".
But this possibility would not necessarily have big knock-on effects on other southern European bond markets. David Owen at Jefferies says these are partly protected by the fact that the European Central Bank is buying bonds as part of its quantitative easing policy. But, he warns, "there is no such safety net for equities." These would probably fall across Europe in the event of a No vote, not least simply because it would increase uncertainty.
Adam Chester at Lloyds Bank adds that such a vote could cause the euro to "drop sharply". This, he says, might strengthen sterling so much that the Bank of England might delay raising UK interest rates. UK savers would then be hit by a double blow: lower share prices plus continued nugatory returns on cash.
Opinion polls, though, suggest most Greeks will vote Yes: Paddy Power puts the odds of a Yes at 7/2 on. While this might cause a relief rally in shares as the immediate threat of a Greek exit recedes it will not end the crisis. The country might still default on a €3.5bn debt payment due to the ECB on 20 July. Philip Shaw at Investec says it will "inevitably require a third bail-out".
But Michel Martinez at Societe Generale says the troika will question whether the government will implement the conditions of any bail-out; this government might not be led by Syriza as prime minister Alexis Tsipras has promised to resign if Greece votes Yes. Any new agreement, he warns, will only be "semi stable" and the risk of a Greek default will therefore be “still significant”.
Most economists believe further austerity will deepen Greece’s recession and so reduce the likelihood that the country will be able to repay its debts. A recent survey by the Centre for Macroeconomics found that the majority of UK economists believe the current proposals from the troika will ultimately reduce Greece's repayments. "The Greek economy’s malaise is only going to worsen," says Mr Venetis.
There are ways out of the impasse. One would be for the troika to write off some of Greece's debt. Another alternative, says Mr Venetis, is for there to be a temporary Greek euro - in effect a devaluation within the euro area that reduces Greek debts and increases the country's competitiveness. But neither option is on the table now. Instead, the Greek government will continue to pretend to implement reforms of its tax and pension system while the troika will continue to pretend that it will get its money back. In this sense, the crisis will continue.
Grexit Uncertainties
The first uncertainty in the event of a No vote is: how will Greece leave the euro? Although European Commission president Jean-Claude Juncker has warned that a No "will mean that Greece is saying no to Europe", there is in fact no legal mechanism whereby a country can be ejected from the euro. Instead, withdrawal might be forced upon the Greeks if the ECB stops lending to Greek banks: the Greek government would then have to print a new currency to support the banks. As that new currency would be weaker than the euro, the question arises of whether debts would be repaid in euros or with the weaker currency - the latter would be, in effect, a partial default.
But this would not mean Greece ceases to use the euro: it could do so just as Panama uses US dollars. This poses the question of how the currencies would work alongside each other. And then there's the longer-term risk of contagion. If Greece eventually copes outside the euro, the risk of other countries following it might increase.
