Greece decision to hold a referendum on its latest rescue plan will prove to be detrimental for the eurozone, Cypriot Nobel economics laureate Christopher Pissarides told CNA.
Speaking to CNA from London, Pissarides said the new developments created after the Greek government`s decision are much more worrisome for Cyprus` banking system due to the uncertainty concerning the size of the haircut of Greek Government bonds.
According to Pissarides, a possible no vote on the Greek referendum to be held in late December, would lead the country out of the Eurozone and to a consequent default.
Replying to a question whether Cyprus, exposed to Greek sovereign debt through its banking system, should be more concerned following the Greek government`s decision, Pissarides replied affirmatively, pointing out no one could know the size of the eventual haircut of Greek bonds.
“In case of a no vote in the referendum Greece, would be forced to leave the eurozone and default on its debt, the Greek bond haircut would not be 50% but 100% or in any case above 50%. This is a more serious situation for the banks,“ Pissarides noted.
“The latest developments are much more worrisome for our banking system than some days ago because I believed that (German Chancellor Angela) Merkel and (French President Nicolas) Sarkozy would reach to an agreement,“ he said, adding “But now our confidence lies with the Greek voters.“