Greece political dynamics likely to remain a concern

The Greek Parliament has approved Greece's third Memorandum of Understanding (MoU) with its European partners with the support of 222 MPs, continuing to show the government's weakening situation. The government itself has called for a confidence vote after 20 August. 

Notwithstanding, Greece is on track to repay ECB-held bonds on 20 August. Q2's upside surprise in GDP growth of 0.8% q/q is likely to be temporary and Q3's is likely to contract severely.

"Domestic political dynamics in Greece are likely to remain a concern. The announcement of a new political movement by the leader of the Syriza leftist platform has raised concerns of a possible deep-rooted division of the party ahead of the Syriza party congress in September and potential snap elections, all of which are likely to keep uncertainty high for the next few months. In turn, Greece's programme execution will be challenging", says Barclays.

Meanwhile, banks will continue to be in a tricky situation most likely beyond year-end and the scheduled completion of the recapitalisation process. 

"On the bright side, the ECB may reintroduce the waiver on GGBs before the end of the year, which would ease liquidity pressure on the banks and enable it to buy GGBs in PSPP", added Barclays.