'Grimbo' may lead to Grexit but after a potentially long period, Citi analysts say

Citi analysts believe a shift in the Greek debt crisis situation was likely to be painfully slow, after a 'no' vote in the country's referendum over its acceptance of the bailout terms proposed by international creditors on 25 June.

"Greece is likely to be in limbo (‘Grimbo’), which could eventually result in Grexit," Citi analysts said in a note to clients on Monday. Nevertheless, they emphasised that Grexit, if it happened, would follow a “potentially long period” of Grimbo.

They also pointed out that even with a “no” vote, a new bailout agreement was still possible, “but will be challenging (and take longer) to negotiate”.

Read more: Greeks back government by voting 'no' to bailout conditions

Citi's Ronit Ghose and Rahul Bajaj commented that although a Grexit was not “Citi's base case,” risks had risen, and even added that “a complete nationalisation of banks can't be ruled out”.

Furthermore, the analysts expected some capital controls to persist, and said that the access of Greek banks to ELA or Eurosystem funding would be capped or perhaps even cut, via increased collateral haircuts.

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