Greece will leave the eurozone on January 1, 2013, Citigroup economists say, the second largest bank in the world by value of foreign exchange transactions. Greek state exit from the euro area is now an alternative considered by an increasing number of analysts which try to assess the impact of such a decision on the European economy. “It would be extremely expensive and very risky, but is part of the technical choices that we have to take into account,” said Christine Lagarde, Managing Director of the International Monetary Fund (IMF).
Political crisis in Greece, which have to organize a new round of elections since the previous elections has “produced” a fragmented parliament, unable to appoint and support a government, continues to be felt on international financial markets. The summit held in Brussels on Wednesday was not likely to give more confidence to investors. “This summit has not disappointed me. They have not promised anything and that’s what they delivered,” said Gary Jenkins, head of financial analysis department from Swordfish Research, quoted by The Daily Mail.
What will be the cost of Greece exit
Michael Saunder, economist at Citigroup, says that the probability that the Greek state will leave the European monetary zone in the next 12 to 24 months is between 50 and 57 percent. In a message sent to clients, Saunders, close to the Citigroup chief economist Willem Buiter has warned that the new currency that would be adopted by Greece will have a depreciation in a very short term, of about 60%. Furthermore, the Greece exit would trigger “a huge wave, but controllable, of contagion in Europe”. “We expect that the exit of Greece from the euro area to be followed by a series of policies aimed to prevent a domino-style collapse of the banking system,” reads the text of the economist, quoted in The Daily Mail.
Reply