Headed by Nouriel Roubini, nicknamed Dr. Doom, economists and investors who last year proclaimed the imminent exit of Greece from the eurozone were silenced by the ambition of European leaders, but also by the defiance of the Greek people during the crisis.
“These factors have been underestimated. Exit of Greece from the euro zone is much less likely this year, but not zero probability,” said for Bloomberg economist Nouriel Roubini, Nobel Prize winner, who predicted 12 months ago at Davos during the annual meeting of the World Economic Forum, that the Greece departure is imminent from the monetary union.
“People underestimated these factors,” said Roubini in a telephone call. He added that a Greek departure “is certainly a less likely event this year, although not a zero probability.”
His opinion was shared at the time by many illustrious figures in the financial world, such as billionaire John Paulson, Gary Cohn – Goldman Sachs president, economists Paul Krugman and Joseph Stiglitz, both Nobel laureates, Mohamed El-Erian Pimco – CEO of Pacific Investment Co., Kenneth Rogoff and Martin Feldstein from Harvard University and Willem Buiter- Citigroup chief economist.
The group of skeptics, Roubini, Cohn, Rogoff and Stiglitz, will be back these days in Davos for a new edition of the prestigious event (January 23 to 27), where they will meet with investors who were forced to withdraw bets on the Greece exit from the eurozone, to send a signal that what is worst is over for Europe.
The speech is fundamentally different from the funeral atmosphere 12 months ago, when German Chancellor Angela Merkel said that Europe is considered the main “headache” of the global economy, and former Mexican President Felipe Calderon described the situation on the old continent as a “time bomb.”
“I am confident that the eurozone is broadly on the right track back to financial stability and economic strength. The contagion risks of Greece leaving the euro zone were too great for everyone, and European leaders are well aware that a collapse of the euro would be the end of Europe’s status as a leading force in global politics and business,” said Josef Ackermann, former Chief Executive Officer of Deutsche Bank AG.
Last year in Europe the winning bets were on euro longevity. The euro has appreciated by 9% against the dollar since early august and is traded at 1.33, up from $1.17 since the introduction of the single European currency in 1999. European stocks were up 11%, and the 10-year yield demanded by investors to fund Spain fell to 5.08% from 7.75%, the historical peak recorded in July.
However, the group of pessimists does not seem to have fundamentally changed their expectations, considering that Europe last year only postponed the disaster. Roubini believes that the chances for Greece to leave the eurozone this year is only 30%, but will increase to 50% in three to five years.
Citigroup economists anticipate a scenario of Greece leaving the eurozone over the next two years, while 12 months ago they estimated that there was a 90% probability that the incident will take place by 2014.
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