Citi: Greece has a 90% chance to leave the eurozone in 2013
The probability of a Greek exit from the eurozone has increased from 75% to 90%, according to new research published today by Citigroup.
Economists at the US bank expect Athens to leave the single currency within the next two to three quarters, while Italy and Spain are likely to ask for formal bailout from other eurozone members and the International Monetary Fund.
The bank assumed a Greece exit would occur on January 1, 2013, even if it is not a forecast of a precise date.
A Greek exit from the euro will be associated to economic weakness in the eurozone’s periphery and further sovereign downgrades.
“We remain gloomy on the euro crisis. Over the next few years, the euro area end-game is likely to be a mix of EMU exit (Greece), a significant amount of sovereign debt and bank debt restructuring (Portugal, Ireland and, eventually, perhaps Italy, Spain and Cyprus) with only limited fiscal burden-sharing,” Citi said.
Economists added: “Our base case is for prolonged economic weakness and financial market strains in periphery countries, spilling over into renewed recession for the euro area as a whole this year and the next.”
Meanwhile, yields on Spain’s government bonds increased steadily during the weak, with the 10-year bond consistently trading above 7%.