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Greece has 1/3 chance of exiting eurozone

Credit rating agency Standard & Poor's said there is 1/3 chance of Greece exiting the eurozone in the coming months.

Written by Agencies | New Delhi |
June 5, 2012 4:06:56 pm

Credit rating agency Standard & Poor’s on Tuesday said there is 1/3 chance of Greece exiting the eurozone in the coming months.

The exit of Greece from eurozone could seriously damage Greece’s economy in the medium term and most likely lead to another sovereign default.

“There is at least a one-in-three chance of Greece exiting the eurozone in the coming months,following national elections on June 17,” S&P said and added such an outcome would,”seriously damage Greece’s economy and fiscal position in the medium term and most likely lead to another Greek sovereign default.”

The exit of Greece from eurozone could be brought about if Greece rejects the reforms demanded by the “troika ” the European Commission,International Monetary Fund (IMF),and European Central Bank (ECB),the report said.

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However,the potential impact on other “peripheral” sovereigns in the eurozone would be less clear cut and other sovereigns are unlikely to follow any Greek exit.

“Greek exit by itself would not automatically trigger further downward sovereign rating actions elsewhere,” S&P said in a statement.

The report says that European policymakers would be keen to demonstrate that Greece is a special case and provide financial support and leniency in the face of slipping targets for other sovereigns embroiled in the debt crisis.

Accordingly,we currently do not consider that a Greek withdrawal would automatically have any permanently negative consequences for other peripheral sovereigns’ prospects of continuing eurozone membership,S&P said. Much would,however,depend on “the robustness of the response from European policymakers,the ECB,and the IMF.”

However,any reluctant policy response from eurozone member states,could lead to further sovereign debt restructuring in countries other than Greece and downward pressure on our ratings on affected sovereigns. Amid persisting fears about eurozone,Group of Seven leading industrialised nations are reportedly holding emergency talks on the euro zone debt crisis on Wednesday.

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