Photo: Bloomberg TV
Citi’s Chief Economist Willem Buiter just ramped up his odds of a Greek exit from the euro. Here’s an excerpt from Buiter’s note via FT Alphaville’s Kate Mackenzie:We now believe the probability that Greece will leave EMU in the next 12-18 months is about 90%, up from our previous 50-75% estimate, and believe the most likely date is in the next 2-3 quarters. As before, for the sake of argument, we assume that “Grexit” occurs on 1 January 2013, but we stress this is an assumption rather than a forecast of the precise date. Even with the Spanish bank bailout, we continue to expect that both Spain and Italy are likely to enter some form of Troika bailout for the sovereign by the end of 2012.
Over the next few years, the EA 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.
Buiter had previously raised his odds of a Greek exit from 50% to a range of 50-75% back on May 7.