Morgan Stanley recently boost their probability of a Greek exit from the eurozone to 35 per cent. With that call, they offer a nifty map on how events will unfold. From Morgan Stanley:
[W]e present the signposts in a possible evolution of events in order to highlight the factors that drive the probability of a Greek exit up or down. A Divorce is not yet our base case, as we believe that there are still significant incentives for both debtor and creditors to negotiate an outcome that results in Greece remaining in the single currency – but it can clearly no longer be described as a multi- year tail risk.
In our view, Greece is unlikely to leave voluntarily. The key decision may be whether the Troika decides to withhold (at least temporarily) the end-of-June tranche as the incoming government insists on renegotiating the bailout conditions, which could cause it to run out of money very quickly, and force decisions on domestic defaults (including pension and wages) and whether to issue IOUs to cover these expenses.
Watch out for these key events, via Morgan Stanley:
Photo: Morgan Stanley