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Morgan Stanley has increased its chances of a Greek exit from the Eurozone to 35 per cent from 25 per cent, and reduced the time projection of the exit to 12-18 months from five years.”An ugly ‘European Divorce’ scenario can’t be ruled out either if economic divergences or political fragmentation prevail,” they write in a note to client. “Our subjective probability for a divorce has risen to 35% and could rise rapidly in the run-up to the Greek election on June 17.”
They warn that a Greek exit will escalate contagion risks both before and after the exit. The other PIIGS countries, Portugal, Italy, Ireland, and Spain are the most at risk.