In a report released today, Standard & Poor’s analysts join an increasing number of analysts making scary predictions about a Greek exit from the eurozone.In fact, they set the odds of Grexit at one-in-three:
We believe there is at least a one-in-three chance of Greece exiting the eurozone in the coming months, following national elections on June 17. This could be brought about by Greece rejecting the reforms demanded by the troika–the European Commission, International Monetary Fund (IMF), and European Central Bank (ECB)–and a consequent suspension of external financial support.
Surprisingly, however, they argue that a Greek exit from the euro might not influence the ratings of other euro area sovereigns, because it will have to be properly contained:
European policymakers would be keen to demonstrate that Greece is a special case. We would expect growing 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. For the same reasons, it is our base-case assumption that a Greek exit by itself would not automatically trigger further downward sovereign rating actions elsewhere.
With EU leaders still resisting significant changes to the fabric of the European Union—and as their policy response has come consistently too little too late—can we suddenly believe in the strength of an EU policy response?
Once more, we can speculate little on the answers to these questions before the European Central Bank meeting on June 6 and Greek elections on June 17.